Transcontinental Inc

TSX:TCL.A

Earnings Call Transcript 2020-Q3

[Operator]

[Foreign Language] Welcome to the TC Transcontinental Third Quarter 2020 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, September 9, 2020.I would like to turn the conference over to Yan Lapointe, Director of Investor Relations. [Foreign Language] Mr. Lapointe, please go ahead.

[Yan Lapointe, Director of Investor Relations]

Thank you, Gabriel, and good afternoon, everyone. Welcome to TC Transcontinental's Third Quarter of 2020 Results Conference Call. The press release and the MD&A with financial statements and related notes were issued earlier today and are available on our website at tc.tc. A replay of this conference call will also be available on our website under our Investor Relations section.We have with us today our President and Chief Executive Officer, Francois Olivier; and our Chief Financial Officer, Donald LeCavalier.Before I turn the call over to management, I would like to specify that this conference call is intended for the financial community. Media are in listen-only mode and should contact Nathalie St-Jean, Senior Adviser, Corporate Communications, for more information or interview request.Please be reminded that some of the financial measures discussed over the course of this conference call are non-IFRS. You can refer to the MD&A for a complete definition and reconciliation of such measures to IFRS.In addition, this conference call might also contain forward-looking statements. These statements are based on the current expectation of management and information available as of today, and they also involve numerous risks and uncertainties, known and unknown. The risks, uncertainties and other factors that could influence actual results are described in the 2019 annual MD&A and in the latest annual information form and were updated in the previous quarter MD&A.With that, I would now like to turn the call over to our President and CEO, Francois Olivier.

[François Olivier, President, CEO & Director]

Thank you, Yan, and good afternoon, everyone. I hope all of you are safe and healthy, and thank you for being with us this afternoon. First, I want to express once again my sincere appreciation for the commitment and dedication of all of our employees. They have shown courage, resilience and agility as we continue to serve our customers safely in a united, prudent and responsible manner during this quarter. Since the onset of the pandemic, we acted swiftly to protect our employees implementing strict safety measures in our facilities to limit the spread of the virus. We were able to adapt to a fast-changing environment in order to support our customers.Looking now at our highlights. We delivered a very strong quarter, demonstrating the relevance of our transformation and the resilience of our businesses in challenging times. This quarter is the first one to include a full 3 months of impact from the pandemic. Packaging performed exceptionally well during this quarter. We succeeded in meeting the surge in demand for retail food and other essential consumer products packaging, driven in part by stay-at-home consumer behavior. During the quarter, in Packaging, we recorded solid organic growth of 2% despite lower resin prices. Excluding the impact of lower resin prices, it would have been close to 4%. This organic growth comes mainly from our verticals related to food and other essential consumer products. We saw strong volumes from our banana business in Latin America, following the introduction of a new generation of crop protection films. When we started the year, we expected modest growth for 2020. If we look at the first 9 months, excluding the impact of the resin prices and of our paper business sold in January, we are close to 1%. We delivered record profitability for the Packaging sector as we continue to drive synergies and operational efficiencies. This was reflected in our adjusted EBITDA margin of 18.6% compared to 13.2% last year. Our Packaging margins also benefited from several additional elements. First, lower resin prices, second, a positive product mix; third, the adoption of the IFRS 16 accounting standard; and finally, from the sales of our paper Packaging operations.In Q4, the lower resin price we benefited from in Q3 will impact us negatively as we will pass through the savings to our customers. In addition, the recent increases in resin prices will negatively impact Q4 margins because of the usual lag before these increases are transferred to our customers.Print also performed very well despite the impact of the pandemic. Early on, we quickly announced important cost-reduction measures. This allowed us to partially offset a loss of revenues of close to $180 million since the beginning of the crisis. Excluding the amount received from Canada's wage subsidy program, we recorded a solid adjusted EBITDA margin of close to 18%, almost flat to last year despite the large reduction in our revenues. This performance underlines, once again, our proven ability to protect the sector's profitability regardless of the economic challenges. We continue to see a gradual recovery in our printing volumes with the reopening of the economy and we now stand at around 80% of last year's volumes. As a result, we have been able to recall approximately 1,000 of the 1,600 employees who were temporarily laid off in March.As I said last quarter, this crisis has clearly shown that the flyer remains a relevant and effective marketing tool. Volumes from most of our customers are gradually returning to normal as the flyer continues to help Canadians make purchase decision and save money, especially in these challenging economic environment. As volumes in verticals like newspapers, magazines, commercial printing continue to diminish, we are now much less exposed to these declining markets. On the other hand, we are showing growth in several verticals like books, premedia and in-store marketing. These growth areas now represent around 28% of print's revenues compared to around 11%, 5 years ago. We are optimistic about the long-term growth prospect of these verticals.Moving to our corporate social responsibility. We continue to build momentum and sustainability. At the end of June, we published our latest CSR report, which highlighted our progress, and we announced that we joined the United Nations Global Compact. I'm also very proud that we are awarded for the second year in a row, a top 10 position in the prestigious Corporate Knights 2020 best 50 ranking.And our new recycling group with the TC packaging is off to a promising start with the purchase of the assets from Enviroplast in June. We are developing partnerships to source recycled resin to be integrated in our production.In addition, I invite you to visit our new packaging sustainability website where we highlight the advantage of flexible packaging. For example, we compare to other formats, flexible packaging has better environmental attributes in terms of carbon footprint, a fossil fuel usage, transport, water usage, product to package ratio as well as material to landfill. By significantly extending full shelf life, flexible packaging plays an essential role in promoting sustainability by reducing food waste. We continue to develop our recycle-ready, compostable and PCR product portfolio to reduce material waste and to help our industry move towards a circular economy for flexible packaging.In conclusion, I want to leave you with 3 messages. First, the pandemic has highlighted the relevance of our transformation and our resilience, agility and operational excellence across the board. Second, looking at our sectors, our Packaging business, which represents more than half of our revenues, led the way in delivering a record profitability in the quarter. In the long term, this business should continue to grow organically and through M&A. At the same time, print continues to show how well it can navigate through difficult environments. We will continue to adjust our costs in order to protect the business for the long term. With volumes gradually recovering and our favorable position in vertical like in-store marketing, books and premedia, I'm confident in the ability of our print sector to continue to deliver important cash flows in the future. Third, after generating strong liquidity in the quarter, our leverage ratio is now at 1.8x net debt to adjusted EBITDA, if we exclude the impact of the IFRS 16.Despite the pandemic, we are in a solid financial position, allowing us to continue to both pay down our debt and also explore potential acquisitions. Throughout its history, Transcontinental has always been able to reinvent itself through innovation. This value is deeply embedded in our culture. As we have done in the past crisis, we will emerge from this pandemic as a stronger company.With that, I'll turn it over to Donald.

[Donald LeCavalier, Chief Financial Officer]

Thank you, Francois, and good afternoon. As you just heard, the solid results for the quarter highlight our resilience and strong execution in challenging context. Looking at consolidated numbers, revenues in the quarter were down $142 million year-over-year, more than half is explained by the lower activities linked to the impact of COVID-19. The balance is mainly due to the sale of our paper business in January 2020, partially offset by organic growth in Packaging. Adjusted EBITDA for the quarter was $139.3 million, an increase of 23.4%. I'll provide more details on how we drove profitability improvement in the review of each sector. Interest expense declined by $5.3 million as we reimbursed $375 million of debt earlier in the year and interest rates have decreased. Tax rate was 25.1%, in line with our guidance. The strong EBITDA performance, combined with lower interest led to adjusted net earnings of $68.2 million for the quarter or $0.78 per share compared to $0.60 for the same quarter last year. Our Packaging sector clearly led the way with a very strong quarter on both revenues and profitability. We generated $6.7 million of organic revenue growth despite a headwind of several million dollars from lower resin prices. As Francois mentioned, excluding the resin price impact, organic growth will have been close to 4%. Finally, a stronger U.S. dollar versus last year generated a tailwind of about $11 million in revenues.In addition to strong top line performance, packaging had a record quarterly EBITDA at $65 million. This translated to a margin of 18.6% and an exceptional performance compared to 13.2% in the same quarter last year. This significant improvement is mainly related to the synergies and efficiency gains IFRS 16 and the sale of our paper operations. We also benefited from lower resin prices, I will come back to resin price in the outlook.Our print sector also had a strong quarter given the context. Revenue were down $99.1 million organically, mainly as a result of the pandemic. This represents a decline of 32%, which is an improvement from the 45% we saw in April. Thanks to the swift actions we took early on to adjust our cost structure and the amount received from the Canadian emergency wage subsidy program, we delivered an adjusted EBITDA of $69.4 million. It is important to note that excluding the subsidy, adjusted EBITDA margin was relatively stable at around 18%, a very strong performance considering the lower revenues due to the pandemic. As we have done in the past, we will continue to optimize the cost structure in the print sector. Our media business also had a good third quarter and benefited from its normal seasonality. Despite the sale of specialty media assets toward the end of fiscal 2019, profitability slightly increased as solid performance for the sector.Following cost-cutting measures at head office, corporate expense for the quarter were down year-over-year despite a negative variance of $2.1 million related to stock-based compensation compared to last year.Turning to cash flow from operating activities. We had a strong quarter, generating $146.6 million compared with $90 million a year ago. On a year-to-date basis, we have generated $325 million so far, which is 19% higher than last year. This allowed us to reduce our net debt in line with our strategy. At the end of the third quarter, our net debt ratio stood at 2x. Excluding the impact of IFRS 16, it was at 1.8x. This is a very significant year-to-date improvement as we were at 2.5x at the end of last year. Since our transformational acquisition of Coveris Americas in 2018, our net debt has declined by $635 million or 43%, excluding the impact of IFRS 16.Furthermore, we have available liquidity of $631 million at the end of the quarter from our cash balance of $197 million and 100% of our credit facilities of $434 million. This strong financial position and our ability to generate stable, solid cash flow provide us with flexibility in terms of capital allocation, including capturing growth opportunities.Now for our outlook. In print, as volumes continue to recover for the fourth quarter, we expect to be at around 80% of last year's volume. With printing volumes gradually recovering and the change in the Canadian wage subsidies program, the subsidy amount will be significantly lower in Q4. As we work through the recovery, we will continue to focus on optimizing our cost structure to align costs and revenues.In packaging, in terms of revenues, we continue to expect strong demand for food and consumer staples. We will, however, face a tougher comparative next quarter since we had a strong fourth quarter last year. In terms of profitability, lower resin price has been positive to margins in the last 2 quarters, but we expect the situation to reverse in the fourth quarter. First, we will have the impact of the previous decline that will be passed to our customer early in the fourth quarter. Second, we have recently seen sharp increase in resin price while we have contractual agreements with most of our customers regarding resin price adjustments, there's a lag before we can recover the increase in costs. Therefore, we expect that resin price movements will have a double negative impact in packaging profitability for the fourth quarter.Overall, as we continue to execute on synergies and gain efficiency, EBITDA margin in the fourth quarter should be higher than last year, but lower sequentially. For the other segment, we expect a solid fourth quarter in media, which will include the back-to-school season. Profitability should more than offset corporate costs for the fourth quarter due to the cost reduction measures at head office and the impact of the seasonability in media. We expect our quarterly financial expense to be similar to Q3, slightly above $10 million. Our effective tax rate should be in the mid-20s range. In terms of the use of cash for the year, you can assume CapEx coming in around $100 million, as for cash tax, for the year, you can assume around $55 million. I am confident that our solid financial position and diversified portfolio will allow us to emerge from this crisis as a stronger company.On that note, we will now proceed with the question period.

[Operator]

[Foreign Language] [Operator Instructions] Your first question will come from the line of Mark Neville of Scotiabank.

[Mark Neville, Analyst]

First off, good quarter and great job managing through this. Maybe just the first question on packaging. I'm just trying to just get an understanding of the margin tailwind from the resin in the quarter, and sort of maybe how much of that you'll need to get back in Q4. And again, sort of understand what's happening. And just maybe just trying to quantify it.

[François Olivier, President, CEO & Director]

I think directionally, we gave you the indication. In terms of quantifying, it's hard to predict, as we have already incurred some increase in some resin prices, and there is a movement to keep going up with the hurricane or potential hurricane or disruption in the south of the U.S. So it's hard to predict if they'll be further raised, but I think Donald explained it very well. And this quarter, we -- resin prices went down, and we have a lag in passing it through. So we benefited from that. And then we'll lose that in Q4. And then we will also incur at least to a price increase that have been announced in past will impact our results, and it might be more. So as you know, our portfolio is very diverse. It's quite complex to calculate all this, but probably half a point to a point would be directionally the impact. And if there's further increase, maybe more.

[Mark Neville, Analyst]

Okay. That's very helpful. Yes, I think when you were talking about sort of long-term margin for this business, you just used to sort of loosely talk about, I guess, 15%. You're trending well above that, sort of even in Q4. It sounds like you'll be above that even with the resin impact. So I guess is 15% sort of still the right number to think about? Or are you now starting to think maybe something a bit better?

[François Olivier, President, CEO & Director]

Well, that was the objective. Obviously, our objective, when we said 15% was for next year, it's clear we're going to make it happen this year. But with the impact of the IFRS on our margin, that's kind of adding a little bit. So I think we -- 15% to 16%, 16% could be obtainable, we believe. But on a long-term basis from quarter-to-quarter, you'll have some lower and some higher like this one. But I think directionally, with the platform that we have, yes, we could go higher than 15%.

[Donald LeCavalier, Chief Financial Officer]

If maybe Amy to add, Mark. When we said the 15% was -- as Francois mentioned, there was no -- you need to consider the impact of IFRS 16. And also, as you know, paper business was not a very high-margin business for us. So when you exclude paper business, then 15% becomes not only something that we should achieve, but you should increase the target for 2020 -- next year.

[Mark Neville, Analyst]

Okay. The -- on the organic growth of 4% number you quoted sort of ex resin. I guess I'm just curious if sort of have those rates of growth -- sort of the cadence, has it sort of abated a bit as we sort of move through the summer and sort of away from sort of, I guess, the peak sort of maybe pantry stocking from COVID?

[François Olivier, President, CEO & Director]

I think we see kind of a little bit in some vertical easing up of the demand. There's some inventory play, in some vertical people have ordered heavily and now their order are higher. The food retail is obviously running at a higher rate than ever before. But I think we're out of the early pandemic stocking behavior of consumer that spiked a huge increase for us. So now I think we're stabilizing at a higher rate for our food customers that are in retail. So I think in our case, we don't expect to have the same kind of results in Q4, simply by the fact that we had a very strong finish of Q3, and then last year, we had a fantastic October, which make for a tougher comparable. So I don't think I see any drastic change in the demand, and the demand out there, I think, it's pretty stable, and it'll be pretty good. But in terms of Transcontinental for Q4, we might be around that par with last year, maybe a little bit less, maybe a little bit better depending on how things play out. But I think, Q3 would have been our highest organic growth quarter. But the market is there, so the demand is strong. So we believe that next year, we should have organic growth around the 2%, 3%. That's what we're planning for 2021.

[Mark Neville, Analyst]

Okay. Maybe just one last question if I can sneak it in. I'm not sure if I missed it in any of the notes, but have you quantified the weight subsidy benefit in the quarter?

[Donald LeCavalier, Chief Financial Officer]

You can find it...

[François Olivier, President, CEO & Director]

I'm sorry, go ahead, Donald.

[Donald LeCavalier, Chief Financial Officer]

You can find it in our financial statement. It is in our financial notes. So we disclosed the total amount over there. And so this is where you can find it.

[Operator]

And your next question will come from the line of Adam Shine of National Bank Financial.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Just going over a few of the prior items. Just going back to the packaging margin. Obviously, it elevated quite strongly sequentially off the 16% or so in Q2. Can you speak a little bit to any further gains in regards to Coveris synergies and efficiencies that are driving some of the incremental margin expansion. And on a secondary level, looking at Q4 specifically, let's say that resin sort of boosted you by 1% or so in Q3, and you're talking double whammy sort of into Q4. So you sort of dialed that back by arguably about 2% or so. Obviously, the gap that you're sort of guiding to is the 13.8% of last year and the 18.6% of the Q3. But I think last quarter, you sort of suggested a reasonable run rate for the margin given the synergies and efficiencies has sort of elevated you into that sort of 16% zone. So is that still reasonably the more likely level for Q4 packaging margin, acknowledging the resin and some of the incremental, obviously, efficiency gains you're achieving?

[François Olivier, President, CEO & Director]

Yes. In terms of the synergies relating to Coveris, we're towards the end of that. The last part of the synergy was the extrusion capacity, we have installed to internalize some of our film that we're applying on the outside. And that's been strongly contributing to our margin. It will contribute in Q4, but not as much because one of that extruder had started last year, if I recall, in October. So we will have a positive impact from that. Having said that, we're doing other capital investment in the network, and they're also helping our efficiency and performance. So I think that we might not have as a strong push on synergy in Q4 as in Q3, but certainly, we'll be there. And I think you're in the zone, I think we should -- in terms of the plan we built, when we have the paper in IFRS, we said we'll bring it from 13% to 14%to 15%. I think if we factor out the paper and the IFRS 16, I think we're there a year earlier. So now if you add back the IFRS and the paper, yes, the 16% number is a good indication of what we could -- where we're at right now. Having said that, this business, there's a little bit of volatility from one quarter to the other with the resin and with the inventory movement of our customers and promotional activities on the products of our customer at retail. But I think your assumptions are right in the zone of where they should be.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Okay. And just, again, going over packaging, I know want to belabor, you were pretty clear that organic in Q4 in terms of packaging growth, give or take, around breakeven. Having said that, can you speak at all to maybe a bit more color in terms of the packaging trend from Q3 into Q4 in regards to any particular segments that either might be standing out or where performance is sort of surprising you to the upside, where arguably, perhaps there's a bit more work to be done in a particular area of the business?

[François Olivier, President, CEO & Director]

Yes. Anything that is related to food and consumer essential has been very, very strong, and we don't see any change there. I think the new normal is -- and all the verticals that we operate in is that increase of revenue. A lot of the food move from food service, from restaurant and hotel consumption to at home. And a lot of our customers were able to move some of their filling line that used to be dedicated to food service to retail, and we've been enjoying some growth there. So we don't see a lot of change right now. As long as the economy or the pandemic don't allow people to freely travel, I think these verticals of food and consumer essential will remain the way it is. On the other hand, there's part of our portfolio in terms of industrial product that we do packaging for that we had hoped for a faster recovery. And I would call it very, very gradual. And I think it will take time for it to come back. So not a whole lot of change, but personally in terms of TC, we had some customer pushing a lot their order at the end of our Q3. So we expect them to eat up through that inventory in Q4. And then again, last year, we had a fantastic October, which is a very tough comparable. So that's why we're saying Q4 is not going to be as good in terms of organic growth, but Adam, no change to the fundamental of the business.

[Operator]

And our next question will come from the line of Drew McReynolds of RBC.

[Drew McReynolds]

Donald, for you first, just a housekeeping question. The $35.9 million in subsidies in Q3. Obviously, the majority of that is in printing. Can you just give a precise split? Or can we assume all of it's in printing?

[Donald LeCavalier, Chief Financial Officer]

Not all of it, I would say, a large part of it is to printing. And the rest is -- will be split. This is a program for Canadian operations. So we have operation across Canada, including Montreal head office. So the rest will be split, but we don't want to disclose too much detail. One of the reason is that we also have costs to -- extra cost in operation to face COVID-19. So it might be a small impact for the other divisions. So we'd rather say that the large part was for printing.

[Drew McReynolds]

Okay. Fair enough. And maybe shifting to you, François, can you give us an update on your discussions? You did a little bit in your preliminary remarks, just discussions with retailers on use of flyers. We do see the general headlines out there on given stay at home or work from home and the transition to digital that's increasingly part of the marketing mix. Just wondering what you've seen over the last 3 or 4 months from your perspective?

[François Olivier, President, CEO & Director]

What we're dealing with more with our customer is trying to predict their supply chain. A lot of our retail customer supply chain challenges or if they are not 100% secure with their supply chain. So obviously, we have to make promotion decision way ahead of them receiving the product. And that's the supply chain challenges, and then some of the retail vertical here in Canada have force retailer. They're all -- they were doing flyers, but for the most part, they advertise a little bit less product, not because they don't want to, it's because of their supply chain challenges. As they resolve these challenges, I would say that they go back to their normal behavior as most retailer in Canada wants to make sure that the Canadian population feel that they are there to support them in those tough time and offer good value for their money. So I think promotion is at the heart of a lot of retailers' strategies, and the #1 tool to make sure that Canadian consumer understand that is still printed flyer. So we've been impacted by lower page count and some customers of their -- as their business resume and come back to normal, the flyer is coming back. Obviously, if they operate at a reduced rate or if their store are not fully open, obviously, they don't advertise as much. But we see a gradual recovery, but I believe that we will not have the same page count as last year, mainly for business-related decision more than substitution for paper to digital. As many studies were issued in the last 2, 3 months about the relevance of print flyer and I was happy to see that the readership and the consumer preference for paper remains solid and remain at where it was prior to the pandemic.

[Drew McReynolds]

Okay. You cut out a little bit, but I think I managed to get most of it. One last one for me on the book printing side. We've seen some, I guess, some supply chain kind of bottlenecks of the U.S., and I think you've talked about it publicly before. Is this an opportunity for Transcontinental to get more business through there? And maybe this is ongoing? If you can comment on that, that would be great.

[François Olivier, President, CEO & Director]

In what vertical are you referring to, Drew?

[Drew McReynolds]

Book.

[François Olivier, President, CEO & Director]

In book? Yes. Yes, for sure. In book, I think we are certainly one of the top 4 player in North America. I would say that we're the most stable one as #1 has filed for bankruptcy and their selling process is still underway. So customers are not too sure what's going to happen with those assets. And #2, as also announced and started to sell its book assets. So obviously, this is the market environment where we're, I think, one of the largest, more stable player. And we have made, in the last year, capital investment that would add about $30 million of capacity to our book capacity because we were kind of sold out. And this capacity is coming online as we speak. And we think in the next year, we'll be able to fill it up. So yes, for sure, book, because of that competitive landscape situation, is a growth area for us. But book also, printed book, as a medium in the last year and especially in the pandemic, is actually growing. The digital readership plateau at around 20%, and book -- printed book are still very popular. And then the area we're in, which is more a school textbook and 4-color textbook. We feel that we have the ability in 2021 and 2022 to fill that capacity that we've created and enjoy some growth in the book segment.

[Operator]

[Foreign Language] [Operator Instructions] Your next question will come from the line of David McFadgen of Cormark Securities.

[David John McFadgen, Director of Institutional Equity Research]

A couple of questions. First of all, just on printing, you gave us an indication that you expect Q4 revenue to be down about 20%? I don't know if you have much visibility beyond Q4. I'm just kind of wondering what your thoughts are in terms of getting it back to sort of a normal rate where it might be declining low single digit. Like how long it would take to get there and when we might get there? And then secondly, you talked about the Canadian emergency wage subsidy being a lot lower for the fourth quarter. Can you give us an idea on sort of what you expect to realize in fourth quarter?

[François Olivier, President, CEO & Director]

Yes. Yes. All right. Well, we -- basically, we expect August, September and October to be better each quarter. This will end up at minus 20%, but we feel that in October, we should be at around minus 15%. So we'll start the year at about minus 15%. We are forecasting the endemic to still have an impact on our revenue in 2021. So I guess you could call it that we feel that it would accelerate it or increase the number -- the usual decrease of revenue that we have. And print -- having said that, the 3 verticals that are growing, which is book, ISM and premedia, I think we will have more opportunity to increase faster there. But having said that, we are forecasting to have a much better year next year than the last couple of months with the pandemic, but not as good as if there would be no COVID. But we have a very strong platform cost reduction plan in place, even though we don't control the volume, we control our cost, and we have a plan where we feel that we could protect a large part of the profitability that we drove in 2020 in print going forward to 2021.As far as the wage subsidy, this is a program that is slowly going to disappear. So every month is going down rapidly. And also as Transcontinental is gaining revenue, our -- the amount of money that we are entitled to receive diminishing very, very fast. So I think we would receive no more than 15% to 20% of what we have received in Q3 and Q4. That's where we believe this is going to be, so drastically lower.

[David John McFadgen, Director of Institutional Equity Research]

So when you say 15% to 20% in Q3 and Q4, do you mean combined? Or we should just look at Q3, you would receive no more than 15% to 20% of what you received in Q3?

[François Olivier, President, CEO & Director]

What I'm saying is we will receive no more than 15% to 20% of what we received in Q3.

[Operator]

[Foreign Language] There are no further questions at this time.

[Yan Lapointe, Director of Investor Relations]

Thank you, everyone, for joining us on the call today, and we look forward to speaking with you soon.

[Operator]

[Foreign Language] Ladies and gentlemen, this concludes the conference call for today. Thank you for you participation. Please disconnect your lines.