Good day, and welcome to Shawcor Q3 2022 Results Webcast Conference Call. At this time, all participants are in listen- only mode. After the speaker's presentation, there'll be a question and answer session and instructions will be given at that time. As a reminder, this call may be recorded. I'll now just turn the call over to Meghan MacEachern, Director, External Communications and ESG. You may begin. Good morning. Before we begin this morning's conference call, I would like to take a moment to remind all listeners that today's call includes forward-looking statements that involve estimates, judgments, risks, and uncertainties that may cause actual results to differ materially from those projected. The complete text of Shawcor's statement on forward-looking information is included in section 4.0 of the third quarter 2022 earnings press release and in the MD&A that is available on SEDAR and on the company's website at Shawcor.com. For those that have tuned in via webcast, you may follow the visual presentation that accompanies this call. I'll now turn it over to Shawcor's President and CEO, Mike Reeves. Good morning. Thank you for joining Shawcor's third quarter conference call. Today, Meghan and I are joined by our CFO, Tom Holloway. During the third quarter, the company shared further details of its ongoing strategy to unlock shareholder value and deliver long-term profitable growth by tightly focusing capital on the core elements of its composite systems and automotive and industrial segments. In September, we announced a strategic review of our pipeline performance group, Shaw Pipeline Services and Oilfield Asset Management operating units. In addition, we announced our intent to rebrand the company from Shawcor to Mattr during the first half of 2023. These steps are important elements in the company's continuing transformation into a high-value materials technology provider, enabling responsible, sustainable renewal and enhancement of critical infrastructure. This strategy is designed to more closely align our focus and capital allocation to our core competencies, position the organization to fully benefit from favorable long-term macroeconomic trends, and lower overall volatility while elevating the company's full cycle margin, cash flow, and return on invested capital profiles. I'm pleased to confirm that Mattr delivered substantial progress towards these strategic goals during the recently completed quarter. Our industrial and infrastructure-focused businesses continue to capture market share and benefit from the expansion of global investment in communications, transportation, low- emissions energy, and water-related infrastructure. These tailwinds, coupled with strong execution and continued changes to the company's portfolio, drove revenues from businesses serving industrial and infrastructure end markets to contribute 47% of total sales during the third quarter, up from 44% in the prior year quarter. Our remaining onshore oilfield-related businesses benefited from continued high demand and secured incremental share gains, including through newly introduced composite pipe products, while our offshore pipeline coating business delivered sequential quarterly revenue growth and a substantial expansion of backlog as it prepares for a significant fourth quarter activity rise. In August, Shawcor divested its Lake Superior Consulting business, which historically formed part of the pipeline and pipe services segment, securing CAD 8 million in total gross proceeds for this business, which contributed CAD 38.9 million of revenue and CAD 500 thousand of adjusted EBITDA in 2022 prior to its sale. Subsequent to quarter end, and consistent with our stated strategic review process, Shawcor has entered into definitive agreements to sell both our Oilfield Asset Management business, which forms part of the composite systems segment, and our Argentine pipe coating business, which forms part of the Pipeline and Pipe Services segment. Each of these transactions are expected to close before year-end, and both businesses are recorded as held for sale in our third quarter financials. Our strategic review process for the remaining components of the Pipeline and Pipe Services segment is ongoing, as is preparation for our corporate rebranding, which is still expected to occur in the first half of next year. During the quarter, we released our annual environmental, social, and governance report. I am proud of Mattr's accomplishments in this space and pleased to report our total Scope 1 and Scope 2 greenhouse gas emissions fell by 11% in 2021. Our energy consumption fell by 10%, and our emissions intensity fell by 8%. We are now 32% below our 2019 GHG emissions baseline and remain committed to delivering a 50% reduction by or before 2030. In parallel, diversity in our senior management increased by 15 percentage points in 2021, and investment in the recruitment, development, and retention of a highly diverse workforce remains core to our culture. Finally, with the company's net debt ratio falling below our target level during the quarter and with strong forward operating cash flow expectations, the company launched a Normal Course Issuer Bid late in Q3 and immediately commenced share repurchases under this program. Tom will talk in more detail on this subject, but I'm proud of the hard work completed across this organization in the last few years to substantially strengthen our balance sheet and our cash generation profile. We are pleased to expand our capital allocation strategy and begin returning cash to our shareholders. Looking a little closer at each of our businesses, our composite systems segment delivered strong operational performance during the quarter, with revenue climbing 43% versus the prior year and adjusted EBITDA margins moving to 21%. As North American sales of spoolable composite pipe continued to rise, delivery of a large Flexpipe order into the Middle East was completed. Both pricing and demand for high specification underground storage tanks in the water and retail liquid fuel markets remain robust. Segment margins also benefited from the absence of Global Poly, our commodity plastic pipe business, which was sold during the second quarter. In addition to growing overall market demand for spoolable composite pipe, the third quarter saw continued market share gains, with the company onboarding new customers across the U.S., while also securing sequentially stronger sales of large diameter products. Flexpipe five-inch and six-inch product lines continue to perform well, and together have substantially expanded our addressable market in North America, positioning the business for continued growth in the coming years. Moving to composite tanks, order intake remains elevated and we are bullish on both liquid fuel station and stormwater system construction activity for several years to come. Our water-oriented business delivered another record sales quarter, which when combined with improved manufacturing efficiency and pricing advancement across the product line, contributed to segment margin enhancement. Our previously discussed strategic supply chain actions to address tightness in the thermoset resin market have been successful, and we do not currently consider this raw material a business constraint. Our tank backlog remains robust, and while general labor availability and cost escalation present lingering challenges, this business is positioned to increase revenue and EBITDA margin contribution over time. The segment would have delivered healthy sequential growth even without a substantial international delivery of Flexpipe during the quarter. However, the presence of this sale further enhanced results, and its non-recurrence, coupled with the impending sale of our Oilfield Asset Management business, drives an expectation of slight segment revenue moderation during the fourth quarter. Demand for the remaining core pipe and tanks businesses of this segment remains strong, and our highly favorable outlook for composite systems' primary markets underpins ongoing investment in support of organic growth initiatives across the segment, with a particular focus on technology development, manufacturing efficiency, and capacity enhancement. Continued strong North American industrial and infrastructure baseline demand, coupled with specific deliveries into communications, nuclear, and aerospace end markets, enabled the automotive and industrial segment to deliver 14% revenue growth versus the same quarter last year, with adjusted EBITDA very similar to the first two quarters of 2022. This performance demonstrates the strength of underlying demand for the company's highly engineered wire, cable, and heat shrink products, despite inflation and energy security concerns. The continued targeted growth of sales into industrial and infrastructure applications led to these end markets representing approximately 73% of total revenue during the quarter, with automotive-oriented sales, which have remained relatively stable in the last two quarters despite continuing supply chain and other headwinds, representing the remaining 27%. We expect normal year-end distributor destocking activity to occur, causing fourth quarter sales for the segment to move slightly lower before restocking and continued strong underlying demand drive a rebound in first quarter 2023 revenue. We remain vigilant to the impacts of energy cost and availability in Germany and other parts of Western Europe, and are actively taking steps to lower the company's near and midterm risks tied to this issue. Overall, we maintain a constructive view of the market trends which impact this business, and we will continue to invest growth capital to enhance our product offering and improve our manufacturing capabilities, including the previously announced intent to relocate, expand, and modernize our Toronto production site. Lastly, our pipeline and pipe services segment saw revenue move modestly upwards from the cyclic low observed during the first half of 2022, driven by continued strong onshore pipe coating work in Canada and rising offshore pipe coating activity. Segment EBITDA fell slightly short of neutral, driven by a week-long weather-related interruption in coating activity at our Veracruz, Mexico site and the sale of Lake Superior Consulting partway through the quarter, which experiences seasonally high summer activity levels. The pipe coating business secured several meaningful contract awards during Q3, including the Southeast Gateway Pipeline Project in Mexico, the Yellowtail Project in Guyana, and the Darwin Pipeline Duplication Project in Australia. These awards, and others, drove a very substantial increase in 12-month and total backlog. Operational activity will ramp significantly in the final quarter of 2022, including coating for the Scarborough Project in Australia and others in both the Eastern and Western hemispheres. While the first three quarters of 2022 have been among the slowest in recent history for this business, offshore pipeline construction and coating activity is rebounding aggressively, and the segment will contribute materially to Shawcor's adjusted EBITDA in the fourth quarter and throughout 2023. Mobilization in support of the Southeast Gateway Pipeline Project has commenced and will continue until mid-2023. Coating activity for this project will start at that time and last for approximately 12 months, with project revenue and earnings recognized during the coating activity period. The combination of a substantial high-quality backlog and elevated levels of offshore project quoting and sanctioning support our belief that PPS segment activity will be robust for the next several years. Turning to consolidated 12-month backlog. At the end of Q3, the company's committed backlog of work to be completed within the next 12 months was just over CAD 1 billion, an increase of CAD 231 million when compared to the prior quarter. Strong order intake prevailed across our Composites and Automotive & Industrial segments, while the PPS segment secured multiple new pipe coating projects, including the Southeast Gateway Pipeline Project in Mexico, Yellowtail Project in Guyana, and Darwin Pipeline Duplication Project in Australia. These new awards, coupled with the near term commencement of previously awarded projects, lifted 12-month backlog in the segment to the highest level seen since the end of 2014, despite the removal of backlog associated with the divested Lake Superior Consulting business. We anticipate the 12-month backlog will rise further in the near term as greater proportions of secured pipe coating work moves into the 12-month period. Total backlog, which includes committed work beyond 12 months, rose 72% in Q3 compared to the prior quarter, reaching nearly CAD 1.5 billion in value. Shawcor's bid number reflects the value of work where the company has issued a firm price with proposed contract terms against an explicit scope of work with a defined timeline for execution. At the end of Q3, the bid balance was CAD 960 million, a decrease of CAD 521 million when compared to the prior quarter, as several substantial pipe coating projects were awarded and moved from bid to backlog. Bidding activity levels remain strong and are a clear indicator that customers are committed to moving forward with new and previously contemplated offshore pipeline projects in the face of elevated commodity prices and growing global demand for natural gas. Multiple final investment decisions occurred during the quarter for projects where Mattr had previously received conditional contract awards. Consequently, the quarter end bid number included only CAD 11 million of conditional awards pending FID. Shawcor's budgetary number, reflecting the value of indicative pricing submitted to allow customers to build a project budget ahead of formal procurement activities, was $1.35 billion at quarter end, up from $1.2 billion in the prior quarter as new budgetary quoting more than exceeded the movement of several projects from budgetary to bid. This substantial budgetary number further supports our expectations that pipe coating activity will remain robust for several years. It's important to note that the vast majority of Shawcor's bid and budgetary balances are attributable to the PPS segment. Tom will now walk through the company's third quarter financial highlights. Thanks, Mike. As mentioned, strong execution resulted in robust sequential and year-over-year growth in revenue, gross profit, operating cash flow, and backlog. The third quarter's consolidated revenue was $335 million, 15% higher than the $291 million in the third quarter of 2021. Adjusted EBITDA was $40 million, a 26% increase from the prior year third quarter, primarily attributed to a healthy demand for products in our automotive and industrial and composite systems segments, with particular strength in both the composite underground storage tank and composite pipe businesses. Consolidated results for the third quarter included non-recurring items outside the company's normal course of business. The current quarter included a loss on the sale of our Lake Superior Consulting business of CAD 5.9 million, which was completed at the end of August as part of our ongoing portfolio optimization strategy. The current quarter also included CAD 2.1 million of net restructuring costs, largely attributed to the completed exit from a leased facility in Edmonton, which was associated with our now-divested Global Poly product line. During the quarter, our selling, general and administrative expenses were impacted by significantly increased share-based incentive compensation accruals. In total, the company recognized just over CAD 9 million of share-based incentive compensation costs during the quarter, largely driven by a share price increase of 50% from CAD 5.71 at the end of June to CAD 8.54 at the end of September. The company continues to perform actions to improve shareholder returns and as a result, further impacts may be recognized. Also included in the results for the quarter, the company reported a CAD 6.6 million gain from foreign currency movements, primarily due to the strengthening of the U.S. dollar. Turning to segment results, the composite systems segment revenue was CAD 147.7 million, a 43% increase compared to the third quarter of 2021, and adjusted EBITDA was CAD 31 million, a 99% increase from the prior year third quarter. These results reflect continued strong order activity for composite pipe products as completion activity levels in North America maintain their gradual rise. The business also benefited from market share gains in the U.S., partially due to the commercialization of its large diameter pipe products and completed delivery of a substantial order to an international customer during the quarter. Additionally, the segment delivered a sequentially higher number of tanks for liquid fuel applications and for water management systems, the latter of which experienced a record quarter. The rise in segment revenue also reflects a rollout of price increases to help offset the inflationary increases in raw material and labor costs across the segment. Automotive and Industrial segment revenue was CAD 81.1 million, a 14% increase compared to the third quarter of 2021, and adjusted EBITDA was CAD 14.8 million, an 18% increase from the prior year third quarter. Record quarterly segment revenue reflected strong project-based activity in industrial markets, particularly for highly engineered wire and cable products, a more profitable product mix, and a rollout of price increases to offset the inflationary increases in raw material and labor costs. Pipeline and Pipe Services segment revenue was $106.8 million, a 9% decrease compared to the third quarter of 2021, primarily resulting from lower levels of pipe coating activity in Europe, Middle East and Africa, coupled with the absence of revenue associated with the core inspection services business sold in December of 2021 and the Lake Superior Consulting business sold in August this year. This was partially offset by increased revenue in Latin America and Asia-Pacific as large projects were commenced. Adjusted EBITDA was -CAD 1.7 million, a 124% decrease from the prior year third quarter, reflecting the aforementioned lower revenue and a less profitable pipe coating project mix. Despite the year-over-year decrease in revenue and adjusted EBITDA, the company's cost reduction and site optimization initiatives have substantially lowered fixed costs for the segment, which in turn partially offset the lower activity levels in the quarter. Turning to cash flow in the quarter. Cash provided by operating activities for the third quarter was CAD 69.6 million, reflecting a CAD 34.4 million reduction in working capital, excluding the impacts of restructuring liabilities. This reduction in working capital is largely driven by the increase in contract liabilities related to cash advances from customers for projects currently in our backlog and awaiting execution. Further working capital progress was made in accounts payable, partially offset by an increase in contract assets and accounts receivable from the timing of billings, purchases, collections, and payments. Furthermore, additional inventory was secured to mitigate the impact of supply chain interruptions and satisfy orders for future quarters, particularly the Scarborough Project to be executed in Kabil, Indonesia. Cash used in investing activities in the third quarter was $15 million, reflecting $21.9 million of capital expenditures, partially offset by $5.9 million in proceeds from the sale of Lake Superior Consulting. During the quarter, cash used in financing activities was $55.8 million, reflecting $50 million in debt repayments and $5.8 million of lease payments. Net cash provided in the third quarter of 2022 was $8.4 million. Based on the actions completed, our diversified business and confidence in our outlook, we expect to generate sufficient cash flows and have continued access to our credit facilities to fund our operations, working capital requirements, and capital programs. As of September 30, 2022, we had a cash balance of $124.2 million, debt of $229.4 million, and $67.2 million of standard letters of credit. Our liquidity position has benefited from the initiatives undertaken since 2020, with continued focus on reducing our operating cost base, as well as repayment of $218.5 million of outstanding net long-term debt since the start of 2021, including $15 million repaid subsequent to the end of the third quarter. At the end of the quarter, the company's net debt had decreased by 63% since the start of 2020, bringing our net debt to adjusted EBITDA ratio to 1.46x, favorable to our target of 1.5x. We also announced our intent to purchase up to 5.7 million common shares through the commencement of a Normal Course Issuer Bid. During the quarter, the company repurchased slightly over 246,000 common shares that were canceled subsequent to the quarter. As mentioned earlier, the company spent $21.9 million in capital expenditures, of which $18.1 million related to growth expenditures, with more than half of this amount spent on the mobilization and re-establishment of a high-capacity concrete coating facility in Altamira, Mexico to support the SGP Project. Additionally, the company invested in facility infrastructure improvements to increase production capacity in the composite systems segment. On a year-to-date basis, the company has spent CAD 42.8 million on capital expenditures, of which CAD 26.1 million relate to growth expenditures. With the inclusion of incremental capital expenditures for the SGP Project, our full year capital spend is now expected to be between CAD 55 million and CAD 65 million, up from the CAD 40 million-CAD 50 million previously communicated. We will continue to prioritize capital spend to drive growth in our most differentiated, high-value, materials-based solutions in support of industrial and critical infrastructure end markets while ensuring that sufficient capacity is available to execute on our pipe coating projects in our backlog. The above strategic actions and others that will evolve over the coming quarters are intended to enhance, over time, the company's margin and operating cash flow profile, lower overall volatility, and deliver greater full cycle value to all stakeholders as our market-leading technologies enable responsible, sustainable renewal and enhancement of critical infrastructure. I'll now turn it back to Mike for some final comments. Thank you, Tom. The underlying trends for each of Shawcor's primary businesses are favorable and expected to remain so for several years. Long duration North American critical infrastructure activity remains robust. Fundamental energy demand drivers persist, and the offshore oil and gas pipeline market has entered a multi-year upcycle. Our simplified portfolio of high- value materials- based products has limited exposure to consumer discretionary spending and we believe has resilience in the face of recessionary forces. We have taken significant steps to increase average margins, lower volatility, and elevate cash flow. We have substantially reduced outstanding debt, are returning cash to shareholders, and investing in high value organic growth. We are actively taking steps to lower our exposure to European energy availability risk and remain committed to tightly controlling fixed costs, optimally deploying capital, and completing the strategic review of our remaining PPS segment businesses. Shawcor's disciplined approach to portfolio management is unchanged. We believe opportunities will exist to make attractively valued strategic tuck-in acquisitions that move the company's composites and automotive and industrial segments further up the value chain, accelerate our profitable growth, and improve our ability to enable responsible, sustainable renewal and enhancement of critical infrastructure. Our hard-earned balance sheet strength ensures we stand ready to take advantage of these opportunities at the appropriate moment. Despite continued cautiousness regarding the impacts of geopolitical events, COVID-19, supply chain risks, and rising interest rates, we remain confident our momentum will continue, and we expect adjusted EBITDA in the final quarter of 2022 will be the highest of the year. We also anticipate delivering very robust adjusted EBITDA growth in 2023 from our core businesses, with strong contributions from the pipeline and pipe services segment, including significant H2 Southeast Gateway Pipeline Project activity. I'll now turn the call over to the operator and open it up for any questions you may have for myself, Tom, or Meghan. If you would like to ask a question, please press star one one. Our first question comes from Aaron MacNeil with TD Cowen. Your line is open. Hey, morning all. Thanks for taking my questions. Mike, you definitely addressed this in your prepared remarks to a degree, but I'm hoping you can give us a bit more details on some of the puts and takes on the composite systems segment this quarter. Just anything you can share in terms of the magnitude of some of those items you mentioned, the large international sale on the composite pipe side, you know, the sale of the Oilfield Asset Management business. Maybe although not specifically stated, I know, you know, the FRP tanks business was sort of held back earlier this year. I'm wondering if you could also speak to, you know, the cadence of that business and how repeatable that might be over time. Certainly. Good morning. I'll start with the last piece. The tanks business, until relatively recently, was still held a little bit back by the availability of resin. As we noted on the call, that is no longer the case and not expected to be the case going forward. What that means is we've seen more consistency in production activity in our various tank sites, and as we roll forward, would expect that we can continue to ramp staffing and throughput in those facilities. I think the performance of the tanks business in Q3 is, I think, a good indicator of what we would expect going forward and continue to fight hard to improve from that baseline. The OAM business, we did not communicate the terms of the transaction that's pending, but we'll certainly communicate those as soon as that transaction closes so that you have better clarity on the contribution that that business has made to the organization up to the date of its departure. The international pipe sale that occurred in Q3, I would categorize it as kind of low single-digit millions CAD. Not a massive number, but certainly contributed to the quarter and that will not be repeated in the fourth quarter. I realize that's not an enormous amount of detail, but hopefully a little bit more that's helpful to you. Yeah. No, that's great. A couple of questions you may not be able to answer, at least won't want to answer fully, but I'll ask anyway. You know, I guess on the businesses that were sold this quarter, you know, are the held for sale values indicative of proceeds. I know there's only so much you can say about businesses that aren't sold yet, but you know, anything you could share from a procedural perspective on the pipe coating business, like where is this process at? Is there a data room open? How long has it been open? You know, are you asking for interested parties to bid by a specific date? Are you happy with engagement levels thus far? Like, anything you could share would be helpful. Yeah. Understood. I'll address the pipe coating piece and then pass it to Tom to talk on the businesses held for sale. We announced the intent to pursue a strategic review for the pipe coating business and other businesses on the twelfth of September. We had not initiated any direct engagement with potential buyers for the pipe coating business prior to that date. We are approximately two months into the process. You know, it's a complex business with a presence in multiple countries around the world. I think we are effectively where we thought we would be in the process. I think our advisors, Goldman Sachs, continue to do a very, very good job. I'm very comfortable with the progress being made. I think the level of buyer interest is very similar to our expectations going into the process, but I probably can't share any more details than that at this stage. Tom, do you wanna comment on the assets up for sale? Yeah. Hey, Aaron. On the held for sale, I think you break it up into two pieces. The OAM business, I think it's safe to say that's kind of indicative and directionally correct, what you said about proceeds. On the Argentina business, little more complicated story just given the currencies involved in the entity itself. I would say that is a very modest transaction, would be where I would kind of leave it for you. Not a lot of proceeds, kind of small end of the scale, single digits kind of thing. Okay, great. Thanks, guys. I'll turn it over. Thank you. Thanks. Our next question comes from Yuri Lynk with Canaccord Genuity. Your line is open. Hi, good morning, everyone. Good morning. I'm gonna follow up on a question on the sale, the Middle Eastern sale, in composite systems. Is that a market where you might see more activity going forward, or was this a kind of a one-off transaction? No. We've seen relatively frequent sales of Flexpipe products into the Middle East over the last several years. As with many product sales into that region, they tend to be part of tendered contracts, so they have a discrete start and a discrete end date, and obviously the magnitude can vary depending on the customer and the country. Certainly wouldn't rule out additional sales into the Middle East over the course of the coming near and midterm, but there won't be any in Q4. Okay, that's helpful. In terms of capital allocation, you talked about the intention to do tuck-in acquisitions. Wondering if you'd like to drill down a little more and is there one segment that offers more consolidation upside than another? Related to that, would you consider adding to the Flexpipe offering, or are you looking to dilute your oil and gas exposure even further than it would be on a pro forma basis? Yeah, great question. I think generally I'd start with our focus for acquisitions is most certainly around the Composites in the A&I segment. Secondly, I'd say we're not, at this moment in time, not specifically focused on consolidation. I think we have a very, very good position in our existing products. It's really more about how can we supplement organic investment by making acquisitions that accelerate the timeline to access a new geography or an adjacent market segment where specific certifications and qualifications of products can, in some cases, take years to organically develop. I would say both segments have some interesting opportunities. I would say we pivoted from a very defensive position in the first half of 2021 into a position where we started to look more aggressively at M&A opportunities as we rolled into the H2 of 2021. When you think about the normal course of these processes, certainly believe we are much closer to being in a position to execute on M&A and talk about it publicly. Lastly, on Flexpipe, I think we have what we need in the Flexpipe business. Not averse to M&A that may add to that business, but I'm not sure that it is necessarily an area of focus because we have a very, very good product portfolio. We're very comfortable with the commercial, technical aspects of that business. Don't believe we're lacking anything. Not an aversion to adding to it, but just don't necessarily see the need in the short term. Okay. That's good color. Thank you very much. I'll turn it over. Our next question comes from David Ocampo with Cormark. Your line is open. Thanks. Good morning, everyone. Morning. You guys provide some decent commentary on the outlook for the Pipeline Services Division, noting an inflection in Q4 and into 2023. How should we be thinking about the respective margins in that division? Is it, you know, peak type margins with the amount of activity that you're seeing in your backlog or more mid-cycle margins? Yeah. Hey, so I'll take that one. I think as you think about Q4 and into the first half of 2023, it's more high single-digit or low double-digit margin type of profiles, as the business sort of starts to come back. As Mike said in his commentary, in the H2 is when we start to see the SGP Project kick in, which is where we would start to expect the upper end of that kind of 20-ish% margin we've guided to, on the high end of the cycle. That's on EBITDA there? Yes, EBITDA margins. Yes. Okay. Sticking with the theme of margins, the Automotive & Industrial segment, you guys are facing inflationary pressure, particularly in Germany. Can you guys sort of quantify what that negative impact is? Because the margin profile still seems, you know, quite strong relative to kind of where you guys were historically. I'll offer some thoughts, and Tom may have some additional comments here. You're right. I think we have done a very good job of preserving our margin profile in that business. The team have worked incredibly hard to lower costs wherever they can, to ensure that raw material cost increases are passed through to customers in a fair and reasonable manner. I'm quite certain that they will continue to be successful in that process. I think if the European energy market really does move to a position of substantial shortage, then you would expect that the costs of energy and those energy input costs going into the raw materials that we consume in our European business would be more pronounced than they have been so far. I certainly am not telling you that we're going to see this impact, but if you think about the, I won't say the worst case scenario, but a reasonably unpleasant case, I think you've got 2-3 percentage points of margin that could be eroded if it's really bad for an extended period of time. We continue to watch it very closely, and as I noted on the call, the key for us is not just what we're doing on a tactical level to manage costs and ensure pricing is fair and reasonable, but it's also on the strategic level of how do we ensure that if that worst case scenario in European energy markets unfolds, that its impact is minimized to our business both in Europe and elsewhere. There is a substantial amount of energy and time going into that process to de-risk to the very best of our ability. Tom, anything you'd add? Yeah. The only thing I'd add is just if you think about this A&I segment combined, Shawflex and DSG-Canusa, there's a bit of an offset happening, right? The Shawflex business has grown nicely on its margin profile, and I think you'll see, you know, relative strength in the overall margins of this despite the pressures on the DSG-Canusa side. I guess how are your discussions with your automotive customers to be able to pass through maybe some of those energy inflationary pressures? Is it something that you guys have to eat entirely by yourself, or are there, you know, rooms in your contracts where there is negotiations that could be made? Yeah. It does vary slightly from customer to customer, but generally, those contracts have an annual renewal point where there is an opportunity to talk about pricing. Again, varies, but many of those contracts have their annual renewal point concentrated between Q1 and Q2, so we're about to cross into the point where we start to have those conversations. We were successful in securing price increases to offset cost increases when we did this earlier in 2022, and we would expect to be similarly successful in 2023. At the end of the day, I think any healthy customer-vendor relationship, win-win, and if we don't feel that we are, you know, generating a reasonable return for our effort and our investments, then obviously, we're gonna be less motivated to continue to do that. I think our customers, while they obviously don't like paying more for anything, they recognize that these are extraordinary times with extraordinary circumstances and have generally been reasonable in those conversations. That's very helpful. I'll hand the call over. Thanks, guys. Thanks. Thanks. Our next question comes from Keith Mackey with RBC Capital Markets. Your line is open. Hi. Good morning, and thanks for taking my questions. I just wanted to start off on the PPS outlook. Certainly, CAD 1.5 billion backlog, the CAD 960 million bid and the CAD 1.3 billion budget certainly does reflect a very strong outlook in the offshore pipe coating cycle and then in that segment in general. Can you just talk about, you know, where you think we are in the offshore cycle? Like, does that 1.3 billion budget reflect most of the projects you think will be coming, or are there some that could materially change that number as well? Yeah. Good morning, Keith. I don't believe we have seen everything. I believe demand for energy, particularly for natural gas, and the associated energy security concerns that are now rippling through the world are going to continue to drive incremental offshore pipeline construction, and therefore, offshore pipeline coating activity. We've consistently said that we believe this upcycle is a multiyear upcycle, and I think as we sit here today, the fact that the bid number continues to grow, despite us moving the best part of $1 billion from bid all the way through to backlog, has shown us that there is still very strong demand in the marketplace, obviously, always subject to minor movements in timing, but I don't believe you've seen all that this market has to give yet. Got it. Appreciate the comments on that. Just to follow up on the backlog, so it's CAD 1 billion or so within 12 months and then the CAD 1.5 billion total. Can you just give us a little bit more color or put a finer point perhaps on when you expect that 500 to be realized beyond the 12 months? Is it sort of a one- to two-quarter timeframe beyond 12 months or, you know, will it stretch out further than that? We'd have to go back and double check, but as I sit here right now, I cannot think of a dollar that's in that total backlog that we would not expect to realize by the middle of 2024. I think everything would be realized in that timeframe. Got it. Okay, perfect. I'll leave it there. Thanks very much. Thanks. Our next question comes from Matthew Weekes with Industrial Alliance. Your line is open. Good morning. Thanks for taking my question. Was just wondering, you know, looking at the tank sales for the water, you know, storm water application, seems like a pretty robust growing market. To the degree that you're able to, I was wondering if you could just comment on sort of how the cadence of growth in those sales is maybe comparing to fuel tanks at this time, and if you can compare the margin profile on one of the stormwater solutions to you know, a traditional fuel tank. Thanks. Yeah, happy to do that. Good morning. Obviously the water business for us is less mature than the fuel tank business and as you would expect, that creates greater opportunity for high percentage growth. Water growth profile is certainly steeper than fuel tank growth profile as we sit here today. I think, as we've discussed multiple times, this is a business where the tank side of our organization has had a presence for many years, but really did not have the capacity to offer a fulsome offering to the stormwater market until relatively recently. The acceleration of the pace of growth in that business has been substantial, and it is driven by our ability to offer a full and complete package of the various technical components that are required for a stormwater solution. We are excited and really have high expectations for this business rolling forward. I think that kind of growth rate is something that is sustainable for a period of time, probably measured in multiple years. I would be surprised if five years from now, the water arm of our composites business is not similarly sized, if not larger, than the fuel arm of that business. The margins vary a little from component to component, but generally they're not dissimilar from the fuel tank business. There's some subtle differences here and there, but nothing that I would call out as being an enormous delta between the two. Okay, thanks very much. I appreciate the commentary. That's it for me. I'll turn it back. Thanks. As a reminder, to ask a question, please press star one. Our next question comes from Michael Storry-Robertson with National Bank Financial. Your line is open. Hey, good morning, all. Congrats on another strong quarter, and thanks for taking my questions. Maybe start with just a follow-up on composite margins. A lot of moving parts, I guess, in the quarter, but you did notice or you did note increased prices trying to offset some of the inflationary pressures that you've seen there this year. I guess just sort of at a high level, like how much do you feel you've caught up at this point with some of those rises in material costs? Yeah. Good morning, Michael. I think we are much closer to caught up now than we were six months ago. I don't believe we're quite there yet, and we need to push to ensure that we reach that point over the course of the next couple of quarters. We have seen some leveling off of raw material costs, so the pace of escalation on that front has certainly slowed, which should make it a little easier for us to get to the right place. But the team made very good progress during Q3. I certainly wouldn't want to overlook the progress that was made. I think their efforts in a very difficult conversation with a lot of customers were substantial and show in the numbers for Q3. A little bit more to do there, but we're much closer to being where we should be. Understood. That's helpful color. Maybe just switching gears to some of your earlier commentary on the situation in Europe. I guess just under the worst case scenario you sort of pointed to, what sort of strategic alternatives are you guys evaluating? Would it just be like rerouting production to other facilities or is there something else, a few other levers that you guys have at your disposal there? Yeah. Perhaps for the benefit of those who are listening and maybe don't have quite as much familiarity with our business as you do, the DSG-Canusa business, the heat- shrink tubing business has three production footprints, one in Toronto, one in Germany, one in China. While there are one or two specific products that are made only in a particular location, broadly, the portfolio is manufactured in all three sites. It becomes a question of ensuring that we can produce the volume of product that we need on a global basis, which obviously could include the reassignment of production activity from our European site to either China or Toronto or both. We also look at the supply chain, both kind of first order and second order supply chains, where are component parts coming from the European market and how can we duplicate that supply chain in other geographies to lower the risk, if the European market does face real energy restrictions. Those are really the two biggest levers that we focus on. The teams have a long history of working together. This is not the first time that there have been challenges in Europe. You may recall last year there was a severe flood in Germany that did take down our facility for a brief period of time. There were a great deal of contingency actions put in place ahead of weather event and following that weather event that give us great confidence that while we may not be without impact, if European energy situation evolves, the impact will be as low as we can possibly make it. Got it. Appreciate the color. Maybe just one last one here for Tom. You know, looking out to 2023, if you've got any sort of rough ballpark idea for CapEx plans, you know, excluding any sort of M&A or tuck-ins, just on your organic opportunities. Yeah. Hey, Michael Robertson, how are you? I think on the CapEx side, you know, we'll be giving guidance as we come into Q1. Suffice it to say, as we've said before, there are lots of organic opportunities across both composites and A&I. Don't be surprised to see us with a very robust internal organic growth plan. On the M&A side, it'll be more opportunistic and kind of as things come, so smaller types of deals. I think consistency with what we said before without giving numbers at this point. Okay. All right. That's helpful. I appreciate you guys taking my questions. I'll turn it back. Our next question comes from Tim Monachello with ATB Capital. Your line is open. Hey, good morning, everyone. Morning. Two questions for me. The first one on composite pipe, the five- and six-inch tubulars have been out in the market for a few months now, and you guys mentioned that you had seen some success in that deployment. You said previously that that could increase the market size by, you know, it could potentially double it. I'm just curious, what the contribution might have looked like in the quarter from those, two SKUs, I suppose, and, you know, what inning you're in in terms of growing into that market. Yes. Morning, Tim. I'd say we're in the very early innings of growing into that market. When you think about, you know, doubling the addressable market, it's gonna take a little while to grow into that. We're still in the first inning for sure. But those products have gone from representing, you know, 0% of Flexpipe revenue to, we're getting close to double-digit representation in our revenue mix. For a relatively short period of time, I think that's an indication of the kind of growth opportunity that's there. Very proud of the team and the work they've done to deliver a great product very quickly and then support it commercially. From a manufacturing perspective, all of those things are not simple, but the team have done an extraordinary job. Okay, that's helpful. Last one for me, just on capital allocation. Balance sheet's in a much better position. Obviously, you're going through the restructuring or strategic review process. I'm just curious what capital allocation priorities look like going forward here with deleveraging still the top priority. How are you guys thinking about returns to shareholders over the, I guess, near, mid, and long term? Sure, I can take that one. Starting with the answer to the prior question, I think organic growth internally will be a big focus for us going forward. We have lots of opportunities, high return projects internally that will grow this business over time. I think you'll see us lean into that pretty heavily, continue our story about M&A and, you know, where there's opportunities, we'll do small tuck-in types of deals. On the capital return to shareholders, remind everyone that we are constrained a bit by our high yield debt currently, which allows us to tap into a CAD 25 million basket, which is what we've got approved today. We intend to be active in the market with that buyback program, but we are a bit constrained in the current period. Now, as earnings grow over time, that basket could grow, and we could potentially expand that. I think, you know, wrapping all that together, organic growth being the biggest use of capital in the near term, share buybacks will continue to be a large portion of our program. Opportunistic M&A with the continued focus to reduce debt where we have, you know, funds and where it makes sense. As interest rates move up, we certainly wanna, you know, bring that interest cost down as well. Okay, really helpful. Thanks. We'll turn it back. There are no further questions. I'd like to turn the call back over to Mike Reeves for any closing remarks. Perfect. Well, thank you all for joining us this morning and for your continued interest in Shawcor. Look forward to talking to everybody again next quarter and wish you all a great day and a great week. Thank you very much. This concludes the program. You may now disconnect.