CIE Automotive SA

MAD:CIE

Earnings Call Transcript

[Operator]

Ladies and gentlemen, welcome to the conference call for the results at CIE Automotive. [indiscernible] We have Lorea Aristizabal Abasolo, Director of Corporate Development. At the end of the presentation, there will be a Q&A and questions can only be asked in questions via the tool provided in the webcast. Now I hand over to Lorea. Go ahead, please.

[Lorea Aristizabal, executive]

Good afternoon, everyone, and welcome to the conference call on the results for the third quarter. We find a quarter that has been underscored by a very concrete event in each of the geographies. And if you agree, we can review them. In the North American market, without a doubt of the trade union strike has marked the quarter an industrial conflict led by the majority of a union and United Auto Workers, UAW as a result of the end of the agreement on September 14, after being [ imported ] for 4 years. This time and for the first time in history, the strike has been aimed simultaneously out of the 3 main American OEMs, General Motors, Stellantis and Ford. The trade union started by asking for a pay increase of approximately 46% for the next 4 years, although subsequently, this demand has been reduced to 36%. Other indications include working a 32-hour weeks with a 40-hour salary, recovering the automatic provision of the consumer price index or a more extensive coverage for workers in the pension plans.

Today, after more than 4 weeks of conflicts, 9 plants have been affected, 38 distribution centers are shut down, including the Ford truck plant in Kentucky which is the largest and most profitable plant, which shows a major escalation in the dispute. Outages that affect our 35,000 employees, representing approximately 23% of the 150,000 members of the union and while the strike is lasting, they are being paid approximately $500 a week by the union. It's estimated in the last 2 weeks of September, which affected the third quarter 45,000 less vehicles have been produced. And in the first 2 weeks of October, another 69,000.

Although at the beginning, it was said that the strike would last 5 to 6 weeks, it's currently considered that the strike made last until the end of November. This would mean 10 weeks with a potential impact of up to 400,000 vehicles less and there wouldn't be time to recover the production in this year, and it would increase our production in 2024.

But in parallel, we also have to consider a potential recovery of up to 140,000 vehicles, which is a demand redirected to other OEMs, especially the Asian OEMs, and this reduces the net impact somewhat.

As just referenced, the last time that the bargaining had been renewed in 2019, the week lasted 6 weeks and only had an impact on General Motors and another reference. While this is happening in the United States, Unifor the equivalent of the UAW in Canada has signed first with Ford and then with General Motors in the last few weeks the renewal of their bargaining agreement, including pay rise of 2 digits and improvements in pensions. So this may be another reference, a situation of which, of course, is worried because of its impact not only on the OEMs but also our suppliers. In the case of CIE, the impact on our plants in the U.S. is an indirect effect because of the shutdowns at the OEM plants since our employees at CIE plants are not unionized. And we can confirm that today in the third quarter we're reporting on, there haven't been significant impacts.

Also, I'd like to remind everyone that the United States represents less than 10% of our global sales. which have greatly limits [ out ] the potential impact. In spite of the strike of the North American market has showed a strong performance in the third quarter with plus 9%, driven to a large extent by the still existing demand and the increase of inventories because of the strike. In the 9 months after September, the North American market has grown 11% and CIE 15% with a significant outperformance of 4 points.

Regarding the European market, what has happened this quarter. We have read many headlines related to a -- the growing boom in Europe of electric vehicles imported from China. While Brussels has opened an investigation into the undercover subsidies for production in China for electric vehicles exported to Europe, the State governments are launching their own initiatives to protect their national automotive industries. We have the example of France, which has stiffened the regulation to [ access aid ] for the purchasing of electric vehicles requiring a local content and therefore, excluding vehicles produced outside of Europe, a regulation that will come into effect in January 2024, and which could inspire other European countries.

The context that is actually taking the Chinese OEMs to plan their production implementation in Europe. Other things in Europe during this quarter, we have also read many headlines about electrification. On the one hand, we've heard about the increase in the sale of 100% electric cars in Europe, which represent 15% of sales so far this year. On the other hand, we've learned that the European Union has postponed the launching of Euro 7, which ought to come into force in 2025, and we've also known that the U.K. government has announced that it will delay the prohibition of the sale of internal combustion engine cars from 2030 to 2035.

These dynamics show that electrification is transforming the automotive industry. And in this framework, I'd like to remind everyone that at CIE, we are capable of tackling this transformation by adapting to the changing demand of our customers with more than 80% of our portfolio agnostic to electrification and above all. And in all cases, without the need to make intensive or disruptive capital investments to produce components for electric vehicles.

In figures, the European market has grown 5% in the third quarter and has an accumulated growth of over 14%, a result, to a large extent, of the weaker comparable [ base ] for 2022. Otherwise, we see volumes and projects that are unprofitable picked up by suppliers in a very critical financial situation. And this inevitably leads to an underperformance in sales.

Regarding the Chinese market, this third quarter has not shown a growth in comparison to last year, but it's important -- very important to remember that the third quarter last year was exceptionally strong in China with its reopening after COVID. So we're talking about a flatter third quarter led to unexpected growth of almost -- not expected and actual growth of 5% accumulated to September. The headline for the Chinese market is without a doubt the price war that we're witnessing them. It's unprecedented situation, which I think we will find completely untenable, bearing in mind factors such as the major losses reported by practically all Chinese OEMs of electric vehicles. The recent bankruptcy of the Chinese OEM, WM Motor, which may be the first of a long list.

On the extremely small number of cars produced by each OEM over there, ratio is extremely low factors that suggest the need for the consolidation and stabilization of the Chinese market with an associated improvement in price levels. Regarding CIE, nothing new, and underperformance that reflects the prioritization of volume cash generation with margins over 18%, in line with the consolidated budgets for the group.

Reviewing relevant events in each of the markets, we'll talk about Brazil. And we have to mention that barely a few days ago, BYD, the Chinese OEM officially announced the acquisition of the former Ford plant in Bahia, a plant that will now produce 2 electric cars among hybrid car as well as electric trucks and buses with the intention of leading the electric vehicle market in Brazil. It's expected that the plant operations will begin in the second half of 2024 with an initial capacity of 150,000 units a year and the volume that ought to increase to 300,000 new units as of 2025, something that's very significant in the context of the size of the Brazilian market.

BYD itself has indicated that it will prioritize the hiring of local suppliers and after several commercial meetings with them, we understand that we have a particular potential to supply plastic and metal to them from our plants in the north as we did before with Ford in Bahia. The Brazilian market that has been weak during this third quarter, it has shrunk by 3%, basically due to the high interest rates since around 2/3 of car purchases result of financing an accumulated figure in the Brazilian market with a growth of 3%. And for CIE, this means a very significant outperformance.

Talking about India, the Indian market has continued to grow. The Indian market segments have had a small weighted growth in the third quarter with significant differences between them. This third quarter implies that in the accumulated figures until September the Indian market has grown around 2% and CIE has doubled that market and has grown organically by more than 4% in these 9 months. 2 issues in India. First, geopolitically, during the month of July, the Indian government has rejected the BYD proposal of building an electric vehicle plant in collaboration with a [ local team ] plant alleging concerns about Chinese technology and also as something new in the advance of electrification in India that at the beginning of October, Tata announced the launch of up to 8 new models for 2030, electric models. The CIE -- this type of news is very good news, very positive since our position as a supplier in the Indian market is extremely good and unlike many local Indian suppliers, we can prove our expertise in the manufacture of components for electric cars in other international markets, and this gives us a significant competitive edge. Moving on to the accounts, our sales. Our sales have had a negative impact from the exchange rate that has lowered growth by more than 6 points in the quarter and close to 3 points in the first 9 months of the year. Also, the impact of the pass-through of raw materials with prices that are dropping which has not been very significant in each autumn, but in the accumulated figures for the 9 months, it represents approximately 2.5 points less growth.

Bearing in mind both factors, the actual organic growth of CIE has been 9.5% this year versus a market at 8.5%. And this continues to be an outperformance and it continues to be a gain in market share, a gain in market share that are reflected in practically all markets, but especially in the growing markets like Mexico, Brazil, India, where -- this is strategic for the future and an outperformance of which is a special merit bearing in mind of this outperformance by 5 points in 2022, which implies a much more demanding comparable base than to the market average.

Focusing on the results, a few brushstrokes and a bit growth in spite of the strong impact of the exchange rate that affects this quarter, 6 points, as I mentioned, implying EUR 9 million less in EBITDA, we've expanded our EBITDA margin by 100 basis points in the third quarter. An expansion in margins that has occurred in all geographies in the exception of naphtha which even so has maintained extremely high margins over 18% as in previous quarters and we should especially highlight the good evolution of our margins in Asia, both in India and in China.

And in the first 9 months overall and EBITDA growth that is more than 10% with practically all divisions growing in margins and most of them are growing at a double-digit rate.

In the nonoperating side, let me call it that in the accounts. if we talk about financial costs and compare with the previous quarters, in this third quarter, we see financial expenses that have been somewhat higher than the first and second quarters because of the negative impact of derivatives and ForEx when in previous third quarters, this impact was positive while the pure financial costs have been more or less similar to those reported for the last 2 quarters. Obviously, comparing year-on-year as occurred in the first and second quarters, these financial costs because of the interest in the third quarter show the strong rise in interest rates. And while on the equity method accounting, that recurrent method we have, in the third quarter has been on similar levels to the 2 previous quarters, around EUR 2 million.

Currently, in 53% of our gross financial debt is closed at a fixed interest rate. And therefore, it's a mitigation element of buffer most of the rates -- in rates, a percentage which has got an increase from 35% at the closing in 2021 to [ 53% ] at the present time.

All this resulted in a net profit of EUR 75 million in the quarter, equaling the best quarter in the past years. In spite of this increase in financial expenses and in spite of the fact that currency is gaining close to EUR 5 million from the net result in the third quarter. Another quarter where the achievements of our operating management offset the increase in nonoperating costs.

And moving on to the most important part cash generation, a quarter where we have beaten our guidance in operating cash flow with more than 65%. A good cash management, which even when paying out dividends that are growing at a double-digit rate. And even though it is a quarter that traditionally consumes cash with regard to working capital in spite of all this, we have maintained the net financial debt flat during the third quarter. A third quarter where the total CapEx has been at levels slightly below 5%, but this has been due to an investment schedule issue and in the accumulated figures for 9 months, we are at the recurring levels of approximately 5% of sales.

For the fourth quarter, we expect to turn around as part of the accumulated investment in working capital and we expect the CapEx to continue along the lines of what we saw in the first 9 months, completely in line with our guidance.

Before closing this chapter, I would just like to remind you that the relevant fact was announced to the CNMV the day before yesterday, indicating that we have finally closed our German forging business on October 16, an operation that you will see reflected in the fourth quarter. And finally, let's talk a little bit about the future about the estimates. In Europe, growth is expected of 6% in the fourth quarter year 2023, we are at plus 12%, and medium and long term and this is very important that estimates that the European market will be practically flat. North America with a drop of 9% in the fourth quarter, mainly due to the strike which were to leave 2023 at plus 6%. And unlike the other mature market, Europe that I've just mentioned, North America is expected to grow in 2024 by 7%. And part of this has to do with recovering strike volumes.

In China, a strong 8% growth is expected in the fourth quarter, so they would close the year at plus 6%. And the Chinese medium term, with growth rates between 4% and 5% for the coming years. Brazil is still very far from the pre-COVID levels, in fourth quarter that is expected to be weak and the Brazilian market will therefore close with 1 point of growth in the year and the 2024 was plus 3% and the coming years with a growth of between 9% and 7%.

India, we'll close the fourth quarter with approximately 7%, 8% growth -- and remember, the fourth growth is the festivity period in India and it coincides with the launching of many new vehicle models. In 2024, after the strong growth, a slight pause is expected in growth due to the tremendously demanding comparison base to pick up speed again with a growth rate of 4%, 5% as of 2025. I -- and this snapshot gives us a global picture for the fourth quarter of approximately 4% a year 2023, with approximately 8%, and we would come into the classic 2% for the automotive sector in the coming years. This would be the global growth -- a global growth that is there, that seem obvious that it will recover and exceed the 95 million vehicles produced in the coming years, although with very different geographic contributions [indiscernible] the 95 vehicles produced in 2017.

At CIE, we have a growth catalyst. On the one hand, external factors such as the foreseeable players. produced in 2017.

At CIE, we have a growth catalyst. On the one hand, external factors such as the foreseeable for players in Europe and the United States, the reconstruction of inventories in certain geographies, all the expected growth in different segments of the Indian markets, such as the 2-wheelers, tractors and trucks. And we also believe that we have internal catalysts such as a strong organic growth in the geographies with the largest market growth, a continuous improvement in margins at plants and within the CIE perimeter. And of course, there's always the acquisition potential of new companies, mainly in emerging markets.

With all these catalysts, both internal and external and with the certainty of the solid results of third quarter of 2023. we reconfirm that in 2023, we will grow in all our lines of the P&L, we will expand margins and we will meet all our strategic commitments for 2025.

And with this final comment, we can move on to your questions. Thank you very much for your time.

[Operator]

We have several questions and we'll group them by countries, that make sense. We will start with China. And there are 2 questions there. The update for the strategy in China and margin improvements in China, whether there've been any one-offs the strategy, our strategy and the evolution? An update of our strategy in China?

[Lorea Aristizabal, executive]

Well, I have to say that it's not much of an update. I can't tell you anything new, but I'll explain it again. So -- but we will all clearly understand it. In China, our activity, 50% of our sales are from Chinese customers with joint ventures with Western customers, 40% of our sales go to Western customers and a little more than 10% go to pure Chinese customers.

In a market where Chinese customers, Chinese OEMs are gaining market share, we don't have the best commercial [ lease. ] What are we doing? While the Chinese market evolves, it consolidates and stabilizes in that price war and in that tenable situation, I mentioned our R&D department is developing new products, products with a price that's a little bit tighter with technology that is a bit more limited in order to offer not just premium products but also affordable products. This is what we are working on. And this is what we believe can open the doors to that expansion of our Chinese portfolio. It's what could open the doors to other kinds of customers and somehow balance out our commercial pie there.

And I think that the second question was related to margin improvements. Well, it's true. We come from a year 2021, where China was around 17%, 18% a year 2022, where China had a quarter with 17%, a quarter with 16% and it finally closed the year with a quarter at almost 19%. And we've had a year 2023 where we're seeing a growing margin 17%, 18%, some 20%.

And what's happening in China? Well, something is happening that I know in CIE for a long time happened in other geographies before like the case of Mexico, a geography when it has a tremendous growth, it usually focuses on finding a way to that growth, and that growth sometimes penalizes the margins.

The opposite of a place like China where quarter after quarter, you can see we're growing less than the market and this has the [ double reading ] that it enables our teams to focus 300% on managing efficiency and productivity. As you know, a lot of our China -- most of our China is related to CIE Golde, our roof unit. And we've always said that when we acquired the Endeavor Roof Division, what today is CIE Golde.

One of our greater surprises and joys was that the Chinese division with its excellent team of managers are there, have provided excellent results.

[Operator]

We move on to the United States. The impact of the strike is having on the CIE and whether it has had anything to do with the drop in margins in the third quarter in naphtha?

[Lorea Aristizabal, executive]

Well, no, I'll start by answering no. The drop in margins you've seen for North America has a little bit more to do with Mexico, not with the United States. And it's nothing that we are concerned about, it is just level of operation issues. When the margins are so high, you've seen in previous quarters, in previous years, that sometimes it goes up 1 point or goes down 1 point, but nothing worrying. And regarding the impact of the strike, bear in mind that the strike started on September 15, so in the third quarter, there have been 2 weeks. And during those 2 weeks, there has been an impact of 45,000 vehicles. We're not talking about a lot. There are only 3 plants shut down 1 per OEM at that point. So we're talking about barely EUR 3 million, EUR 4 million lost in sales, nothing that really affects us.

In the month of October, we are aiming -- aiming at an impact on sales of a little bit more than that, perhaps double, we'll see. It's too soon to say yet. We'll see how the strike develops because right now it's a little bit unpredictable. It's scaling up very quickly than the last few days and it's unpredictable, but nothing that will prove significant with sales of approximately EUR 4 billion in round figures that CIE is going to have this year.

[Operator]

Well, also asked about India which is showing perhaps less growth in the last 2 quarters at CIE what do we think of the future of this market?

[Lorea Aristizabal, executive]

India, is a market, and I think we've discussed this many times, is a different market to the rest of the market where CIE operates. Why is it different? Because India is very strong, not just in passenger vehicles, but in India, other segments are very important, such as the 2-wheeler, 3-wheeler, the truck segment, the tractor segment.

And in fact, it's an exception at CIE is the only market we have a strong exposure to all segments to give you an idea. We're talking about passenger vehicles, representing approximately 50% of our sales in India, 25% of our sales in India in round figures are 2-wheelers, 3-wheelers and the other 25% has to do with heavy vehicles and tractors.

What situation are we seeing in India this year? We're seeing a very significant dichotomy between the evolution of the passenger vehicle market, which is positive, a significant growth and the rest of the segments that are lagging behind that is 50% of our sales is exposed to segments that haven't got started yet. And I say this because it's very important and I invite you to listen to the conference call from our colleagues in CIE India, where this is [ printed down ] with much greater detail, but I say that they haven't started up yet, because these segments today, and therefore, about 50% of CIE sales are affected by segments that are not growing very much, but the future is very good.

Right now on the growth for the coming years of passenger vehicles in India is expected to be good, but the growth of heavy vehicles is expected to be at 5 points for the coming years and tractors another 5 points and the 2-wheeler, 3-wheeler markets 10 points and accumulated growth for the coming years. So these are segments that are going to take off.

[Operator]

So -- from a juncture point of view, there's no concern. A market that without a doubt is bringing and is going to bring great news. And to close the chapter on countries or regions markets, we're asked about Europe from the Chinese angle, what growth strategy will CIE take in relation to the arrival of Chinese OEMs?

[Lorea Aristizabal, executive]

Well, it's true, and I mentioned it. In fact, in a proactive way, the entry of Chinese electric vehicles exported from their market and being brought over here, the measures that Europe has taken, and I mentioned the investigation in Brussels, the protectionist measures like the one in France, but none of us like we all like a free market, but we understand that protectionism of the national market.

The only thing in these variables is that Chinese OEMs are planning their entry with production capacity in Europe, is that positive, negative or neutral for CIE? Well, I think there are 2 factors in the future in Europe.

One, a necessary consolidation of the supplier market in Europe, there are many people in a very critical financial situation. Some of them will survive, others won't survive but those that do survive will take up their market share. So CIE has a very important catalyst for market growth in Europe.

And then there are the Chinese, and I say this on a positive note. I think that the Chinese OEMs are going to resort to the local supplier base in each market they go to, and I gave you the example of BYD in Brazil, how BYD in Brazil have spoken publicly that they're going to use local Brazilian suppliers, and we've already had meetings with them. So I can only think of positively and exactly the same thing will happen in Europe, and we will have an additional opportunity to grow with the Chinese OEMs that -- that implement their operations here that will gain market share, and we can gain market share with them.

And Moreover, once the door has been opened to the Chinese OEMs, either in Brazil, as it's opened already or in Europe when they come over here why not a good crossover with the Chinese market and also find the opportunities with them in the Chinese market. So from my point of view, the prospects are good, and it's a good opportunity, and changing to something else.

We've deleveraged less in the last few months. Does that have anything to do with working capital? And what we see in the future regarding the leveraging in general? Well, yes, so that the working capital has had a certain investment in these months. I don't know if I remember correctly, the EUR 60-some million in 9 months, nothing that worries us we're going to make every effort so that we will recover a lot of that in the fourth quarter or at least partially recover that investment in the fourth quarter. It's not the same first time that this has happened.

So in 2023, the effect will be small or may also be a neutral, let's say, a small investment of EUR 10 million, EUR 20 million, EUR 30 million in a total of EUR 6 billion in assets, which continues to grow, I think it can be considered to be in significant investment in working capital. So they're not moving from our policy of good working capital for the whole year or maybe more or less in a given quarter, for the whole year, the aim is to not have a significant impact or have a neutral effect and this without a doubt, helps to deleverage the year 2023 overall.

[Operator]

Looking at the future, how do you see the fourth quarter and 2024? Do you expect to go to the outperformance in the fourth quarter by margins in general? How do you see the fourth quarter 2024?

[Lorea Aristizabal, executive]

Regarding market growth, I have mentioned it, I reviewed each one of the markets. And I would say that in general, they have a very good outlook, the forecast in each market, especially strong in China, for instance. In the case of India with the festivities. And this gives us a very good global snapshot as a context.

How is the year going to end with that fourth quarter? Well, I think I'll go back to the words spoken by Jesus [ Barandiaran ]. When you asked him this at the conference call for the first half, if I'm not mistaken, Jesus [ Barandiaran ] said that this was going to be a historic record year. He said that we were going to see EBITDA margins, EBIT margins and net results that we're going to grow significantly, that there will be a gradual increase in P&L to continue to reach our goals for 2025. And there hasn't been anything in this third quarter that makes us change that statement we made on June 30.

And along those same lines, they ask about the consensus how do we see it? If I'm not mistaken, the Bloomberg consensus is around EUR 3,900 million in sales or something like that, EUR 700 million in EBITDA and EUR 300 million-some in net earnings. Well, I don't think we'll have a problem to meet something similar to that.

[Operator]

On M&A, we have questions on how we see the M&A pipeline. Is it possible to get it to plastics in India? Are we going to use the EUR 2.5 billion from now until 2025?

[Lorea Aristizabal, executive]

Plastic in India. Well, plastic in India without a doubt is one of those boxes we'd love to tick. you know that one of our strengths vis-a-vis customer is to offer in each geographic market all our multi-technology and issue that in India right now after the latest investments in aluminum that we already carried out with the integration of Aurangabad, to the purchasing of Aurangabad, we have to [indiscernible] that with plastic. And hopefully, 2024, in 2025 will bring in good news to tick that box.

What's the M&A pipeline? I think that it was, as expected, since we launched the strategic plan at the beginning of 2021, we spoke about 2 parts in the strategic plan. 1 part that was the first half of the strategic plan, which was the post-pandemic. We have to remember that we launched a strategic plan in 2020 post-pandemic. And we said that the first part of the plan had to be focused on us, we had to look at ourselves to improve, to deleverage, and this is what we've done. And I think that we were very honest and very transparent by saying that M&A and inorganic growth had to come more in the second half of the year once we have created the capacity on the balance sheet to go out shopping.

This is still the case. How are we doing with M&A? -- we're up to the brim, I can guarantee we're looking at many things, many things that aren't interesting with a really distressed profile, with financial difficulties, a very critical financial situation, which in most cases, isn't the kind of company we're interested in and other things that we are interested in small groups with a certain turnover, where they're doing a good job. They're putting up a fight. They have margins that we consider can be improved but they are not bad and especially, I'll emphasize this, that with the focus on future growth markets, starting with India, Brazil, Mexico, markets that we are delighted with and of course, less in mature markets like the European market or the U.S. market with their own problematic. So in relation to labor disputes that are costing us all so much.

So we're very optimistic about having M&As in 2024, 2025 and before producing the strategic plan. it's unpredictable. I don't want to make a commitment. It's unpredictable, but I would say, optimistic.

[Operator]

And related to this, a reminder of the magnitude of German Forges at CIE, the impact on cash, et cetera.

[Lorea Aristizabal, executive]

Okay. German Forges, 2020, the German Forges of perimeter we're selling were about EUR 220 million in sales, sales that you no longer see on the account. So remember that this operation has been under discontinued operations as of October 16. So EUR 220 million sales at the speed with a recurrent EBITDA that I would say is around 5%, approximately 5% approximately with a net result that is practically breakeven. We've sold the forges for an enterprise value of EUR 55.5 million, which, if I'm not mistaken, represents a multiple of 5x and the recurrent EBITDA and for a European business and our European truck business is really good and equity value of approximately EUR 25 million with a small part of the payment that's being deferred and part of the payment that was collected on October 16, and you'll see it in the fourth quarter.

[Operator]

A final question. Capital allocation, we consider buybacks bearing in mind that the share price, what's happening to the share price?

[Lorea Aristizabal, executive]

I don't know how to answer that question. If anybody knows how to answer that question, I would be very grateful to receive the comment on what is happening to the share price. There's a reality and objective reality. After buybacks and with the -- so two share buybacks operations we've carried out, liquidity is low. That's an objective reality. Since then, we've seen a drop in the share price and with a company that's generating value objectively every quarter with results and the performance that are spectacular quarter after quarter. The drop in the share price is a drop in valuation that we find completely incomprehensible and we can only -- I expect that the market when it can or when it decides to in the midterm, well we cover the share price and we align the value of CIE Automotive on the market, the actual value of CIE Automotive. May there be more share buybacks. It's true that the share price is low and it's also true that liquidity is very low. So we have to consider both factors, and we'll see.

[Operator]

That was the last question. Well, thank you all very much. But if you have any further questions, you know where to find us. Thank you all very much. Good afternoon.