Ladies and gentlemen, welcome to the Hermès International Third Quarter 2023 Revenue Analyst Conference Call. Now, I'd like to give the floor to Mr. Éric du Halgouët, Executive Vice President, Finance of Hermès International, and Mrs. Carole Dupont-Pietri, Head of Investor Relations and Financial Communication. Sir, Madam, you have the floor.
Thank you. Good morning to you, one and all. Thank you for joining us on this occasion of this publication. As of the end of September, the group's consolidated revenue amounted to EUR 10 billion, which is up 22% at constant exchange rates and up 17% at current exchange rates. This growth is particularly virtuous because it's based, I remind you, on organic growth, without any new price increases since the start of the year. All regions show strong performance, with growth above 20%.
This growth is driven by activity in the growth, in the group stores, up 22%, and also driven by wholesale sales, up 23%. Third quarter activity reflects the strong desirability of our collections worldwide, with particularly strong momentum in both Asia and America, where growth is 20% over the past three quarters. Sales came reaching EUR 3.4 billion, up 16% at constant exchange rates, despite a particularly raised baseline for comparison in Asia. In Q3, the group continued job creation and training programs to support growth. Investments speed up in the second half, both in production capacity as well as in the distribution network. We'll come back to that point later. The good results of Q3 demonstrate the relevance of our strategy based on abundant creativity, serving uncompromising quality.
For 2023, despite the uncertain global context, we are confident in the strength and resilience of the Hermès house. Our outlook remains unchanged. Now, I'd like to give the floor to Carole Dupont-Pietri to talk to us about activity by geography and business line.
Good morning to you, one and all. Let's now look at activity by geography. The changes are given at constant exchange rates. As of end of September 2023, all regions are showing solid performance, with growth above 20%, despite a particularly high basis of comparison in Q3 in Asia, as Éric indicated already. The main trends are as follows: First of all, Asia, excluding Japan, up 21%, continues its strong momentum. Sales are robust in Greater China, Singapore, Thailand, Australia, and Korea. For memory, the third quarter 2022 was exceptional after the lifting of health measures in China.
A new store was opened in July in Tianjin City, in Northern China. Petit h made a stop in September at the Beijing China World store. Japan, up 25%, thanks to its local clientele, confirms the solidity of its growth. America, up 20%, continues to make very good progress in Q3, also up 20%, similar to the two previous quarters. In the United States, a new store was opened in Los Angeles, Topanga, in July. It's the sixth store in California after the openings in Naples on the Gulf of Mexico in February and Aspen in Colorado in June. Several projects are underway, such as the enlargement of the Chicago store, which will be inaugurated this week. The fall/winter 2023 men's collection was showcased during an event in Williamsburg, Brooklyn, in mid-September. Finally, sales in Europe, excluding France, are up 20%.
In France, up 22%, confirming, confirming very strong progress. The store in Vienna, Austria, reopened in September after a renovation and expansion. The Hermès in the Making event, which is where the public can meet with artisans and view their know-how, made a stop in Lille in July. Let's now come to the activity by business line, also given at constant exchange rates. At the end of September 2023, all businesses confirmed their solid momentum, again highlighting the attractiveness of the House of Hermès. Leather goods and saddlery up 19%, first of all, benefiting from sustained demand in all geographies. The new models, Hermès Geta and the suitcase R.M.S, requiring a high level of know-how, enjoyed a great success. Two new models, Kelly Messenger and Maxi Kelly, are popular among our male customers.
This year, we're also celebrating the hundredth anniversary of the Bolide model with arts and crafts versions of it, such as the Bolide Shark and the Bolide on Wheels. We continue to increase production capacity with four leather goods projects for production sites underway currently over the next four years. In Riom, 2024, L'Isle-d'Espagnac, that's in Charente, in Loupes, in Gironde, and then Charleville-Mézières, that's in the Ardennes. Four of them. They'll strengthen the nine clusters located throughout France. A further demonstration, Hermès continues to strengthen its territorial anchoring in France, job creation, and training, including, among other things, the Hermès School of Know-How, approved by the National Education Department. For memory, the annual objective remains unchanged. The ready-to-wear and accessories division, up 29%, achieved robust growth, thanks to the success of the ready-to-wear collections, fashion accessories, and footwear. The...
Spring/Summer 2024 men's fashion show at the Palais d'Iéna in June was very well received, as was the Spring/Summer 2024 women's collection, presented at the end of September at the Republican Guard, Garde Républicaine. Silk and textiles business, up 17%. Very good growth, thanks to exceptional materials, diversity of size and formats, as well as a boosting of production capacity with the extension of the textile site at Pierre-Bénite, which is near Lyon. Perfumes and beauty, up 8%, continue their development, inter alia, with the Twilly d'Hermès line, which saw the arrival of the Tutti Twilly d'Hermès perfume at the beginning of September. Beauty has also been enriched by a fifth chapter, launched at the end of September, Regard Hermès, inspired by the iconic colors of the house.
The watches business line, up 24%, confirming its good performance, thanks to the development of items which combine creativity and exceptional watchmaking know-how, both for the models with complications as well as the house's classics, such as Cape Cod and Arceau. The Hermès H08 line brings in several new products this year, and very successful. Other Hermès businesses, up 26%. This includes jewelry and home products, continuing very strong growth around creative and unique collections. An event on the anchor chain link, the Chaîne d'Ancre link, was held in the Faubourg store in July and August. Another one will be organized in several subsidiaries in the group next year. Thank you. We'd like to answer any questions you might have now.
Ladies and gentlemen, you can now ask your questions by pressing star one on your telephone keypad. Please only ask two questions.
The first question from Kepler Cheuvreux. You have the floor.
Good morning. Thank you for taking my questions. My first question, I get the impression in reading your recent releases, that the pace of store openings speeded up recently. I believe two new openings in China slated for Q4, if I'm not mistaken. Could you update us on your store openings, number of openings, scheduled for 2024 at this juncture? Question two, this is on your prices. Some of your competitors did further price hikes to offset changes in currencies in Asia, inter alia, but apparently that hasn't been the case for you at Hermès, price hikes. In this context, can we expect any further price increases, significant price increases in 2024? Thank you.
Good morning.
For your first question on store openings, the pace remains similar, on average, around two openings in the U.S., two openings in China. That's pretty much a constant between three and five per annum, plus there are refurbishments and enlargements this year. Toward the end of 2023, there'll also be an opening in Chengdu, in China. That's near Shanghai. That'll be in the fourth quarter. And then mainly, there are going to be renovations and some enlargements. We mentioned Chicago at the end of the week, reopening, plus Bordeaux in France. And then you'll also have some other refurbishments in Seoul. 2024, there'll be no change in the pace. We're talking about openings in similar number in the U.S. and in China. That was Carole.
Halgouët adds: There's no change in the pace, five or five openings, around 15 projects for refurbishments, with and without enlargements, with and without actual store moving. We're placing emphasis on the U.S. and continuing our development strategy in China with one or two stores, depending on the scheduling of projects. Regarding our price policy, I'd remind you, on average, there's been an increase of 7% for the full year 2022... 2023, sorry. Now, there were sort of two extremes. In the U.S., just over 3%. When we decided on price increases, the US dollar, end of 2022, was almost at parity with the euro. And then a slightly greater increase in Japan, a double-digit increase, due to the weakness of the yen, and that was further confirmed in 2023. As to 2024, we are beginning our budget process.
We're looking at this business line by business line, looking at raw materials price increases, looking at wage base and so forth, so we haven't yet determined anything here. 2024 will also be a year where you'll have a negative currency effect, so we're looking at all this right now during the current budget process. Thank you. The next question from Antoine Belge from BNP Paribas Exane. You have the floor for your question. Next question, Antoine Belge from BNP Paribas Exane. You have the floor, please.
Let's take the next question, then. There's a technical difficulty there, apparently. Okay, the next question from Anne-Laure Bismuth from HSBC. Go ahead.
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Go ahead with your question. For HSBC.
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Mr. Antoine Belge, your line is open now, if you'd like to ask your question. Or Ms. Anne-Laure Bismuth, you have the floor.
Yes, good morning to Carole and Eric. Thank you for taking my questions. I have two. The first one is on expected growth in 2024. We know the consensus is at 11.4%. It's slightly greater than average performance in the industry. Are there reasons to think that you won't reach this? Any reason to think this level of growth is reasonable? Second question, trends at the beginning of October. You mentioned no change in trend. Is that comment the same in all geographies, no change in trend? Thank you.
Answer from Eric. 2024, as I mentioned, we're currently in the throes of our budget process, looking at each market, determining volume increases, price increases.
What we can say, in any event, there could be double-digit price increases, but it's early days. I can't tell you precisely where we stand vis-a-vis consensus, consensus and so forth. As to changes in trend, I said there is no change in trend in any of our markets. Here in Europe, outside of France, in France, in the U.S., and also in China. Broadly, what we see is footfall continues to be good. We're cautious, though. Some people in industry, some publications say there might be a slowdown, particularly for more affordable items, what you might call inspirational items. But at this juncture, we're not seeing that trend. We're keeping a careful eye on things, particularly due to the deterioration in the geopolitical context, which could have an impact on tourist travel.
What we're seeing so far is we are possibly less exposed than others due to our value strategy and due to a very loyal customer base, high-quality customers in all of our geographies.
Next please.
The next question from Antoine Belge from BNP Paribas Exane. You have the floor.
Thank you. Good morning to you both. I have two questions. I remember last time we spoke, you said you were being cautious. You reminded us that the baseline for comparison in Q3, and then you managed to see 16% growth in leather goods. If we remove the price effects, it's 9% growth. So how did you achieve this performance, which seemed to you almost impossible a few months back? And to what degree might this postpone problem to Q4?
I think we're 19, and Carole was saying, after talking about, leather production site openings, that the target remains unchanged for this year in terms of volume. Question two, general performance, up 10% organic. Could we get some figures regarding China, specifically?
China, and then also on Chinese customers, more broadly, to compare with last year, possibly, or some corporations to, to compare with 2021, year, when there wasn't COVID in China. Éric says: Good morning, Antoine. On leather growth, we confirm an annual objective with growing capacity by 7%. We can add the price effects, the average price effects, group wide, around 7%. That's the annual target. Now, the question, why is our pace of growth higher as of end of June, and also although the gap is lessening, but also, we see this in Q3? Well, remember, the production baseline, for comparison, was very favorable in the, the first half of this year. In 2022, the production activity was still disturbed, by COVID in our production locations. So positive basis for comparison in the area of production.
Furthermore, this year we saw strong activity, particularly with the Chinese New Year, which boosts leather sales in the first half, strong deliveries outside the network... to the network, sorry, and very strong productivity. There you have it. That said, we confirm our annual objective. And remember, in Q4, the comparison baseline is particularly high because we were growing by 25% in leather in Q4 2022. So take all this into account, and you see, it's for all these reasons that at the end of the year, we should reach our objective, which we've been giving you for several quarters now. On to China, to talk about Greater China. There are tourism flows within Greater China. First of all, Hong Kong, let's mention a strong increase in footfall. When I say strong increase, it's above 50%, 50.
Sales in Hong Kong to local customers, very strong trends, over two-thirds of our sales to local customers. Macau, also a very strong increase in traffic, but this is mostly customers coming from mainland China. But very good growth there. Taiwan, great momentum. Here, though, it's local customers versus the situation in Macau. This brings me to mainland China. From memory, if you look at percentages, there was a lockdown in 2022 from 20 March to end of May. Hermès Group reported very strong growth in Q3, a strong resumption and a catch-up effect of any delays that had taken place during the two months of distressed activity. Traffic, again, mainland China, strong increase in footfall, including in Q3. Double-digit growth figures for traffic.
Something you don't see in the percentages, but in mainland China, revenue for Q3 is up double-digit compared to Q2. So we've increased our revenue in mainland China. The price effect is unchanged, approximately 6.5%. Scope effects, Carole mentioned these. We'll open a second store in Chengdu in October, in Q4. So Hermès' performance in Q2 and Q3, compared to what some people are seeing in the industry, well, I think our performance is... If we step back a moment, we can see it's due to the great proportion and loyalty of our local customers, and also due to our group's value strategy. In spite of macroeconomic difficulties that China's encountering in the short term, our view is potential for development continues to be very strong in the medium and long term.
There'll be a resumption of growth and also, further growth of the middle class. This is also why we're continuing our investments at the same pace, depending on, project advances. It's 1 or 2 stores per year, so no change there. We believe there's true, genuine potential throughout the geography. Thank you. Possibly a brief follow-up, question to fully understand. To end up at the 14% for the full year, after 19% in the first nine months, there should be growth. There'll be just slight or maybe zero in leather goods for Q4. We can hope it's not... Well, maybe mixed effects will make for slight growth, but nevertheless, it would be single digit at best if you don't go beyond the 14%. Eric, if all goes well, it could be 19%. There'll be slight growth nonetheless.
We're talking about going into next full year. Questioner. I just wanted to emphasize that mathematically, to not go beyond 14, if you've reached 19 in the first nine months, then it'd be zero at best in Q4. Eric, that's true. Thank you very much, says the questioner. Next question from Edward Aubin, from Morgan Stanley. You have the floor. Good morning, Eric and Carole. Two questions. Firstly, could you please tell us the proportion of VIP customers in major geographies such as China and the United States? I'm sure you won't give a specific figure, but I'd like to know if there's an increase in 2023 compared to 2022, or not, in VIP customers. Second question, production. In product categories such as ready-to-wear and footwear, you work with outside suppliers, outside manufacturers, particularly in Italy.
Could you talk about capacity of these outside suppliers, their ability to keep pace with double-digit volume growth in the medium term? A related point, your strategy to increase... Is it your strategy to increase, numbers of products produced per supplier or increase the supplier base? Carole, good morning. Regarding customer proportions, no increase, no change, no significant change in the makeup of our customers. We have a large portion of these VIPs within Hermès clientele, but there's been no significant change in either direction. Éric, regarding our matures, our business lines, we've got strong growth, such as Ready-to-Wear and footwear. Firstly, yes, we work with outside suppliers, with whom we've had a very long-standing business relationship. We've got a very long track record with these suppliers. Some of them...
Well, they all share our quality requirements and move with our abundance of creativity. In some instances, we could consider taking a stake or sometimes consider buying out a partner to consolidate the partnership, but this is only done when need be, for our quality requirements and for the sake of creativity. Let me say, we've already got very strong integration. The proportion of France is significant. But for those two business lines, Ready-to-Wear and footwear, it's true. There's specific know-how in Italy, which we continue to use and continue strengthening our partnerships both there and in France. Question? But no, medium-term problem for production capacity? Eric, no. No shortfall, no crunch in production capacity. We've secured our volumes for the next year, few years. Okay, well then, thank you for answering my question.
Next question from Thomas Chauvet, Citi. You have the floor. Good morning, Eric and Carole. Two questions, if you don't mind. Regarding prices beyond 2024. I have a question on your price strategy. When your competitors, for two, three years, have been significantly increasing their prices, probably more than cost inflation. I know Hermès products are priced based on raw materials cost, labor costs. As unique as a brand may be, it can't completely ignore its price positioning vis-a-vis competitors. I can remember when Axel Dumas was saying he didn't look at the competition. This was back in February, at the wonderful, previous swimming pool, the Lutetia, the meeting there. I'd like to know, though, might Hermès, to some degree, be forced to make up for a price lag?
It's true that you've been much more moderate and modest than your competitors may have been in the last three, four years. If we set aside inflation. Another question, a follow-up, having to do with vertical integration. Could you possibly, on Ready-to-Wear and also on Jewelry, as well as, watches, talk to us about vertical integration, possibly give us a percentage, very simple percentage, as of end of 2023, and then what your medium-term objectives are to in-source some of this? We know the impact this could have on has had on Leather Goods and silk and textiles. I can remember Axel Dumas, back in February, was talking about Jewelry. Carole talked about Pierre-Bénite in Lyon. Could you give us an idea? Talk to us about your, targets of possibly insourcing some things rather than subcontracting. Eric, our price, price strategy does not change.
I can reconfirm this. This is our working assumption for 2024. Slight differences between 2022 and 2023. Currencies have gone in the wrong direction for us, currencies. So it's possible we'll go slightly above our cost price, but the way we craft our sales prices continues to be the same, based on cost price, raw materials, labor, and then we'll see, depending on spot, currency, fluctuations, if possibly a rebalancing might need to happen in a geography. But the basis remains unchanged, basis for our calculation. Now, vertical integration, that point, it's meaningless to give you percentages. In some instances, it could be a minority stake we would take in a supplier. In some other instances, we might take a majority stake. In another instance, we might have a specific production site dedicated to Hermès products.
So there's no general rule of thumb on this. Mainly, we take into account our growth and ratchet up our own production capacity. This is true for Hermès watches, where we're setting up a second site for watch dials and cases. Equally true for home products. Think of porcelain products, fashion accessories. This is equally true in textiles. As you know, we enlarged several years back now our Pierre-Bénite site. We've been enlarging it for a while. Currently, our capacity is... We're working to full capacity in silk. We're going to be setting up a new printing table printing line for cashmere shawls and the size 90 carré scarves. Inventory levels on these products are fairly low in the retail network. Lastly, perfumes.
We're currently significantly enlarging the Le Vaudreuil production site to keep pace with increased demand for perfume, so we're increasing capacity there. As you can see, we've got a combination of things. We do big and make—we make big investments in our own production capacity. I wouldn't have mentioned leather capacity, which has its own trajectory and projects that cover the next four to five years for leather production sites. As I've said, we're both combining vertical integration and boosting our investments, our own production sites. This is why this year we should see a level of investments reaching around almost EUR 900 million, which is quite an acceleration compared to previous years. Thank you for answering that question. Next question from Loïc Morvan from Bryan, Garnier. Go ahead. Good morning, Éric and Carole. A brief question.
On Q3 trends, did you see a similar trend July, August, September, or did you see things speed up slightly? I get the impression that some of your competitors, for them, July was a difficult month, but then gradually after July, things improved. Did you see a similar trend, Eric? No. Basically, September was stronger than August, after a very good month of July. So the last months of the quarter were good. All right, then. Thank you for answering my question. Next question from Carole Madjo, Barclays. Go ahead. Good morning. Two questions. Firstly, on the silk and textiles division, different from other growth rates. Can you explain the difference, baseline or something else? Another question, second question.
On growth, e-commerce versus brick-and-mortar stores, are you seeing a major difference in growth levels between those two channels, or is there similar growth in both channels? The underlying question, can you see a difference in terms of recruiting new consumers? Any slowdown through these channels or not? Éric, on silk and textiles, the slowdown which you've seen in Q3, as in all business lines for that matter, but it's especially impacted by the drop in comparison for China, which I mentioned earlier. Furthermore, as I mentioned, we're currently investing in a new silk printing line. We've been working at full capacity, and our levels of inventory were fairly low in the retail network. We're replenishing those inventories. Now, to talk to you about digital, growth continues to be good, similar growth to in-store growth.
Brick-and-mortar stores slightly higher, actually, than physical stores in most regions. Inventory there is somewhat tense due to popularity of collections. Very good business in all the regions. Thank you. And what about recruiting new customers? No change in pace of attracting new customers, acquiring new customers? Well, customer typologies, says Eric, no change, no big change in any of our regions. Thank you. Thank you very much for answering my question.
The next question is from Rogerio Fujimori. The floor is yours.
Bonjour, Eric and Carole. I have one question about the other Hermès sectors. I think it's on its way to break EUR 1.5 billion annual sales. So I was just wondering if you could unpack the growth for jewelry versus home products, and any color on volume versus mix, as I presume 7% comes from price. And then your comment on leather. I think you, in terms of production plans, I think you referred to four new leather workshop projects for the next 4 years. Is 6%-7% volume growth still the base case, or should we assume some more like mid-single digit, given the extraordinary growth you're experiencing right now? Thank you.
Yes, regarding your first question, the growth of the jewelry and the homeware or tableware is similar in Q3, and there is no difference. And, Carole, can you
Regarding your second point, Rogerio, absolutely. It's exactly the four projects for the next four years is exactly the translation in volume of the 6%-7% growth on average. So we are exactly online with the target we have for the next years, excluding price.
Thank you.
The next question from David Da Maia, CIC. Go ahead. Good morning, Carole and Éric. Two questions from me as well. Firstly, on currency effects in Q3, impact on revenue, quite significant, maybe even stronger than expected. Could you update us on currency effects, particularly on gross margin, and maybe update us on hedging levels to date for 2024? A second question on growth and resilience of growth. Several times you've focused. You've said your focus on values strategy is one of the reasons you've resisted better than competitors. Could you tell us which business lines benefit the most from the value strategy? I understand in leather, it's not necessarily the case, if I've understood properly, but could you possibly give us a ranking, which of the business lines that are the most impacted by this value strategy. Thank you.
Eric, currency effects, first of all, there are conversion effects that you can see on sales have a strong impact in Q3, they'll strengthen further in Q4. Remember, the dollar was at parity with the euro at the end of last year. The gap will widen by between 5 and 6 points in the wrong direction, which will reduce growth at constant rates into the year. Now, the two currencies are hedging positive impact this year, but hedges we're taking out for 2024 haven't yet been finalized. We're waiting for the end of the year, but at this juncture, we're seeing two main points of deterioration. Firstly, the Chinese yuan, which depreciated, continues depreciating. Here, we're seeing a deterioration in our hedges if you compare 2023 to 2024 by 8% and/or 9%. Also, deterioration, a similar deterioration with the yen.
The Japanese central bank hasn't yet stepped in for its monetary policy. So those are the two currencies. Next, the dollar zone. Deterioration is not nearly as significant. We haven't finalized, but there should be a deterioration of the order of a few percentage points. 2023 saw the Forex hedging with a very positive impact. 2024, we'll see a less favorable, but in fact, they're hedging. We're applying the same hedge policy, of course. Your second question on our value strategy. This covers several business lines. Firstly, ready-to-wear. This is a business line that's growing strongly. These are exceptional pieces, a lot more exceptional items in these collections, with exceptional raw materials, a great deal of labor, and so forth. Also, Jewelry.
Jewelry, if you segment jewelry into small jewelry items, medium, and then high jewelry, our growth is in the medium and high jewelry segments. In 2024, there'll be a new collection of high jewelry, so the proportion for that segment will be much stronger in that year. Next, time pieces. We have a lot of exceptional watches, with many complications. We're also developing watch movements through our partnership with Vaucher, and we have a stake in that business, a minority stake. So time pieces, this is a business line where we've got to focus on value. So those are the main, business lines where there's the value strategy.
Comes from Zuzanna Pusz, from UBS. The floor is yours. Good morning, thank you for taking my questions, I have two. So the first question will be on your margin outlook for H2. Can you just remind us if there is anything specific that we should take into account in terms of any one-off costs? I think there's also this new share plan. So just anything you could remind us, and especially maybe a clarification around the IT costs, which I believe in H1, they were expense. So can you just remind us if that was already the case in H2 last year, or if this is impacting H2 this year as well? And secondly, just a clarification on pricing.
I think you mentioned you haven't finalized your budgeting for next year, but I think you also did mention in some of the answers that, well, basically double digit. So I wanted to understand if, you know, double digits is something you're contemplating or sort of... I'm just clarifying because maybe I missed it because of translation, because I heard double digits, but at the same time, you said it wasn't finalized yet. So just a clarification on how you're thinking about pricing for next year would be very helpful. Thank you.
So regarding pricing, we have not yet finalized our budget process, but we will not be double-digit. We should be mid-single-digit. Could be, but we will not be double-digit. Because we stick to our basic rule, which is to reflect the cost of products in the selling price. And you know that the price of materials is still increasing, but not so much. So we are not going to implement a double-digit price increase. Regarding your question on margin for the second half, we will accelerate the CapEx. We have a target of EUR 900 million of operational CapEx.
We will increase our communication expenses in the second half with more events. We mentioned when publishing our first half results, the weight of the free share plan that will impact the second half. It's a plan with a cost of EUR 600 million that will be spread over four years and will impact the six months, the second semester of this year. Acceleration of recruitments-
... we target more than 1,200 recruitment this year, net recruitment, in line with our targets. And finally, we will reinforce our investment in information systems, to optimize inventory management, omni-channel, and so on. And as you know, we will book as a charge and no more as a CapEx, all the information system expenses, which are called SaaS, Service as a Software. SaaS means Service as a Software. And now, the accounting rules oblige us to book it as expense, a charge in the period and no more CapEx amortized over 3-4 years. And this is little bit technical, but it has to be taken into account.
Thank you. So just to clarify, in H2 last year, that was still booked as CapEx, right?
It started from mid-year last year.
In H2, we will be annualizing it already. So it had a negative impact on your H1 margin, but in H2, we will be already comping of you having-
Yes.
-expensed it last year, right?
Yes, that's right.
Thank you.
Well, thank you very much for joining us this morning. Of course, don't hesitate, if you need a further discussion, to call us, and have a great day.
Thank you very much.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.