Coca-Cola Icecek AS
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Coca-Cola Icecek AS
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Ladies and gentlemen, welcome to Coca-Cola Icecek's Third Quarter 2021 Financial Results Conference Call and Webcast.
I will now hand over to your host, Ms. Cicek Ozgunes, Investor Relations and Treasury Director. Please, ma'am, go ahead.
Good morning, and good afternoon, ladies and gentlemen. Welcome to Coca-Cola Icecek's third quarter 2021 financial results conference call and webcast.
I'm here with Burak Basarir, our Chief Executive Officer; and Andriy Avramenko our Chief Financial Officer. Following Mr. Basarir's and Mr. Avramenko 's presentation, we will turn the call over for your questions.
Before we begin, please kindly be advised of our cautionary statement. This conference call may contain forward-looking management comments, including projections. These should be considered in conjunction with the cautionary language contained in our earnings release. A copy of our earnings release and financials are available on our website at www.cci.com.tr.
Now let me turn the call over to Mr. Basarir Sir.
Okay. Thanks, Cicek. Good morning, and good afternoon, everyone. Thank you for joining us today to discuss our third quarter results. We are reporting the sixth quarter since the pandemic began. Although it has been a challenging and volatile experience, thanks to the commitment of our people, the power of our brands and the loyalty of our consumers, CCI continues to deliver solid results.
In the third quarter, we kept building on the momentum we had seen since the beginning of this year. Before moving to the third quarter operational performance, I would like to thank our people for working relentlessly as one team to create value for all of our stakeholders. I also would like to reiterate how happy we are to have successfully closed the Coca-Cola Bottlers Uzbekistan acquisition at the end of the quarter. Uzbekistan has now become part of our family, integration work progress at full speed. I will give more information on this operation later in the call.
Looking at our quarter performance, the consolidated sales volume grew 11% on the strong summer season volume performance, both in Turkey and internationally. We have reached the highest ever quarterly performance on a consolidated basis. With the reopening of On-premise channels and our focus on growing IC share in the home channel as well, the number of transactions outperformed sales volume growth. Although not yet back to 2019 levels as a percentage of total sales, we saw sequential improvement in IC share.
Net sales revenue growth outpaced sales volume-driven by the price increases, better discount management and other revenue growth management initiatives. EBITDA grew strong in absolute terms. Although as expected, the EBITDA margin declined by 415 basis points versus prior year 24%, remaining significantly above historical averages. As guided before, the margin contraction is due to exceptionally high base of the last year.
Net profit was TRY 916 million in the third quarter and TRY 2 billion in the 9 months on the back of strong business momentum, higher profit and FX gains due to hard currency loan position.
Let's move on to the next slide, please. As discussed in the previous slide, our performance was in line with our quality growth algorithm, except for the EBITDA margin contraction. As you will remember, to deal with COVID-19 uncertainties last year, we cut down significantly our DME spend to own absolute minimum and substantially reduce the number of SKUs to give more flexibility to our supply chain.
Now the business is back on to normalized top-line growth, although learnings from the pandemic remain, and we continue operating with a frugal mindset. The margin of third quarter of 2020 are not a realistic comparison. CCI's current 24% margin is the second highest third quarter margin ever achieved right after third quarter of 2020.
On the next slide, the sparkling category grew by 10%, mainly driven by the performance of the brand Coca-Cola, Coca-Cola Zero sugar, growing 10% and 15%, respectively. Fanta also posted 14% strong growth, 39% decline. Stills category registered 27% growth in the third quarter on the back of solid performance of Ice Tea and juices. Energy drinks delivered strong 23%, driven by Monster Energy, which doubled its volume in the quarter.
The water category grew by 16% with the continuous prioritization of IC packs. We continue to support our consumers with our rich and diverse product portfolio on all at home occasions, including work, education, leisure, entertainment, family gatherings, breakfast refreshments and et cetera.
Channel mix further improved during the quarter. Share of the On-premise channel increased by more than 3 percentage points compared to the same quarter of previous year and reached to 20%. The shift was more visible in Turkey. As a result of both On-premise recovery and at home channel performance, IC packages significantly recovered in the third quarter, reaching a 29% share of total volume. The share of IC packages reached to 32% in Turkey.
On the next slide, let me talk about Turkey business a little bit. Turkey sales volume grew by 15% in the third quarter compared to a year ago, led by segmented marketing campaigns, effective promotion management, successful innovations in summer season and increased availability in the e-commerce platforms. East pandemic restrictions increased mobility and favorable weather conditions contributed to strong top line growth as well.
The record high sales volume was exceeded in July and the high momentum was maintained for the rest of the quarter. We are also delighted with Coca-Cola Zero sugar sales performance that we launched in the previous quarter with an improved taste and new look. Sparkling beverages grew by 13%, led by a 14% growth of the brand Coca-Cola. Coca-Cola Zero sugar drove the share of the sugar-free category to 6%. The sales category registered 21% growth, led by double-digit growth in both IC and juices.
The energy drinks continue to high single-digit growth with the sales volume of Monster Energy almost doubling. We maintained our more profitable small packs focus in the water category and registered 18% growth in the third quarter. Higher sparkling sales improved IC mix and effective pricing enabled 17% growth in the net sales revenue per unit case. However, the depreciation of Turkish lira and higher commodity prices put pressure on margins in Turkey, while cycling an exceptional high base of the previous year, profit margins contracted in Turkey.
Moving on to the next slide. On our international business, we have cycled a high base of the third quarter of 2020 of 9%. Central Asian operations and Pakistan were the main drivers of our growth. Sparkling Beverages grew by 8% with 7% growth of Coca-Cola and 15% growth of Fanta brands. Stills category grew by 35%, mainly driven by the strong performance of Ice Tea and juices.
The water category continued its gradual recovery with 14% growth in the third quarter of 2021. All large operations registered net sales revenue per unit case growth. On a currency-neutral basis, NSR grew by 22% as a result of our GM initiatives, including packaged region based pricing adjustments, effective discount management and improved category mix. Currency-neutral EBITDA grew by 20%, delivering 28% EBITDA margin.
On to the next slide, please. Pakistan is always a fascinating market. As challenging as it is, the market possesses so much potential. The operation became much more resilient with our effort to improve execution in Pakistan by fixing the fundamentals and creating a better route to market. Despite price increases in the third quarter and a robust base of third quarter 2020, sales grew by 8%, thanks to improved route to market and better market execution. The sales volume of brand Coca-Cola increased by 10%. Top line grew by 23% on the back of solid volume performance and price adjustments. We are committed to staying on track in Pakistan to deliver sustainable value creation.
On the next slide, Kazakhstan and Iraq are other key international markets with around 20% share in our total volume. Sales volume grew 21% in Kazakhstan compared to a year ago, ease COVID-19 restrictions, effective consumer promotions with the right execution, favorable weather conditions were the main drivers of the volume growth in the third quarter. With the continued IC focus, transactions grew above volume by 28%. Cycling as solid base, Iraq sales volume was down by 5%. It is worth noting that in Iraq. The main decline is coming from the water category, in line with our plans. Sparkling decline is limited to 3%, cycling 11% growth a year ago, while observing a 15% price increase in response to 23% currency devaluation at the end of 2020.
So let me touch base, our Uzbekistan addition. On September 29, we've completed, as you know, the Uzbekistan acquisition after obtaining all regulatory approvals, and integration has started at full speed. While integrating the operation to the CCI family, our immediate focus is on ensuring the business continuity, aligning all key activities to CCI standards and minimize an organizational change in anxiety by adapting an open communication strategy. Although we are still at the very early stage of integration.
We wanted to share some preliminary figures for the first 9 months of the year to give you an idea of the scale of the business acquired and opportunity in front of us. With 78 million unit cases, sales volume in the first 9 months Uzbekistan would have a 7% incremental growth effect to our 9-month results. Had it been a part of CCI in the period. Uzbekistan's revenue per unit case is accretive to CCI's consolidated per unit case, as guided before.
On the other hand, the EBITDA margin is dilutive with the potential to start improving as our integration work progresses. We work very diligently in all functions of expertise from HR to digital, from commercial to legal, to unlock a great value potential of Uzbekistan business as soon as possible. Our team is combining the expertise of CCI with the deep knowledge required to win locally in an environment that remains dynamic and opportunistic.
When we announce our full year results in February, we believe we can give more precise guidance on the impact of this business to our consolidated results. I will now leave the floor to Andriy to go over the financial results. Andriy, please?
Thank you, Burak. After excellent first half, we continued delivering strong financial results in the third quarter despite Turkish lira depreciation, all inflationary challenges and high base of the third quarter of 2020. Our net sales revenue grew by 37% in the quarter, driven by the sales volume momentum, especially in Turkey and Central Asia, improved package and channel mix, timely price adjustments and other revenue growth management initiatives. There was 233 basis points contraction in gross profit margin due to the surge in commodity prices and depreciation of Turkish lira.
Contraction remains limited, thanks to our hedging initiatives, proactive procurement management and price adjustment we made during the quarter. When we look at the country detail, contraction comes mainly from Turkey, while there has been 165 basis points improvement in the gross margin of international operations. Higher Turkish lira devaluation against more stable international currencies is one of the main reasons. As we guided previously, our direct marketing expenses increased in line with the normalization and higher mobility. OpEx to sales ratio realized at around 16%, up by 104 basis points against a year ago.
EBITDA grew by 17%, and we delivered 24.1% EBITDA margin, 415 basis point decline in the EBITDA margin is mainly due to exceptionally high base over the last year. As I mentioned, gross profit margin contraction in Turkey also made an impact due to significant depreciation of Turkish lira and higher commodity prices. We delivered a strong TRY 916 million quarterly net income. Strong operational performance and prudent financial expense management made the highest contributions to the net income growth.
I also must mentioned that during the quarter, we recorded a sizable provision for slow-moving and lower per unit value spare parts, amounting to TRY 205 million. This was partly mitigated by the TRY 140 million income from the land sale, yet on a net basis, it had a noncash negative impact on the consolidated net income. Next slide, please.
Our FX-neutral net sales revenue per unit case growth was on track in the third quarter. It increased by 14% on the back of dynamic pricing, better discount management and other revenue growth management initiatives, including prioritization of certain SKUs and IC multipacks. However, due to the significant surge in commodity prices, COGS per unit case grew by 18%, more than offsetting the positive contribution from the strong top line.
We continue to invest in marketing as our business is back to a new normal. As guided before, we stepped up our marketing expenses from 2% last year to over 4% this year in third quarter. This gradual normalization in OpEx, combined with higher cost pressure led by -- to a 5% contraction in FX-neutral EBITDA per unit case in the third quarter.
Our proactive hedging initiatives and frugal OpEx mindset help us to keep reduction to a limited level. However, looking on a 9-month cumulative basis, the profitable growth momentum continued, strengthening our confidence to deliver in line with our revised guidance for the full year. The next page, please.
Let me give you more color now on consolidated EBITDA and free cash flow evolution for the first 9 months of the year. In terms of top line growth, we performed ahead of our expectations year-to-date, the easing of pandemic related to restrictions and reopening of on-premise channels contributed to this robust performance, while the positive momentum at the at-home channel continued.
Top line growth with improving channel package mix and timely price adjustments were the main contributors to EBITDA growth. However, globally elevated demand and the supply chain bottlenecks led to a significant surge in the commodity prices, which pressured margins through COGS, especially in the third quarter.
On the OpEx side, we continued our tight OpEx management with the learnings from the pandemic period. But in line with the normalization, and as we guided before, our direct marketing expenses increased to their pre-pandemic levels. We delivered 43% EBITDA growth in 4 months -- in 9 months of 2021, with less than 0.5 percentage point of margin contraction.
On the other hand, our net working capital over annualized sales turned negative. Although CapEx doubled in nominal terms, it only increased by 1 percentage point as a percentage of the net sales revenue. Bearing in mind that last year, we cut CapEx to an absolute minimum. This limited increase in CapEx is the result of our disciplined spending and is a strong contributor to 30% free cash flow growth. On to the next slide, please.
Our net leverage continued to decrease to the lowest level ever of 0.4x due to strong free cash flow generation and our prudent FX risk management. We financed the Uzbekistan acquisition with our own cash, relying on our strong balance sheet. Even after $252 million payment for the acquisition, our net debt-to-EBITDA ratio remained at historical low levels, thanks to our continued cash generation.
We do not expect a significant change in our leverage for the rest of the year. We remain comfortable with the strength of our balance sheet and liquidity position. Use of cash to finance the Uzbekistan acquisition increased our short currency position compared to the first half. We have short position of $350 million after deducting the existing hot currency cash balances and financial hedges. This is approximately to one-time of our international EBITDA, which we are comfortable to carry.
As you know, on top of financial hedges, we have a net investment hedge as well. Since the Uzbekistan's acquisition is made by our di-subsidiary. And in order to finance this, we made a cash capital increase in the di-subsidiary. We were able to increase the net investment hedge amount by $150 million. If we include net investment hedge as well, then CCI maintains net loan currency position, hence in pure FX gain when Turkish lira depreciates against dollar.
Considering the recent currency fluctuations, we keep our financial management discipline to mitigate the negative effects of currency depreciation on our balance sheet. We may consider further hedging alternatives depending on the market conditions. We are committed to maintain the balance between sustainable short position and strong free cash flow. On to the next slide, please.
From a cost point of view, the world is certainly going through a very challenging time. The rapid price increases in global commodity markets are coupled with reports of raw material shortages and procurement delays around the world. In this environment, our #1 priority is to ensure continuity of raw material supply.
Our procurement team has been quite proactive in terms of identifying potential in common issues, engaging with alternative suppliers, preparing backup plans and even implementing in-house solution for certain items such as CO2. Therefore, we do not expect to run into any procurement problems in the foreseeable future. However, we are not immune to the commodity inflation. This is another factor we are managing proactively.
We have been successful with hedges that we have put in place in 2021 during the pandemic. They helped mitigating the impact of current input cost inflation substantially. However, these hedges begin to roll off by 2022. We kept adding new hedges over the course of 2021, although at higher levels than during pandemic, the new hedges still provide some mitigations against current spot prices and help with input cost visibility for the next year. For 2022, we have already hedged 80% of our elicit needs. However, unless we see a good correction in aluminum prices, we do not expect to increase hedge coverage substantially beyond current level and leave some exposure to the sport procurement in 2022.
Aluminum is not a substantial part of our cost base, and we are questioning the sustainability of current prices. We also hedged 42% of resin requirements and looking for opportunities to add coverage. Sugar is a regulated commodity in many of our markets. Therefore, our coverage is limited since hedging is not available or practical. We continue monitoring the commodity price environment.
Apart from hedging, we are taking proactive price increases, implementing further RGM initiatives and accelerating productivity measures to offset some of the commodity cost pressure as we look forward to the next year. I now hand over to Burak for his closing remarks. Burak, please?
Well, thanks, Andriy. Given the strong results year-to-date and increased visibility into the rest of the year, we are revising our organic guidance on sales volume and revenue terms. Our existing hedges protect us to a great extent, and the larger scale also supports our profitability. As a result, we are committed to keep our EBITDA margin flat on an organic basis despite the challenging commodity cost environment.
As you know, since the beginning of last quarter of 2021, we have started consolidating Uzbekistan operation into our financials. The fourth quarter impact will not be significant. Therefore, you will see only a couple of percentage points of incremental growth from this operation on the volume and revenue side. As discussed before, you will see a slight dilution on the EBITDA margin level, nothing material.
Looking ahead, an inflationary environment, supply chain bottlenecks and currency volatility will be the main headwinds for our operations. We continue to be agile, careful in dealing with these short-term challenges. However, we are leveraging the learnings from the COVID period, applying revenue growth management initiatives, working our supply chain levers and expanding digital enablement of execution to capitalize on the strength of our brands.
We have use of experience succeeding in the volatile environment. However, we will not deviate from our long-term road map of creating value for our stakeholders that we serve. We look at the future with the confidence counting on our commitments, talented people, excellent brand portfolio, digital capabilities, strong system alignment and underlying potential of our markets.
We are now ready to take your questions. And operator, please. Thank you.
[Operator Instructions] The first question comes from Hanzade Kilickiran from JPMorgan.
I have a question for Andriy, actually. Andriy, you mentioned about the hedging in major cost items. So according to your current hedging levels at the hedged prices, how much headwind -- margin headwind are you looking for next year?
Thank you for the question. In terms of the margin, I guess, I understand you're looking for guidance for the next year. And I think we will be more comfortable to provide it when we actually finish this year, and we are working on different scenarios. Obviously, as before, we are focused on optimizing the business and mitigating the impact of commodity prices by other measures that we described.
There are also -- we're devising the plans for the remainder of this year and for next year to make sure that we minimize or mitigate the impact of commodity prices on our margins. I understand that you would prefer if we shared the guidance, but we're not ready to give the EBITDA guidance for margin for the next year.
Maybe not the guidance, but I'm trying, because you already know your cost base now because you are already hedged 80% on aluminum, sugar prices are regulated mostly in line with the inflation and the resin is mostly hedged. So I'm trying to understand, if we increase the prices in line with the country's inflation.
I mean, the margin headwind should be clear, I think, I mean -- or how much price increase do you need to cover these hedge prices? I mean, because I don't know your hedging price on the aluminum or other raw materials. So are you a hedge -- I mean, your hedging prices are lower than the current crisis or compared to 20 -- I mean, so far on a year-to-date average cost of expense?
Yes. The -- why we're hesitant to provide guidance because our 2020 numbers, particularly third quarter numbers. In terms of the commodity prices were extremely low, right? This was probably the bottom of the pricing for very, very long time. Right now, we sort of ran over hedges that we made during crisis during quarter last year for this year by sort of early Q3.
And in Q3, we were on a more normalized procurement and added hedges this year. Therefore, if anything, the Q3 is sort of a more sustainable situation than the previous year. And therefore, we are looking at how much price we already took and how much price we need to take to cover that impact.
[Operator Instructions] We have a question from Cemal Demirtas from Ata.
Congratulations for very good results. My question is about your guidance. I think you just include the effect of CCBU. Could you give anything about excluding that to see the trends? And as far as I understand, you are only going to record it for a quarter, right? It's not going to be just backports. You're going to just include the fourth quarter to your consolidation?
Yes. Thank you for the question. We -- yes, we include only for the fourth quarter impact of CCBU. Since it's the smallest quarter, you understand that impact overall is fairly small, particularly that CCBU has only 7% volume impact on overall CCI. So yes, it's a fairly small impact on overall guidance.
And as a follow-up, when I look at your numbers, I see that still side is performing better recently compared to sparkling side. Do you see any just fundamental thing or change in trends? Or it's just a cyclical or the nature of the business?
Good question. Thank you. We -- I think we talked about it fairly often on our investor calls and presentations to investors. If we look at this cycles, economic cycles and sort of crises in the past. Sparkling usually goes to decline last, it declines less. And then it comes out of the crisis earliest.
This is -- and this is exactly what happened in the quarter. So this was sort of sparkling performed relatively better, significantly better than still. Now when we get to sort of economic improvement, overall, climate, consumer confidence increasing, newer categories, they tend to grow relatively faster. So that's nothing unusual. So we expected that, obviously, we are very focused on continue to develop the full portfolio without forgetting continuing to grow sparkling as the core of our business. But we don't see any unusual trend in this. It's a normal dynamic of sort of cyclical performance in our industry.
And one last question about your effective tax rate. We see some decline in third quarter versus second quarter. Part of it could be related to changes in corporate tax in Turkey, that was why second quarter was high. What do you see for the following quarters, just average thing consoling to your combined results -- consolidated results.
No, there should not be any significant deviation going forward. In terms of the tax rate.
[Operator Instructions] The next question comes from Charlie Higgs from Redburn.
The first one is on Monster Energy where you doubled volumes. Can you maybe give a bit more color on what's going on there? Is that underlying consumer demand? If that is a check changing that execution or a combination of both some line extensions perhaps? Just maybe a bit more color on that strong performance? And then the second question is on Pakistan, where you said you've changed your route to market. I was just wondering if you had a bit more color there and your thoughts going into Q4, where you've got a pretty tough volume comp on Q4 '20.
Thank you for the question. So first is Energy and then Pakistan. On Energy, I think it's all the factors that you mentioned. One, the consumer demand is there and very evident. It's a high-growth category overall. 2, we are -- we've said it multiple times, we are committed to grow in this category.
This is one of our strategic categories, and we will continue to improve. And so that's why we are actively driving the business. We are -- we continue to improve and streamline our relationship with Monster and working with the strong portfolio and winning portfolio from our perspective. So yes, there were some line extensions and other actions, but nothing unusual, just focused and very good execution by us and Monster together.
Now Pakistan. In terms of Pakistan and route to market, we have been talking about route to market in Pakistan for the last 2.5, 3 years. And this was a very deliberate change that we started 2.5 years ago or so. And now it's given the results that we wanted that we planned that we expected from that change. So what we have been doing in Pakistan over the last 2.5 years is simplifying and streamlining how our product gets from our factory to the hands of the outlet and finally to the consumer. And there was a fairly archaic and multilayered system of how product was moving it from multiple participants, and this was a standard for the industry, for FMCG more broadly in Pakistan.
We decided to change it to what we are more accustomed to, much more efficient and effective system where participants are in that value chain only if they truly clearly contribute to the advancement of our business and our products and adding value to the chain. And therefore, that simplification. In addition to just normal route to market expansion, sort of horizontal expansion, adding more outlets, reaching new areas, improving full replacement and in-store execution is given the results. But again, this is not something new. This is a very deliberate plan for the last 2.5 years.
[Operator Instructions] We have a question from [indiscernible].
Congratulations on a good set of numbers. My question is related to the Uzbekistan operations, which you have recently acquired. Could you please elaborate on the areas in which you see room for improvement? And what are your medium-term targets on the operating lines of Uzbekistan operation? I'm referring to the -- more to the EBITDA margin guidance for Uzbekistan operation.
Okay. In terms of Uzbekistan and what are the areas of improvement, as Burak said, that we are very excited that CCBU became part of CCI family. It's a well-established operation when it comes to manufacturing and basic policies and procedures of the Coca-Cola system. However, the biggest opportunity we see in Uzbekistan is sort of commercial area and in-market execution and commercial capabilities. And this is where we believe we bring strength, particularly in emerging and frontier markets.
And this is a very significant part of our focus, how to create value and accelerate value creation in Uzbekistan, particularly that the market continues to demonstrate a tremendous growth, naturally, with our execution capabilities that we'll be able to step change of what CCBU has been doing so far, we believe we can add a lot of value. Second, the business was sort of optimized and around on a very limited capacity. And essentially, they have been selling until now what they can produce from the factory floor.
There is a tremendous unaddressed demand in the market. And therefore, adding capacity while improving in market execution, could provide very significant growth potential for foreseeable future in Uzbekistan. In terms of the guidance for the next year on Uzbekistan, again, I'm afraid I would disappoint you as Burak said that by -- probably by end of the year, when we have a next call for the next quarter, we'll give a clear guidance on how Uzbekistan will be performing. At this time, we just would like to share with you the 9 months actual results and the -- that's pretty much what we have as we took control of the operation since basically the last day of the third quarter.
[Operator Instructions] The next question comes from Hanzade Kilickiran from JPMorgan.
Andriy, I have a follow-up question on pricing. Did you start increasing prices in Turkey and how much price increases go down in the third quarter, including Turkey and for other markets?
Yes. We have been -- we have been taking prices regularly in all our markets. And this year was no exception as we have been communicating for the last few years, regularly that we are committed to monetize value of brands we operate better in every market we are present. And we stick to that strategy. In terms of increases in Turkey, in this -- in the third quarter, we made approximately 10% price increases on average in Turkey specifically, right? And so we -- that's just in this quarter. And we will continue to look for opportunities to sort of continue on our strategy of realizing a sort of better value and better pricing. For example, as you may recall, in the first half of the year, we already grew increased average price in Turkey by about 17%.
Is there any other significant price increases in other markets? I mean, that you may flag?
Yes. I think we -- as I said, we took pretty much price increases, pretty much in all markets we operate. And therefore, I think you can see the results in terms of NSR growing significantly ahead of volume in international operations. And in Turkey, in Pakistan, for example, we took pricing in the third quarter in high single digits again. And this is on top of the previous price increases that we already realized there.
Thank you. Ladies and gentlemen, there are no further questions. I will now give back the floor to our speakers.
Thank you. Well, thank you, everybody. As a system with the Coca-Cola Company, we are very excited. I'm very happy how are we going to close the year at CCI and the Coca-Cola system. And we're also very happy and optimistic about how the 2020 will turn out to be.
We know, and as discussed, there will be a lot of headwinds that we have to deal with. But we are extremely confident that with our system, with our strong capabilities and skills. We've been able to deliver another strong year for next year as well. And I would like to thank all of our employees and thank you as well supporting us on every front. So I'm wishing you all the best and hope to see you next time. Thank you very much. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect your lines