Prologis Property Mexico SA de CV

OTC:FBBPF

Earnings Call Transcript 2022-Q2

[Operator]

Good morning. My name is David, and I will be your conference operator today. At this time, I'd like to welcome everyone to the FIBRA Prologis second quarter earnings conference call. [Operator Instructions] Thank you.

Alexandra Violante, Head of Investor Relations, you may begin your conference.

[Alexandra Violante, executive]

Thank you, David, and good morning, everyone. Welcome to our second quarter 2022 earnings conference call. Before we begin our prepared remarks, I would like to remind everyone that all the information presented in this conference call is proprietary and all rights are reserved. The information has been prepared only for information purposes and is not a solicitation of an offer to buy or sell any securities.

Forward-looking statements that are in this call speak only as of the date of this call. Our actual results, performance, prospects or opportunities may differ materially from those expressed in or implied by the forward-looking statements.

Additionally, during this call, we may refer to certain non-accounting financial measures. The company does not assume any obligations to update or revise any of these forward-looking statements in the future, whether as a result of new information, future events or otherwise, except as required by law.

As is our practice, we have prepared supplementary materials that we may reference during the call as well. If you have not already done so, I will encourage you to visit our website at fibraprologis.com and download this material.

Today, we will hear from Luis Gutierrez, our CEO, who will discuss our strategy and market conditions; and from Jorge Girault, our Senior Vice President of Finance, who will review results and guidance. Also joining us today is Hector Ibarzábal, our Managing Director. With that, it is my pleasure to hand the call over to Luis.

[Luis Gutierrez, executive]

Thank you, Ale, and good morning, everyone. The logistic real estate sector in Mexico is having one of its strongest quarters, reflected in our results, which has surpassed our expectations. For this reason, we're adjusting our occupancy and same-store guidance. We are confident of our business resiliency despite the current global uncertainty and inflation.

Let me provide some highlights. We had a high occupancy of almost 98%. This is 140 basis points above last year. Our FFO continues to grow mainly due to strong rental growth and the addition of last year's acquisitions. For the last 12 months, we have leased 6.5 million square feet and our rental change on rollover is 13%, which is reflected in the company's same-store NOI.

Additionally, on the ESG front, we recently published our ESG report, in which we have certain goals and accomplishments. And we have announced our alignment with Prologis commitment to become net zero scope 3 by 2040. And Jorge will provide more color on this.

For the first 6 months, demand increased almost 20% year-over-year and in our markets mainly from manufacturing expansion due to nearshoring in border markets, and demand from logistics operators to serve e-commerce adoption in consumer markets has kept a positive trend. Quarterly demand was more than 8 million square feet in our 6 markets, an increase of 23% year-over-year, outpacing supply by more than 2 million square feet, resulting in market vacancy of 1.8%.

Demand continues to surpass supply. Barriers to supply like low utility availability, land scarcity and increased raw materials are delaying new deliveries to the market. This will benefit the overall occupancy, facilitating rental growth. Market net effective rents have increased around 7% in the first half of 2022, and we expect them to continue with a positive pace towards year end due to the strong demand and limited supply.

Let me spend a few moments on what we're seeing on the ground. On the manufacturing side -- has been one of our key drivers of the Mexican economy. During the quarter, non-auto manufacturing exports grew 25%. Manufacturing is now 2/3 of the overall industrial demand. Nearshoring and U.S. labor shortages have been the main drivers. We're seeing a strong pipeline of customers willing to expand their operations in Mexico. It is in different sectors from electronics, medical devices, auto, consumer products, et cetera.

Nearshoring has been accelerating, and if it keeps the same pace, it will double the demand for space from 2021. The main markets have been Monterey, Tijuana, Juarez and Reynosa. Our sponsor has a pipeline of 5.1 million square feet of built-to-suits. And of course, the economic recession conversation is present in some of these transactions, but it's still with a positive sentiment.

On the logistics front, retail consumption has had a positive semester and e-commerce adoption is increasing into a low double digit due to the marketplace expansion and omnichannel activity. For the remainder of the year, consumer spending is expected to have a positive real growth and e-commerce penetration will be around 11% from a 4.8% pre-COVID as a reference.

We're also seeing movement in our leasing of our last-mile facilities. This kind of assets are starting to gain traction. Mexico City, which is our most important market, land continues to be very scarce, forcing development to the north of the toll booth. As a result, we remain very bullish on the performance of the portfolio as rents rise. Logistic real estate continues to be the preferred asset class.

In summary, we know there is a potential softening of demand. Our best-in-class portfolio has been resilient and has been built to outperform in any part of the cycle. Despite of a higher interest rate environment, values increased 2% in the second quarter. And we expect valuations to keep stable for the remainder of the year as we see a good balance between cap rates and rental growth.

In operations, rents continued to grow and our lease mark-to-market has increased to 15%. This will be a major driver of earnings going forward. On the capital front, we're active and engaged from consolidating our acquisitions plan before year end. Opportunities are already identified and closing is presenting good progress. We will continue to focus in our Prologis markets with a special attention to real estate quality. On top of third party deals, Prologis' pipeline keeps growing with build-to-suit projects and with positive traction on pre-leasing and speculative investments, our strong balance sheet, which provides us a major competitive advantage and flexibility to play offense. Finally, we remain committed to creating value for our certificate holders.

With that, I will pass the word over to Jorge.

[Jorge Girault, executive]

Thank you, Luis. Good morning, and thank you for joining us. Starting with our financial results. As we've mentioned, we had a strong quarter, above our expectations. FFO reached $39 million or $0.045 per certificate, representing a 9% increase compared to the second quarter last year, one of our highest increases on a relative basis and in line with our NOI growth. AFFO was $29 million for the quarter, basically flat when compared to last year and in line with expectations.

Moving to operating metrics. Leasing activity reached 2 million square feet, the highest in the last 5 quarters, with period end occupancy reaching 98%. Net effective rent change and rollover increased almost 20% in dollar terms, a record high since IPO. And for the last 12 months, it has been above 13%.

In terms of same-store cash NOI, we had a positive 5.1% and for GAAP 4.3%. These results reflective FIBRA rent growth and annual bumps for the quarter.

Given the above results, we are adjusting our 2022 guidance as follows. We are increasing our midpoint of same-store cash NOI by 100 basis points to be between 4.5% and 6.5%. We are increasing our midpoint of the year end occupancy also by 100 basis points to be between 97% and 98%.

I would like to touch on FIBRA's balance sheet and explain why we see this as a strength, in particular in an environment of interest rate hikes. Our loan-to-value is 29%, which gives us enough space to reach our 2022 acquisition guidance as we have $270 million of liquidity under our line of credit, including our accordion feature.

Our next debt maturity is not until 2026 and our weighted average maturity is over 7 years. Our weighted average interest cost is 3.8%, and we have 80% of our outstanding debt fixed with a floating piece, being our line of credit. In short, we have a flexible balance sheet.

Moving to ESG. First, let me mention that FIBRA Prologis is again part of the ESG BMV Index as well as the Dow Jones Sustainability Index. As mentioned by Luis and in line with our sponsor, yesterday, we published our 2021 ESG Annual Report and announced our alignment with Prologis commitment to achieve net zero by 2040, 10 years earlier than the Paris Agreement, which consists in: net zero emissions in scope 1 and 2, which are related to our operations by 2030; and scope 3 by 2040 across our value chain, mainly focused on clients operations in our buildings.

We're extremely pleased to have once again raised the bar and hold ourselves accountable to real and reportable progress for our investors, our customers and our planet. What specific steps are we taking? We're looking to use more clean energy in our portfolio. As you know, we are currently working on our solar pilot program in some of our assets and in line with local regulation. Not stopping there, we're also collecting more data regarding water and waste in order to be able to structure and communicate our role in the future.

Regarding social, we are committed to improve the way of life of the people in our markets through our community workforce initiative program. In terms of governance, we're not stopping on having a diverse majority independent and qualified technical committee. We are also follow -- we also follow ethics training and FCPA rules as managers.

We want to be clear on our ESG goals and commitments. It's not checking the box. It's something that we take seriously. It's part of our DNA and our way of planting a seed for a better world.

Before I finish, I would like to thank the analysts from the sell side that participated with the Mexican Association of FIBRA, AMEFIBRA, on helping the sector to improve its financial disclosure by recommending 5 specific items. At FIBRA Prologis, we made our best effort to take these recommendations and making the corresponding enhancements to our supplemental financial information.

As you have seen, the industrial sector in Mexico remains very strong, in particular in our specific markets, benefited by nearshoring, e-commerce and other factors. With this said, we recognize the local and global challenges in the current environment. This is why we have built a company that we believe is resilient through different cycles, as demonstrated by our results and which we believe is a great investment from a risk-return perspective in today's world.

With that, I will turn it to the operator for Q&A. Thank you.

[Operator]

[Operator Instructions] And we'll take our first question from Gordon Lee with BTG Pactual.

[Gordon Lee, analyst]

Congratulations on the results. A couple of questions on rents and specifically on the leasing spreads on the increases on rollovers. First, I was wondering if you could remind me whether that calculation at 20% that you saw in the first quarter is a simple average? Or is that a square foot weighted?

And then the second one is, as you are renewing these contracts for bringing in the new tenants, are you maintaining the fixed absolute annual escalators that currently are part of your rental structures? Or are you starting to introduce CPI-linked escalators as well?

[Jorge Girault, executive]

This is Jorge. I will take the first part of your question. And by the way, this is one of the enhancements we did in our supplemental financial information. It's under Page 12 of the supplemental financial. You can see that we made 22 operations or leases during the year. And it's a weighted average that we get to 20% for those 2 million square feet that we reached during the quarter.

So in other words, we leased 2 million square feet during the quarter. Those 2 million square feet had a 20% weighted average increase. And for example, Monterrey had a 46% increase and Guadalajara had a 12% increase. So on a weighted average, you get 19.6% to be exact. So with that, I'll pass it to Hector for the second part.

[Hector Ibarzabal, executive]

Regarding escalation in the contracts, as of today, we have 1/3 of our contracts which are CPI based. On the other ones, we have a fixed number that goes between 2.5% to 3.5%, being the most of them near 2.5% increase. Out of the new contracts and since inflation started, we are having probably 98% of our contracts CPI increase no matter if they are peso or dollars. 100% of our peso contracts are CPI increases.

[Operator]

And we'll go to our next question, Pablo Monias with Barclays.

[Pablo Monsivais, analyst]

This is kind of a different question. But I was just curious to know what is your take on the impact of water scarcity in Monterrey and in Nuevo Leon, and if -- do you think that this could limit the region's ability to attract new tenants? And also for existing tenants, what have you heard in terms of how this is affecting operations?

[Hector Ibarzabal, executive]

And we all know that, unfortunately, Nuevo Leon is facing a historical crisis regarding water. I need to say that as of today, none of our parks, none of our customers have been affected by this situation. We have supplied from a robust wealth of water that has been providing water accordingly.

We are ready because we might be requested to rationalize water. And the first step that we need to take is on common areas, on the green areas. We're already working in some of our parks to provide with water treatment park, which this is aligned to our ESG initiatives.

In a few words, our ESG approach takes us to be very conscious of this situation, and we're trying to be close to our customers, helping them on being more efficient on the water use.

Having said this, Pablo, we see the water situation as a situation that is going to be affecting not only Monterey, but might be affecting some other markets. So we are aware of this, and we are anticipating with infrastructure investments and with programs with our customers in order to be more rational in this regard.

[Operator]

Next, we'll go to Francisco Suarez with Scotiabank.

[Francisco Suarez, analyst]

Congrats for the results. The questions that I have is that I noticed that your parent company mothballed the overall guidance for completions taken this year, but actually, they increased their overall completion guidance on 2023. So perhaps this is actually a follow-up on Pablo's question before. In addition to electricity constraints, any other reason that you may see of why the overall completion guidance that PLD had in Mexico for this year was cut?

[Hector Ibarzabal, executive]

It has been a little delayed in some internal process. We are not being affected in the projects that Prologis is currently developing by this electricity situation. The electricity situation is more linked to new land acquisitions that Prologis is making. And as we have referred in previous calls, this is requesting, in some cases, 2 years or even more time of working with CFE trying to get the right infrastructure in place.

We are anticipating, as we like to do in all the aspects of our business, working on the electricity front on new lands, but electricity is not affecting our current operations and it is not affecting our current development pipeline.

[Operator]

Next, we'll go to Sheila McGrath with Evercore.

[Sheila McGrath, analyst]

You described demand at historic level. Can you drill down by market on where demand is strongest? Which industries are driving this demand? And which countries are the biggest sources of demand?

[Hector Ibarzabal, executive]

We have important activity in all of our important markets. Practically, in Juarez, we have 100% of occupancy. If we take out the assets that are not strip leased, we have Juarez. In Tijuana, we're at 100%. In Reynosa, we're 99.8%. So basically, the nearshoring activity and the increase on expansions of our current customers is taking this demand as high as we have seen it.

Monterrey is a very strong market. Part of this manufacturing activity relies on Monterrey as companies want to establish in bigger cities. And Monterrey presented a 3.4 million square feet of net absorption and Monterey in this quarter presented over 5 million square feet of build-to-suit projects.

The main industries that we see participating are electronics, are auto components and medical. We see that this demand will prevail despite of the macro conditions that we are facing. So we are trying to anticipate and be prepared to supply with the right spaces to the customers that are requesting these ones.

[Luis Gutierrez, executive]

And Sheila, I would add that -- I mean if you see demand from 2020, there was about 16 million square feet overall in our 6 markets. We are expecting 2022 to be at least double that. And of course, 2021 was about double that. So I think the pandemic and I guess the geopolitical events have produced more demand for our markets. And we see that the sector continues to be very resilient.

[Operator]

Next, we'll go to Nikolaj Lippmann with Morgan Stanley.

[Nikolaj Lippmann, analyst]

Congrats on the number. I joined a little late, so sorry if the question has been asked already. But looking at what's happening in the space, your results, you sold out. So I think the obvious question is how can you catch up with growth? Or how can you make sure that -- how are you thinking about M&A? How are we -- how should we start thinking about growing the GLA? Is it additional capital? Are you thinking additionally about M&A externally? Are you thinking of partnering with different private equity groups? That's basically my question.

[Luis Gutierrez, executive]

And certainly, we are in great shape. We have prepared the company for any part of the cycle. You can see our loan-to-value at 20%. And this just gives us flexibility to do a lot of things. So I think in this times there are opportunities that may present itself, and I guess we will be ready for anything that comes in our way.

[Hector Ibarzabal, executive]

On the other hand, Nikolaj, Prologis has made important investments on replenishing land banks. The largest land that has been bought took place last year. And this year, the plan is to keep on replenishing land are in place.

As I mentioned in the previous question, you really need to anticipate development because infrastructure and entitlement is becoming more complicated. You have the additional complication of construction costs increasing near 1% every month. So you need to put all this in the equation. And this is not an easy task to anticipate 2 or 3 years, the acquisition of land.

As of today, we have enough land in the future to take care of all the big demands, which I anticipate will be through build-to-suit projects as the big companies are not finding the spaces currently in the market. So the share of built-to-suits have increased. And I think that, that trend will keep on happening. And our sponsor, I think, that is very prepared to take care of these opportunities.

[Operator]

Next, we'll go to Alejandro Chavelas with Crédit Suisse.

[Alejandro Chavelas, analyst]

Congratulations on the results. I wanted to ask, we have recently seen news of upcoming deceleration in the economy. Are you seeing perhaps a slower pace of request for proposal? Or are you seeing those remain steady? Have you heard of any client postponing investment decisions in light of the challenging economic environment? Just your thoughts on that part.

[Hector Ibarzabal, executive]

On the operational front, we keep on seeing a very strong performance from our customers. I think that the disruption of the supply chain keeps on playing and the nearshoring activity keeps on creating more business for us. What we have seen is in the peak times at the beginning of this year or probably by the end of last year, the pipeline was at 120 miles a piece. Probably today it's at 90 or 95. So there's a little slowdown on the pipe request for future projects.

Our risk is that companies are doing further analysis before taking a decision. But having said this, the pipe and the traction about requesting new space is in very good shape. Probably peak about this is behind, but we anticipate that the supply will keep on being strong for the following 24 months at least.

[Operator]

And next, we'll go to Jorel Guilloty with Goldman Sachs.

[Wilfredo Jorel Guilloty, analyst]

So I wanted to touch a bit on the onshoring, reshoring topic you mentioned as being a key driver for leasing in your portfolio. But I was wondering if there's a way to better quantify this. If you could perhaps say what percentage of leases that were -- that are new leases over the past 6 months or 9 months or something like that have been tied to onshoring? Or how are you -- if there's any way to quantify that demand at perhaps a city level, a regional level. Just want to get more numbers. Because there is a lot of discussion around the topic, but the quantification of it has been a bit of a challenge. So I was wondering if you could provide some color on that.

[Hector Ibarzabal, executive]

As you mentioned, it's difficult to have a precise account of how much of the business is really coming from nearshoring. There are some cases in which the identification is very easy. As you see brand new companies jump into Mexico, and they have that label on day #1. But there's as well some important activity coming from companies that are already with us and already having operations in Mexico, and they decide to expand their business lines or even to bring some other divisions into Mexico.

The best reading that I may have without giving a precise number is that at least 33%, 1/3, of our activity is coming from this front. But the important thing is that event that we see going forward is positive. In Prologis, we have the ability and we have important operations in China and Japan. And we're starting a program to try to create synergies between our operations there and the ones that we have in Mexico. I think that this is a unique competitive advantage that we have, and you should be hearing from this soon.

[Operator]

Next, we'll go to André Mazini with Citigroup.

[André Mazini, analyst]

Yes. Sure. So my question is, if you could compare and contrast the e-commerce landscape in Mexico to the one in the U.S.? Of course, famously, we saw some news allegedly that Amazon will be subletting some space in the U.S., right? In the beginning of the call, you guys mentioned that e-commerce, of course, is growing in Mexico, is around already low teens in terms of penetration.

So if you think -- I know it's very different north of the border. Maybe e-commerce companies did take all the space they needed over there for the short term. And Mexico is a different story. It's more of a secular growth trend. And if there's any risk of this slowdown in e-commerce pickup or even on the other way around, some spaces getting back to the market? Or if it's very different Mexico versus the U.S.?

[Hector Ibarzabal, executive]

Effectively, this announcement that Amazon made in the U.S. is making a general perception that e-commerce was probably overpriced or overvalued. As you mentioned in your question, the situation in Mexico is different than in the U.S. In the U.S. -- what has happened and is happening in Mexico is that once that the pandemic is somehow left behind, people is going out and they're spending more money in experiences than in buying goods online. I think that that's something that we need to recognize and we are there.

Having said this, the ratio of infrastructure compared to the business that they have in the U.S. is completely different than the one that the big e-commerce companies they have in Mexico. We keep on working not only with Amazon, but with all of the other e-commerce big players, and we do see that they keep on having important plans of expansion.

So the situation in Mexico is different than from the U.S. There's not an over infrastructure or an oversupply of e-commerce space so far. We have commented that the barriers to supply space are big in Mexico, and most of the space that these companies are requesting are needed to be satisfied through build-to-suit projects that are taking more time to be developed and to be launched into the market. We keep on seeing this activity as some of our strengths. We have the land bank and we have the relation with these companies. And we keep on looking forward to be doing an important announcement of growing these customers in the future.

[Luis Gutierrez, executive]

André, so e-commerce in the U.S. now represents 21%. I guess, during the pandemic it went to 23% in Mexico. E-commerce sales have grown even this year, and they represent 11%. So there's a huge gap between 11% and the 21% that we have in the U.S. So as Hector said, there is a lot of room to grow.

[Operator]

Next, we'll go to Francisco Chávez with BBVA.

[Francisco Chávez Martínez, analyst]

My question is regarding your guidance. You increased guidance for occupancy and same-store NOI. But guidance for AFFO and distributions remain unchanged. Are you expecting a higher financial cost? Or can we expect an upward revision in your distributions during the second half of the year?

[Jorge Girault, executive]

This is Jorge. We're keeping our guidance on distributions untouched given everything that is going on in the world. We said this last quarter. We always want to keep some space there.

In terms of the FFO per certificate, you're right. We increased our occupancy on same-store. But we're keeping the FFO per certificates unchanged. And this is mainly derived from the increase in interest expense. Nothing that we don't have in our projections. You have seen interest rates go up. 80% of our debt is fixed. But as we use our line of credit, which today is at 20% of the total debt and it's based on floating rates, it does increase. So we're taking that into account. So answering your question has to do with -- specifically with the higher cost of interest on the line of credit.

[Operator]

Next, we'll go to Alan Macias with Bank of America.

[Alan Macias, analyst]

Just a question on the solar panels and if you have any restrictions in the amount of solar panels you can install in your buildings? And if this is the case, does this represent a risk for your net zero emission goals going forward?

[Luis Gutierrez, executive]

And this is a very good question. So as you saw, we announced a net zero for 2040, and certainly, the solar situation is part of that goal. So we have been studying this now for a while, and we are beginning with a pilot program and we will be installing in 9 of our buildings solar panels as a pilot program. Some of the challenges that we have had to do with the FIBRA tax status, in which the FIBRA cannot sell solar panels. But we think we have found a structure. So after this pilot, we will be relaunching a much higher program, which will comply with local regulation. So I believe at the end, we will be successful in our solar program. It will take some time.

[Operator]

Next, we'll go to Juan Macedo with GBM.

[Juan Macedo, analyst]

My question is regarding the acquisitions you did in Mexico City. It was made at a slightly higher cap rate. So we were wondering if this is due to the kind of property or maybe the economic situation in the region.

[Hector Ibarzabal, executive]

Acquisitions made in Mexico City are either to last touch project or to infill projects, and the cap rate that we see is between 7% to 8%. I think that there's a unique opportunity. And that we have anticipated enough, so the appreciation cost that we have on those link with the current market conditions, are going to make out of those investments one of the most profitable ones that we have in Mexico City.

There's still a lot of work to do on that regard. We are developing a new relation with the authorities in Mexico City because most of our staff, even we call it in Mexico City, was in the State of Mexico.

More to come on this regard. We keep on having a strong pipeline on this. And this is a unique way to provide service to our current customers that are requesting this type of properties.

[Luis Gutierrez, executive]

And just one point, Juan, regarding our last touch facilities. In general, as a rule of thumb, cap rates on those acquisitions are higher. They're more like a retail type of investments because they are higher rents, closer to the consumer, more expensive per square foot. But in terms of yield or cap rates, those generally -- these are higher vis-a-vis an industrial warehouse, a shoebox that we typically would buy or build in this market.

[Operator]

[Operator Instructions] Next, we'll go to Armando Rodriguez with Signum Research.

[Armando Rodriguez, analyst]

Congratulations on all these results. So my first question is related to your efficiencies on your operating expenses that reflect an increase in NOI margins. What we should expect on this in the following quarters? And my second question related to the CapEx investments. What's your comments on the impact that you are seeing in this CapEx related to the CPI levels. That's my only questions.

[Jorge Girault, executive]

This is Jorge. First of all, regarding margins. We have said in the past that our operating margin, our NOI margin is around 87%. We have had -- last quarter, for example, we reached 88%. At the end of '19, we were at that 84% level. But in the average, overall, we have an 87%.

So you should look at our operating margins in the 87% level. And we don't see a change there. Obviously, expenses increase with inflation, and we increased our rent through rent bumps and rent changes on the rollover. So there is a catch-up sometimes there. But in average, we will have the 87%.

In terms of CapEx for certificates, I think you're referring to our $8 million of CapEx on leasing commission, maintenance and TIs that we spent this year. Our guidance is that CapEx on an annual basis is going to be between 13% and 14% of NOI. We're not changing that. You have some quarters that you have a higher CapEx than others. Last quarter was pretty low. This quarter it's higher. It's $8 million versus $6 million that was last year -- last quarter, sorry.

And that depends on how much leasing volume you have. We have more leasing volume this year. This quarter we had a maintenance CapEx. We have rainy season, so you have a little more of CapEx on that side. Also on the leasing volume, you have the TIs of your tenants. So it depends.

Just to give you a sense. For this first half of the year, total CapEx has been 12.6% of NOI. So we're in line with what we guided. You won't see a change there. Maybe quarter-to-quarter, but not on an annual basis.

[Hector Ibarzabal, executive]

And a specific comment on this last point that Jorge mentioned. CapEx looked higher this quarter because several of the spaces were small spaces, and this creates the percentage to be higher. But no surprises what the number is going to be, as Jorge described.

[Operator]

Okay. There are no further questions at this time. I'll now turn the call back over to CEO Luis Gutierrez for any additional or closing remarks.

[Luis Gutierrez, executive]

Thank you very much for being on the call and your interest in FIBRA Prologis. In spite of the current economic conditions, our business remains resilient, and this somehow is shown in our results. And we feel confident about reaching our goals. So looking forward to keeping in touch with you and looking forward to see you during the quarter.

[Jorge Girault, executive]

Thank you very much.

[Operator]

This concludes today's conference call. You may now disconnect.