Nippon Paint Holdings Co Ltd

TSE:4612

Earnings Call Analysis

Strong Q2 Performance Amid FX Challenges

Nippon Paint's Q2 revenue rose 19.3% year-on-year to JPY 432.8 billion, with a 6.1% rise in operating profit to JPY 51.8 billion. Despite FX volatility, the company maintained its full-year guidance, anticipating steady growth and margin improvement. Revenue from NIPSEA China increased by 5.6%, with a 30.2% rise in operating profit. The company expects solid growth in the second half, particularly from new store openings in North America. Despite challenges in Europe and Japan, the company remains optimistic about achieving its initial guidance.

Introduction

In the recent earnings call for Nippon Paint Holdings (NPHD), the company discussed its financial performance for the second quarter of FY 2024 and provided an outlook for the rest of the year. The key themes included revenue growth, margin improvements, challenges due to currency fluctuations, and strategic measures to enhance future performance.

Revenue and Profit Growth

NPHD reported a significant increase in revenue, which rose by 19.3% year-on-year to JPY 432.8 billion. Operating profit also increased, albeit at a slower pace of 6.1%, reaching JPY 51.8 billion. On a non-GAAP basis, revenue was up 5.4% and operating profit by 7.5%. The growth was attributed to a combination of factors including paint volume, adjacencies business, FX, and new consolidations.

Regional Performance

In China, NPHD’s decorative business saw a revenue increase of 5% despite a challenging market environment. However, revenue from TUB (Technical and Utility Building) declined by 12%, resulting in an overall 5.6% revenue increase for NIPSEA China, with a 30.2% rise in operating profit on a non-GAAP basis. The Japanese segment struggled with declining automobile production and tough market conditions for both decorative and industrial segments, though the marine segment performed well. In Dulux Group's Pacific division, market conditions were difficult but sales grew by 4%, with margins remaining flat.

Impact of Currency Fluctuations

The fluctuations in the yen, as well as other currencies, significantly impacted the financial results. The yen's appreciation was stronger than expected, which created volatility that made it difficult to forecast future performance. Despite these challenges, NPHD decided to maintain its initial forecast for the year.

Outlook and Guidance

NPHD maintained its revenue and profit guidance for the full year. They acknowledged some uncertainty due to exchange rate volatility and the delay in closing the buyback in India. However, they expect stable raw material markets and slight downward revisions in revenue growth rates in most regions, except Turkey. For China, the growth rate was revised to 10-15% from around 15% earlier, with anticipated moderate improvement in margins.

Strategic Measures

To counteract market challenges, NPHD is focusing on controlling costs and raising prices where possible. They emphasized not pursuing unreasonable market share increases, instead aiming for balanced growth and profitability. The company is also planning various recovery measures in regions like Indonesia, where the economy has not fully recovered.

Future Opportunities

In Australia, the market is bottoming out, and the company plans to renew core Dulux brands for the first time in ten years, which is expected to drive future growth. Additionally, NPHD is expanding its Dunn-Edwards stores in North California, reaping benefits from a competitor's exit.

Challenges and Risks

Despite the positive outlook, NPHD faces challenges like hyperinflationary accounting in some regions, political instability, and difficult market conditions in places like France. They are cautiously optimistic and plan to implement cost control and volume recovery measures to mitigate these risks.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, everyone. Thank you for waiting. We now like to hold the conference call for financial results of the second quarter fiscal year ending in December 2024 of Nippon Paints Holdings.

Before we begin, we have some request to the participants. [Operator Instructions] Also, simultaneous interpretation in Japanese and English are available for this conference call.

Now, I'd like to turn this over to Wakatsuki san and Tanaka san.

[Yuichiro Wakatsuki, executive]

Thank you. Hello, everyone. I am Wakatsuki, Co-President of NPHD. Thank you very much for taking time out of your busy schedule today to attend the conference call.

I now would like to present the overview of FY 2024 Q2 financial results. For your information, as this is the second quarter financial results briefing, we have participants from the media as well.

First, Page 3, today's summary. On Tanshin basis, revenue increased to JPY 432.8 billion, up 19.3% year-on-year. Operating profit increased to JPY 51.8 billion, up 6.1% year-on-year, continuing significant growth both in revenue and income. Positive factors for revenue are as shown in the bottom right, paint volume, adjacencies business, FX and new consolidation. While price/mix is somewhat negative.

On non-GAAP basis, revenue was up 5.4%. Operating profit increased by 7.5%. On non-GAAP basis, acquisition of NPT in Italy last year and Alina in Kazakhstan closed this year are not included. Including these, revenue growth without FX would be about over 8%.

NIPSEA's China's decorative business increased 5% in revenue in TUC despite challenging market environment, and TUB's revenue declined by 12%. But adjacencies business grew, and as a result, NIPSEA China as a whole increased revenue 5.6%, operating profit increased 30.2% on non-GAAP basis with margin improved as well.

In the Q1 earnings call, I stated that basically we were on track plus and this remained the same in the second quarter. And furthermore, with the benefits of FX in the first half as a total, we can say our performance was extremely strong.

Please turn to Page 4. As to revising the full year guidance or not, we kept considering to the very last minute, but starting the conclusion first, we maintained initial forecast without revision this time as the recent exchange rate volatility has been too great.

In the first half, we saw steady business growth and solid margin improvement. The yen appreciation was greater than we expected, and we judged it's difficult to foresee FX in the second half.

Also, the delay in closing the buyback in India announced as of the first quarter, We thought that would be more than compensated for by the weaker yen. However, now it has become a little more difficult to have visibility to the FX trend. We have taken all of these factors into consideration comprehensively, and our guidance is maintained at this point.

I would also like to add that assumption for this is taking account of absence of revenue of about JPY 30 billion and operating profit of about JPY 1.6 billion expected in India at the beginning of the year.

I believe you are already well aware that we are not a company in the export industry, but as an aggregation of local production for local consumption businesses. Basically, FX fluctuation gives certain impact to some raw material cost, adjusting this in conversion rate. And I think it is better for us to look at trends in local currency terms for actual state of business.

Thus, on Page 5 and 6, we updated the business growth rates and margin and trend expected in February guidance in local currency only if for full year basis. As this is the latest forecast, except for Turkey, it looks like there are more slight downward revisions in revenue. However, basically, with the exception of some TUB businesses, basically, there are slight revisions of revenue growth rates and there are no major changes.

For China TUC, growth rate is revised to 10% to 15% from around 15%, while we forecast moderate improvement in margin. As we kept saying from before, we will not pursue an unreasonable share increase only, but aim for both solid growth and revenue at the same time.

Page 7. The raw materials market is generally stable. And of course, in Japan, there's some FX impact, the positive for stronger yen and negative for weaker yen. But all-in-all, including demand and supply, the things are stable.

On Page 8, the heat map is as shown on this page. In the Chinese automotive market, Japanese OEM manufacturers continue to struggle and we think we have lost the market share slightly versus the market.

Page 9. I would like to refer to the major segments here and leave the details to the QA session. First, in the Japan segment, automobile production continued to decline in the second quarter as well after the decline in the first quarter. And the market conditions remained difficult for both decorative and industrial segments, and we are making up for the decline in volume by raising prices.

Marine segment continues to perform well and in total, both sales and profits are almost flat. I have covered NIPSEA China earlier. Non-GAAP basis margins have improved, even taking into account additional provisions made last year. So once again, we have achieved a good balance between growth and profitability.

NIPSEA, except China, continues to achieve high growth and margins are high. But the figures are slightly skewed by inflation in 2Q and hyperinflationary accounting. The decline in margins is also largely due to 2Q.

Excluding 2Q, sales growth of NIPSEA except the China is around 6%. There is a bit of instability in the political situation and other factors in various regions, but things are generally as expected.

That said, the economic conditions in Indonesia, which showed some recovery compared to the first quarter, do not warrant an optimistic view. We plan to implement various recovery measures in the second half of the year. Alina in Kazakhstan also contributes with an operating margin of around 20%. In the sense things are going very smoothly.

Next, in DuluxGroup, market conditions are difficult in both the Pacific and Europe. But in the Pacific, sales grew by 4% and margins almost flat, partly due to the contribution of small acquisitions in the adjacencies business. Especially in Australia, the market is bottoming out. And in the second half, the core brands in Dulux will be renewed first time in 10 years. So both of them, the growth is possible.

In Europe, the sales are unfortunately down due to continued difficult market conditions in France. However, we estimate that market share is rising slightly. And according to the latest report, the market is bottoming out. Minus 5% growth per annum continues for several years that is quite rare for matured markets. And we will see the recovery going forward and we are seeing the sign of the recovery.

Lastly, in the Americas, sales of automotive product increased by 8.6% due in part to strong sales to Japanese automakers, while the market production remained almost flat. And sales of decorative products grew, the interest rates are relatively high and for the other housing market included, markets are difficult, but showing positive growth.

As I said in the first quarter, in the North California, a total of 17 new store openings were completed in May on the site where a competitor had left after going bankrupt. And those stores are expected to make a gradual contribution in the future. It should be noted that these stores are neither business takeovers nor acquisitions, but rather the opening of new the Dunn-Edwards stores.

Page 10, as a topic, I'd like to touch upon the publication of the Integrated Report. So basically, it follows the medium term management policy announced on 4th of April, but it also includes more in-depth explanations of our thinking on ROIC and other topics, as well as a dialogue between Chairman Goh and Lead Independent Director, Nakamura. So it is worth reading. And this year's report was published 2 months earlier than the one last year. We hope you will take the time to read it. The briefing session will be held on the 5th of September. Thank you for your support.

So that concludes my brief presentation. In short, I would say that there are no particular surprises. So that we have done sound -- the growth and the margin in various regions and the measures are paying off and economic conditions are not something that we can be very optimistic, but we are seeing some good signs in some regions. And original guidance will be achieved and we'd like to beyond that and in the third quarter, if necessary, we would like to make update.

With that, I'd like to entertain your questions. Thank you.

[Operator]

Now we move on to QA session. [Operator Instructions] And first question will be asked by Shintani san from SMBC Nikko.

[Yasuhiro Shintani, analyst]

This is Shintani from SMBC Nikko Securities. About China TUC, I'd like to ask a question. Well, the TUC and 15% of the increase. In terms of pricing, you have revised -- you have not revised DIVA pricing. And so is this a correct understanding and also in the cities and also where local areas, is there any differences? And also, what is the outlook for the share increase going forward?

[Yuichiro Wakatsuki, executive]

Shintani san, thank you very for the question. As you said, well, to be very frank with you, the market environment in China is not really well suited for the price increase. There are 2 factors in some discounting and also DIVA competitors have discounted their prices.

And so, another factor is related to mix and the economy part. The economic -- so the products are going to grow. So in terms of volume and then about 15% or more, and also the mix would be negative. And so -- and as for the June and, well, major cities, well, we have more businesses, but March to June in TUC, well, a little over 20% is accounted for and that growth is higher.

And furthermore, in the second quarter, somewhat noteworthy, other than TUC, TUB businesses and their -- and were approximately 5% to 10% of the total. And so 70%:20% and 5%:10% TUC, TUB and others, these are the composition ratio. And so this has not changed much, but the others.

And well, the peripheral area enabling of the coating and the sales of some raw materials have seen quite a good growth. And so the margin themselves is not that high. But in terms of mix, it would be somewhat negative. However, having said that, well, all in all, TUC as a whole -- sorry, TU as a whole margin, it has been very healthy. And so in that sense, we have been able to maintain the premium segment business and also to grow and then well we are also able to increase the revenue at the same time. That's it from me. Thank you.

[Yasuhiro Shintani, analyst]

Just a follow-up question. So the volume and the CCM and also the store increase might be contributing. And also for the decorative and others, do you think that while the same trend is going to continue from the second quarter and beyond?

[Yuichiro Wakatsuki, executive]

To be very candid with you, others, we are somewhat opportunistic. And so the supply and demand situation in market will drive the performance. And so TUC, of course, TUB included and these are -- these were the higher-margin businesses and so we are to focus on them. However, in terms of the markets, almost zero growth is expected. And so this was 5% growth. It's quite noteworthy and 10% to 15%. So in the second half, we hope that they will do better.

And if I get to say one more thing, the first quarter of the previous year, it was really well good. And then the second quarter, the 15% for TUC. And so -- and second quarter, where the demand is higher, and I think, well, it is about 5%. And third quarter and fourth quarter, we would like to keep monitoring and keep our eyes on how things would develop going forward. Thank you very much.

[Operator]

Next question, Enomoto san from Bank of America Securities.

[Takashi Enomoto, analyst]

Here Enomoto. As to the other corporate plan, so the numbers remain intact. In the first half and the second half about a JPY 5 billion decrease in profit is expected. I think usually second half has better results, and you have not revised it this time. Between first half and the second half, what will see the decrease in profit?

[Yuichiro Wakatsuki, executive]

FX impact is quite big, the JPY 142 per dollar. So it's really difficult situation to come up with guidance. And also the Indian business and the absence of it, Probably September end, we thought we could make it, but the digitalization of other stock share and also the elections in June, it's not that the business itself is having some problems, but even on the 3 months window, we can't just make any the forecast.

[Takashi Enomoto, analyst]

JPY 151 against --

[Yuichiro Wakatsuki, executive]

Well, it's not really the dollar/yen, but also the renminbi is a big factor. So -- but we are not talking about any expected decrease in profit.

[Takashi Enomoto, analyst]

What is the seasonality between first half and the second half last year?

[Yuichiro Wakatsuki, executive]

Second half was better.

[Takashi Enomoto, analyst]

Are there any trends at the first half and second half in terms of profit?

[Yuichiro Wakatsuki, executive]

The second half is slightly better.

[Takashi Enomoto, analyst]

Understood. That's what I thought, because I felt a little bit uncomfortable with the guidance for the second half. In the first half, dollar/yen basis, JPY 151, right, or JPY 154 rather.

[Yuichiro Wakatsuki, executive]

JPY 1.6 billion -- and it went to JPY 142 temporality and we did not know what we should do with this volatility in the FX. So on the full year basis, minus the first half, we are not doing that kind of calculation. That will be misleading.

So the actual picture of the business itself is not bad. And year-on-year basis, growth is -- Page 6 and Page 7, I think or Page 5 or Page 6, you can refer to those pages. The growth is positive on a full year basis, basically. So in the second half, almost no areas we would say negative growth, but it's our guidance, our forecast. Have any impression on potential negative growth.

[Takashi Enomoto, analyst]

No, it's clear.

[Yuichiro Wakatsuki, executive]

Please put yourself in my other shoes. The stock goes up and then goes down on the next day. And also there's an FX impact. We are not exporting company, but we have certain sensitivity to FX. So looking at the peers and their examples, I don't think it is the timing to change the forecast.

JPY 145, JPY 146 level stability, where do we have FX sensitivity? And please look at our sensitivity as well. But basically in the second half, we expect a very good level. And between the first half and the second half, with the constant currency, second half will be more positive than the first half.

[Takashi Enomoto, analyst]

That's very clear. I have been struggling with the situation.

[Yuichiro Wakatsuki, executive]

I understand.

[Operator]

The next question, Nishiyama san from Citigroup,

[Yuta Nishiyama, analyst]

Nishiyama from Citigroup Securities. And Page 5 and Page 6 there was the full year guidance in terms of the revenue. And then well, on the Slide 12, were the details. But with the profit wise, will you want to maintain or will have some upside and its profitability when compared to the earlier forecast, I think, of course, this differs from each individual our business segment. But if you could tell us why you are forecasting in this way?

[Yuichiro Wakatsuki, executive]

Thank you for the question. Basically speaking, while raw materials are relatively big factors and their raw materials are stable or RMCC [ EVA ] has come down, and so that is because some impact. And also depending on the ratio, while for example, in China, it's not that we are going to put it into our pocket. And so it is that we have to deal with them with the mix related measures, but we do have somewhat increase in volume. And so we are seeing some subtle results in total China. Compared to the previous forecast, I think it would do better. That is the kind of the impression we have.

And as for the other regions, well, somewhat -- well, dubious or they have some doubts with the Turkey. And depending on the Central Bank policy interest rate could be about 50%, and so there has been a big change. And so to really well fight against inflation.

And then there will be, well, a list of the mobility in terms of the products and others and the fixed cost will go higher. And then and also the superinflationary accounting would be applied. And so that it would well, really put us more in a challenging environment, particularly in the second one. And well as for 29, and so the application of that would not be that bad, but that could be one of the unfortunate factors for our business.

And also, PT NIPSEA in Indonesia, slightly below is what we mentioned because while the revenue is somewhat weak and soft and the -- sort of the equity method stake is well smaller, and so that is the reason why the fixed cost is well higher. And also the margin, 32.9% of the previous year. And in contrast to that, it will go over 30% for sure. So the trajectory wise, it is going to be more difficult. And growth for the prospect of volume, it would slow down. And so we would see its somewhat lower performance compared to the original forecast and the cost control and somehow to manage the recovery in volume. And in total, almost in line with the initial guidance we have provided at the beginning of this year.

[Operator]

Next question, Ikeda san from Goldman Sachs.

[Atsushi Ikeda, analyst]

Here is Ikeda of Goldman Sachs. I have a question about NIPSEA China, your competitors in the second quarter, the market went down like by 20%, that's what your peers said. And some of the peers are running in the red. What is your understanding of the future market conditions?

And also, you are rising the rates -- prices in China and you will not go for too aggressively for the market share. And so the margin of other 15% is going to be the at the bottom. Could you please talk about the competitive scenery in China?

[Yuichiro Wakatsuki, executive]

Thank you. To be honest, regardless of the trend among the peers, whether are we going to see industrial restructuring or not among some smaller players? Without using any capital, we can have some OEMs into our group, that is our basic strategy. So at least, probably, we will not go to buy some businesses. I don't know about the other companies like [ Akzo ], they are buying [indiscernible]. Those entities are struggling in China. They cannot win over Nippon Paint. So it's a positive story for us.

So the question is whether are we going to use capital to buy some businesses. That will be the discussion on the different the league. To be honest, that is unlikely.

As to price increases, I don't know what your the information source is Ikeda san. But in the premium area, the discount is kind of contained. But for example, the 12% is not a magic number. The margin is much higher for TUC. It is not our style to dictate which percentage should be applied.

At other companies' cases, there was a case like that it dictated to 15%. But in that case, if you can go full at 17%, that is possible, then why not 17% instead of 15%? Let's say, in other business exists, but the other TUC, Eric Chung, who is covering the whole Chinese business, for them the growth is a must, making money is a must. So the revenue, earnings and the growth should be achieved together and that will maximize the corporate value.

If the market is not so dynamic, then rather than the applying discount policy, we would like to focus more on the profitability, but that doesn't mean that we have given up the growth opportunities. So it's a question of how to strike out balance and that is being worked on by the Japanese team.

So it's not that the other you are actually raising prices in the market. Let me repeat, we are doing -- that we are thinking to decrease the range of discount, but not really raising the prices. The environment where you can raise prices is like the price of raw materials is going up so rapidly. But that's not the case. The consumer sentiment is tough. So the needs for paint as a must item are very strong. So rather than having too much discount, we have been keeping this mindset that the other, we would do business.

[Atsushi Ikeda, analyst]

Well, the CEO of your competitor company said that you are raising rates, so?

[Yuichiro Wakatsuki, executive]

Well, if the other peers also raise rates, that will be a good sign. They said, well, in China, those people are actually giving discount saying that the other companies are raising rates. So you need to be cautious.

[Operator]

The next question, Yoshida san from Mizuho Securities.

[Atsushi Yoshida, analyst]

Yoshida from Mizuho Securities. I have some questions. And lately, the profitability is not growing. And Wakatsuki san has already explained in terms of market environment, it is quite challenging. And towards the second half, the core brand will be renewed, well, for the first time in 10 years. And inclusive of that, how are you going to rebuild or to put it back on the growth trajectory? Can you do that? Or in these 4 regions, Europe and other regions might differ. But do you think that you'll be able to put this business back on to the growth for trajectory?

And so we will -- if there are differences, please describe how you're going to deal with that in Europe as well as in the Pacific.

[Yuichiro Wakatsuki, executive]

Australia and Europe, they are quite different. In Europe, the market, well, is pretty well just for going at zero rate. And then you have the inflation, 5%, and then the 2% was share gain. And so when it was listed, it was really 5% well growth. And then you are really going to go through a series of smaller acquisitions. And then they are achieving 8% or so.

But it should look at the market. And so if the market is not that good in case of the COVID-19 pandemic. And well, there was a big boom in the retail channel of the burnings in Australia. However, in Europe, 4% in the second half. In total, 5% to 10% is what we are really forecasting. And this is really well outstanding. And 5% to 10% and then 5% would be just well, good and then 10%, really good.

And so the confidence level and I have talked with William, well, it is not going to rebuild, but what they have been doing will further be refined. And they have the Ocean brand. And so it was already launched and the renewal thereof and how to promote. And most of all, probably in terms of the achievement of the budget and achieving 5% to 10%. And I just ask him if there is any concern. And then there were almost no concerns. And then just 95% probability of achieving that.

And so we hope that the cost could be reduced a little more in terms of the operating level, but by making investment in marketing. And then they are really going to really have the better, sort of premiumness. And so compared to the other regions where RMCC ratio is low. And so there are quite a large amount of the SG&A cost ratio, but if they are able to really well implement all this and then the 8% growth and then the revenue.

And so I think for the Australia, it's not that they are going to really make a turnaround or rebuilding of that, but they are really going to do more. And then in Europe, in contrast to that, as I said, the market in France, and it turned out to be well, more difficult than what we have expected.

And Dulux is in retail or in the tint channel. And they do have the network of their own retail outlets or through distributors. And then the 75% is accounted for and 25% is were the retail and were the big box. And so negative growth has not been experienced many times. And not just limited to Dulux, but in the mature market.

And of course, well, the war in Ukraine and European economy has worsened and this negative for minus 5% is not going to be or continued forever. And so I think at one point in time it will go back to some flat growth. And then so baseline will come back first. And on top of that, we are to really increase our share in French business and to raise it to a little higher level. And so with the all these projects and also the efficiency improvement and also the appealing brand and explore the more of the channels.

And then it may take more time, but the cash is being generated. And so it's not that we need to really inject additional sort of the fund or money, but in terms of some supply chain, and Australian teams are really providing support. And so in this fiscal year, we would have the better visibility of the improving profitability and efficiency.

[Atsushi Yoshida, analyst]

And so for our information and with respect to the Australia campaign, is there going to be a big cost to be incurred?

[Yuichiro Wakatsuki, executive]

So within the scope of the risk And then so they are defined as the sort of marketing company. And so the assumption is that always the marketing cost would be incurred, but it's not that where there would be a very huge marketing cost incurred. And also as in terms of the comparison to the previous year. And while the insurance -- sort of there were income from the flat, and so there was this more onetime factor enjoyed for last year. And so there is going to be absence of that. So it's not that we are seeing some weird sort of negative factors coming into play.

[Operator]

Next question, [ Cho ] san from CLSA Securities.

[Unknown Analyst]

Here is Cho of CLSA Securities. I have a question about Japan segment. The business environment, the automotive production decrease in April through June and also new housing starts were not so big. Still the profit in the second quarter and the margin were quite robust. Could you please talk about why? Could you please talk about the background?

[Yuichiro Wakatsuki, executive]

As you said, on the revenue side, the environment is not good. In the case of Japan, the raw material cost is on the rise and the personnel cost is on the rise, so it's inflationary stage. So we are raising prices with the understanding of the customers. At the same time, we are controlling cost.

As we said before, the Japan segment, because of the spin off, depending on the other companies, there are some differences in the duplications and we have been reviewing such situations over the past several years. And we have materialized to some effect impact. And our aspiration is quite high, much higher. So each company is doing lot of efforts. Our partner, [ Kim san ], we see Kim san that is encouraging people.

And as to marine application, the market is good. This segment has overseas business, namely FX benefit gains. So China or Singapore, their profitability is getting better, contributing to the overall the profit, although the absolute amount is not so big. But compared to several years, we are seeing improvements.

[Unknown Analyst]

The impact coming from decreased automobile production for April through June is reflected in the second quarter and it is not to be reflected in the third quarter, am I right?

[Yuichiro Wakatsuki, executive]

For the third quarter, heat map basis, the Japanese automobile production is expected to be flat. So hopefully, not much impact, but different things could happen. So it's -- at the moment, it's difficult to make any specific comments.

[Operator]

Next, [ Fujio san ] from [ Nikkei Newspaper ].

[Unknown Analyst]

Fujio from Nikkei. I have one question. Really well we have the volatility in FX and also the stock prices have been fluctuating very violently. And so will M&A be strategy? And where from where you are really going to do the financing? If you could elaborate on these points.

[Yuichiro Wakatsuki, executive]

Well, basically, our basic policy has remained unchanged

[Technical Difficulty]

[Statements in English on this transcript were spoken by an interpreter present on the live call.]