Earnings Call: Q3 2019

Nov 6, 2019

Dear ladies and gentlemen, welcome to the Q3 2019 Results Call of Rentec AG, and our customer's request, this conference will be recorded. As a reminder, all participants are in a listen only mode. After a presentation, there will be an opportunity to ask questions. May I now hand you over to Ms. Collins who will lead you for this conference. Please go ahead Thank you, and, good afternoon, everybody. Welcome to our call. As you know, I'm here my CFO, John Mueller, and this indeed will provide my last call as CEO, as I sat down at Christmas. Let me start with the highlights of the quarter. Operating gross profit rose by 2.9 percent, which was 1022,200,000 on a constant FX basis. I'd like to know that like to note that our newly established food and nutrition organization contributed well in the third quarter. The gross profit growth was mid to low digit, which was clearly above the organic development of the group. The operating quite a bit, economic environment at the at the moment with the demand. Checked our operating EBITDA stable against last year's q3. It's only constant tax rate, and then on a frozen gap basis. Q3 reported operating income of 262.800 to report an FX adjusted growth of 13.9 percent. This increase in operating EBITDA is heavily impacted by the application of the new IFR accounting standards on leases, underlying growth of Eastern More Flattish. The cash flow strongly increased by more than 60% and amounts €646,000,000 in the reporting period. As we've always said, cash flow in our business is particularly strong in terms of macroeconomic weakness. Underscoring the resilience of our business model. We continue to execute on our M and A strategy and sign a number of deals enclosed further acquisitions. In the quarter and year to date, we've noticed a continuous slowdown in the economic situation, which is impacting demand generally. This is broad based in many industries and regions. The amendment of our guidance range of 0 to 4% operating EBITDA growth in mid mid July, we've been taking a more cautious view regarding the overall market conditions. Situation definitely not improved since then. We are facing a high level of economic concern need. You speak to our operating EBITDA growth for 2019 to be around the lower end of our guidance. I will just confer with the details and the outlook later. Into our EBITDA bridge. On the last call, took care of that positive debt from FX translation of €6,000,000. Acquisitions come to be €8,000,000 in the reporting period. Has been written out of the operating EBITDA associated with our ProStector business, which we sold for the end of 2018. The positive effects from the application of the new accounting standards and leases on our operating EBITDA was €30,000,000 for the group. For the EMEA and North America affected by the overall macro conditions, in Q3, we've reported negative organic growth of 43% respectively. This is in line with what we've seen in Q2 this year. Latin America was not able to continue the growth projection in this quarter. The reported negative organic growth around about 30%. This is an entry for certificate developed as well in Q3 with organic operating EBITDA growth of 2%. Just coming to the regions now. To proceed to India, as I mentioned, we've already received continuous softness in the macroeconomic developments, and overall weak demand. On our while many countries in the region are fixing the situation, Germany and France continues to be a big gift expected by weak demand. For these conditions, we we achieved a stable gross profit compared to previous year. The organic decline of our pricing readout was about 4%. The new accounting standard, leases have an effect of around 1,000,000 on the operating EBITDA in the near region. Coming to North America. This is q 2 this year. We've seen a continuous weakening of demand also in North America. The current census is around 5 trade are affecting customer behavior. Gross profit growth of 5% is resulting from organic growth and product positions. Organics for the operating decreased by 50%. Despite the current slowdown, we have continued to invest in both people and resources, which are expected to pay when my when market consolidation is in the car. The effective application in your county's business and leases amounted to around €14,000,000 us in the region. Latin America, after strong first half, we see a high volatility volatility in Latin America. The region could not continue its growth trajectory. In total, the operating readout declined by 30% in the quarter, effective IFRS 16 amounted to 2,500,000 in the region. We are able to report a positive extraordinary income below the operating EBITDA of around about 1,000,000 is due to a refund of recent claim of Social Security charges and correctly levied on our business. To Asia Pacific, although we see Summit and uncertainty in Asia as well. China and the region, China grew well in Q3 despite softening economic environment and and warrant and continuing challenges in the logistics infrastructure. In addition, our acquisitions contributed to the quarterly results. EBITDA grew by 2% on 18. The effect of the initial application of IFRS 16 amounted to 1,000,000 in the quarter. Moving to acquisitions. Continue to exit execute our M and A strategy and we acquired a number of targets in the last couple of months. As you can see, we are active in all parts of the world since the beginning of the year, we've implemented these transactions with enterprise value of €260,000,000. In total, we've and transactions so far. The majority of these transactions are all closed already. We expect those to close, which we've signed so far until the end of this year. Thank you, Steve. Good afternoon. I would like to speak about our income statement for the first quarter 2019. On page 11, you see the upper part of the income statement in the third quarter, we saw a slight design entails of 1.4% on an adjusted basis. This reflects the prices for chemicals across our portfolio are declining. However, our operating gross profit rose by almost percent on an adhesive just to say this that demonstrates well that we are able to protect our absolutely perfect contribution in a deflationary price environment. Operating EBITDA for the group to 13.9 percent to 1,000,000 on an FX adjusted basis. The growth was clearly impacted by the application of IFRS 16 on the frozen workplaces operating EBITDA is flattish year over year. On the next slide, below the operating EBITDA, you will notice positive extraordinary effect in the amount of €9,200,000. This mainly relates to the case in Brazil that we have claim for refunds relating to Social Security charges. Depreciation was higher than in last this quarter. This is mainly attributable to the application of the new accounting standards on leases. Most of these expenses are no longer shown above operating EBITDA plus split into depreciation and interest. The financial result amounted to a net dollars of €23,000,000 earnings per share stood at $0.83 compared to $0.72 in the 3rd quarter 2018. In Q3, we reported a significant increase in operating cash flow to 1,000,000. The significant increase is partly due to working capital development. In the third quarter, to get a significant inflow converting capital reductions. As most of the lease payments are now included in the finance cash flow, the operating cash flow benefits in the year over year comparison. Interest payments were clearly lower this year than last year. Last year, we still had interest payments on an expensive bond that matured last year. Let me move to the investment and financing cash flow on Page 14. CapEx in the 3rd quarter was higher than in last year's quarter and amounted to 1,000,000, which is in line with our plan. In addition, we spent around 1,000,000 in the closing of acquisitions. In the application of IFRS 16, the line repayments of posted also includes most of the cash out in relation to operating leases. This effect is around €27,000,000. And moving on to the free cash flow. The free cash flow is performance indicator for managing our business. It amounted to 1,000,000 in the 3rd quarter and that is more than 60% higher than in previous years. You would see in this table the relevance of working capital In connection with the first time application of IFRS 16, we have already earlier this year adjusted the definition of flow in order to ensure comparability with previous years, free cash flow now also includes leasing payments in a separate time. On Page 16, you see information on net debt and lebriin net debt amounted to 1,000,000,000 decrease compared to the end of the 3rd quarter with attributable to see cash flow generation. Leverage is at 2.0.9. Net debt as well as the leverage ratio particularly exclude lease liabilities, and we get that to ensure the timeline that we present to you is system. Net working capital amounted to 1,000,000,000 at the end of the quarter. Working capital turnover stood at 6 point 9 times in third quarter. With that, hence the presentation back to Steve. Thank you. Right. I've decided to start with the current trading and then adjust the outlook for the remainder of the year. I'll just try and do this slowly. So in July, the growth is our gross profit for working day growth numbers. In July, the growth was 3.1% 0.5% on an organic rate basis. In August, credit was 4.3%, one of which 1.3 organic. At 7 in September, it was minus 1.1 percent, minus 2.8 percent organically. October was plus 1.4 and minus 0.5 organically. So I think we said a little bit earlier on in the in mid July, we just did our outlook for 2009 of operating EBITDA which goes between 0 4%. We have been taking more cautious position with regards to the economic for the rest of the year. I think we're very much right in June. So we are basically a particularly difficult macroeconomic environment with a certain high degree of of not a uncertainty. And as I said earlier on on, as against this background, we we specify expectation that are not pressing the EBITDA will be around the lower end of our guidance range. I think at that point, we're happy to take some questions. We will now begin our question attention to speak, to advise you are 2 to answer your question. If using some equipment today, this is a handset for making The first question is from raghaflatalei of Sam BNP Paribas. Your line is now open. Just I'll start off with 2, please. On CapEx, firstly, you indicated you started the investment program in North America. Can I please confirm that the scope of this is still around 1,000,000? Also, any color you can share on progress made with this market opportunity would be helpful. And secondly, on just free cash flow for the fourth quarter, assuming sort of current conditions remain for the rest of the year, can you give us a sense for how different fourth quarter free cash flow look versus the 3rd quarter. Please or large movements, the flag would be helpful. So in terms of the, the CapEx which we've already highlighted, I think, about 40,000,000 physical, a consistent number, which you would go with. These are somewhat lumpy acquisition, lumpy investments. And therefore, it's not entirely certain at which credit will be spent, but we try. I would think we've seen most of us done this year, and they're absolutely in line with our strategy going forward. On the quest free cash flow fourth quarter. Obviously, you can deduct the EBITDA number from our guidance, I would expect, assuming unchanged condition for chemical production prices I would expect further inflow from working capital reductions. On the other hand, you would expect, a certain degree of pickup in CapEx in the fourth quarter. So, 4th quarter should well have very good cash flow probably not exactly on the levels of Q3 due to the of Mexico. So could I just follow-up the capital number for the full year? You guide differently. Now you will have, from the Chinese sales only 5,000,000, so we should be looking at 6215. Is that correct? Oh, it's it's, it's not for sure exactly how the timing of the things will fall. It will be anywhere between the between 202120 time. Okay. Of Kepler Cheuvreux. Your line is now open. Good afternoon. Two questions. First on IFRS 16. Where in the Q3 report, you still talk about the estimated impact on the FDA of around 100,000,000. But looking at the number year to date, it's already at 86,000,000. So either this 100,000,000 for the full year is now overly conservative. Or in Q4, we will see a substantially lower number than what we have seen in the first three quarters. So may maybe you could clarify this point. And then my second question is on IT costs in EMEA. I recall that in each one, you didn't incur some cost related to an analysis of the IT landscape, to get you into additional cost in the in Q3. Has this, analysis been completed now and and when will you start to spend on the actual harmonization of the IT systems and what would that mean for OpEx and CapEx going into 2020? I take the, the IFRS 16 question. I know we did repeat the 100,000,000 IFRS 16 effect on on a full year basis into report. It might be a little light, so $110,000,000. It's a more realistic figure. So anywhere between $100,000,000 $110,000,000, I would say. And just coming up to the the IT question, we are we are pretty much, through the, initial, scoping phase fully for the IT in Europe. That actually is going to get through a a further review, in in December So, decision, I can't give you any more firmer details than that, but certainly, we'll be there with a point of activity deciding, you know, the roll out of program. When you make the decision, will we then see some shift from OpEx to to CapEx? I think that would be the case because I think the the scoping work that's been done so far as we can issue with you. Okay. Thank you. The next question is from Rajesh Kumar of HSBC. Your line is now open. When you look at 2020, do you think your cost base is in the right shape Are there any potential cost actions in terms of branch in terms of warehouse print or logistics with print you know, headcount, you would need to tweak during the current a bit of growth? The straightforward answer to that is that there will there are actions underway at the moment in terms of looking at our operating costs and these have been ongoing throughout this year, which is a and put a balance to be made in some respects because we have been investing in some specialty chemicals, marketing and technical support functions within the within the business and obviously investing in certain expansions of our American parts of our American business. At the same time, we we have reduced operating costs in North America and in and in parts of Europe, we there is more to be done. We do actually have in real terms, a number of, actions in place such as a headcount freeze, for the the the ongoing businesses. And we are seeking to reduce our continue to seek and reduce our logistics costs and energy costs. So both of those are but all those three answers are in clear focus. So going into 2020, we very much see, cost control and cost reductions has been part of, sort of a defensive approach to our business in the in the 2020. Thank you very much. And just in terms of the discussion you've had with your suppliers about plans for the next 6 months, next 3 months. What kind of sentiment you are seeing in the supply chain of people looking to assure volumes you're going to buy from or sell for them or okay, trying to renegotiate the volume, you know, the prices you're getting volume have come down or if you want to relative basis, have you become a more important customer for them? Well, I like you have always been an important custom system. Where we are at the moment, a reasonable expect, a reasonable, comment would we would be to say that the prices have come down. Prices are, in in general, we we do part we do pay market prices. We don't see any one particular supplier, discounting ahead of their their competitors in a in a in a tax to try and send more business from Brentac. And clearly, we do have partnerships out there. So we are we do have a a partnership approach to, to our supplier base in terms of working with them on a in terms of sales and marketing of their products. So we're not completely transaction in that respect. I would be glad to say that we've seen, specialty chemicals under some pressure, in terms of a lot of specialty chemical manufacturers are clearly searching for volume. And that's an area which is under some under some pressure. And this is in particularly area of things like paints and coatings. And you can imagine in the car industry, which is a very heavily, important specialty chemicals. Those areas are are somewhat very competitively priced and manufacturers are looking for volume. But I think, you know, we we have a a pretty steady shift in terms of both the relationship with our suppliers and the pricing that we use. Appreciate that. Hi there. Thanks for taking my question. Firstly, apologies. I I missed the, the monthly numbers earlier on. I've missed the first couple. If you could just repeat those That would be that would be incredibly helpful. Sorry sorry about that. Just on, I also wanted to talk about specialties in food and nutrition. Could you give us a bit of a feel for for how how special this is going for you? I know you just bought there about tough pricing, and some of these or specialties, but maybe any kind of organic gross profit growth you could give, for those facilities and food nutrition would be great. In in you talked before about price weakness. Could you because that instead official for your margins. I know that it it at times when prices are quite volatile. Chemical distributors can can make decent margins as as you can sort of somewhat slow in passing those through to customers. Maybe if if that's been a, would you rather be quite helpful? And just thinking about your guidance, the last point, you did roughly sort of down 3 a half percent or kind of kept it after the first half. You've done minus 4 here. You know, your guidance for the year on an organic basis has you doing about minus 2 and a half minus 3 at the low end. So are you expecting a bit of an extra improvement, in the, on a year on year basis in the next quarter in order to hit all kind of more of the same. Alright. Well, I'll try to be incredibly helpful and give you the numbers again. So in July was, 3.1% growth, 0.5% organically. It's August 4.31.3. Again, it's late September minus 1.1 minus 2.8 percent organically. And October was plus 1.4 and minus 0.5 please. I think food nutrition was around about 5 to 6 percent GP growth, in the period if that's what you're looking for. There is, in terms of just and gently speaking our specialties, to the as in as in to the previous caller, clearly, there are there are pressures and especially in specialties in terms of taste and coatings because any editing involves the metalworking, even even simple things like whiteboards, they require special tech specialist chemistry to for a number of finishing and what have you in case the car industry is a perfect example. So I would say in those industries, the specialties are under some pressure, because of a lower demand for for product generally. In terms of pricing, clearly, there has been some volatility in pricing. But as you know, we have a relatively, short lead time in terms of our staff holding. And last week, we certainly get a a little bit of a a positive, when prices move, but it's not excessive by any means. And it's it's more of a a cushion against any losses in the up or down phase. So again, no appreciable margin accretion during this period of volatility. I think Steven was also looking for for a little bit of color on how do we see organic earnings growth in Q4 relative to this year. So far. Oh, the difference of Cuba quoting stigma, relatively small differences. So if I take, we would expect the fourth quarter organically to be on the same growth trends that you have seen year to date so far. Great. Thanks a lot. Thanks for that. The next question is from Ketan Udeshi of JPMorgan. Your line is now open Yeah, hi. Thanks. Thanks. I just had a one question and to some extent, maybe this is a clarification. Know, I heard, you guys talk to me about some OpEx optimization or cost optimization program, but if my math if my math is correct and if I were to add back the IFRS 16 benefit to your OpEx, then essentially the OpEx was up close to 6% year on year in Q3 2, which is actually higher than your FX adjusted gross profit growth. I'm not very clear where is the operating savings reflected in terms of numbers. Then, I mean, eventually any business model probably would want to have the other way around that the OpEx growth is slower than the gross profit growth. So I think can you maybe help us explain when that nominated thoughts, the more visible your, background time? Maybe let me clarify the numbers and then I'm sure Steve wants to give some color. The, I can't flow the 6% OpEx increase in in Q3. You mentioned, I assume not sure, but I assume this is not an adjusted number. The OpEx increase in Q3 including M and A has been 4.9% but on an organic basis has been 3% and the 3% reflect a general cost inflation in the market. And keep in mind, we are holding up, if not growing our volume. I don't think that's probably a fair comment from Bjorg. And, I would think it was, it's also the case that, in the current environment, we we have held our volumes in the market. So our operating costs are are not unreasonable in some respects. However, we do recognize that, and you, as you quite rightly point out that, you know, in a in an environment where margins are under pressure, we have to get cost down. And hence, we have the hiring freezes. We have a number of initiatives on logistics and and other things like trouble and all sorts of things going on as you would expect a responsible company to do so. And we we are trying very hard to get those costs down. And we have a we have a and we have a mixed there's a mixed priority here in some respects. And, yeah, in terms of actually running our business, we clearly see an opportunity to grow our business in human nutrition. And therefore, we're not how we don't have a hiring freeze in terms of developing our food and fishing business. And clearly, we see an opportunity to to take a a a view versus a market consolidation in North America. Which is in itself is, something which will have payback in the future, not necessarily today. So that that balance is the one we have to achieve. But, certainly, we're very conscious about that our OpEx has to be in line with our ability to generate GP. Understood. Maybe if I can follow-up on student nutrition, I mean, there's there seems to be some slowdown in hitting the food and nutrition market as as well. Have has that had an impact on maybe the competitive landscape between event tag and your competitors in terms of building business or in any shape or form, it would be useful. Well, as far as we're concerned, we're very happy with the development of our food nutrition business. And, you know, it's one of these things where we are we are effectively leveraging our our size and market penetration, food and nutrition in a in a way which we haven't done in previous years. It's proving very effective. We are attracting more and more suppliers to Brenntag as their preferred Sheldon market partner, and we're attracting more and more customers. So, yeah, I'm I'm quite sure in the in the market is not mounting along and why would it So from our perspective, we see a positive development. And, we have we have size, and market position to advantage of our current strategy. The next question is from Sandogan of ABN AMRO. Your line is now open. Yes, sir. Good afternoon, everyone. Just one, very simple short question. It's on M And A. This has averaged around 8,000,000 in the last three quarters. I know Q4 is a bit weaker quarter. So should we expect a It's slightly below the time of going into Q Four because I have to say the historical numbers have been a bit higher than what I forecasted. It's a bit higher. Relatively small difference, maybe 6 for the 4th quarter. You you are wondering EBITDA contribution on the quarter, right? Exactly. Yeah. Okay. Thanks for that. And maybe just sneak one more. One question more. It's on the IFS 15. Just wondering, how is it possible that numbers is so much higher than a number mainly focusing in Q3, but also for the full year that's higher than your guidance. I would have assumed that you know your contacts up front. So why is the absolute impact higher than what you guided partly M and A activity, partly FX translation, you know, dollar relatively strong this year And this is 3600 contracts. So while in principle, you know, all the contracts beforehand until you really work through the the contact takes a little bit of a time. The next question is from Markus Mayer from Helvea. Well. Firstly, on your oil and gas business, maybe I missed it in North America. Can you give us a kind of update there, we see continuously the primary account numbers has this any effect on your business? Secondly, in your out education, you, say that you do not expect macroeconomic conditions to show any improvement So the question is, do you see any end markets improving or any, regions improving. And lastly, the question as the time is getting tougher for for chemicals of all, do you again, the distribution outsourcing trend accelerating this environment? Thank you. In terms of our oil and gas business, it clearly, we, we are, we do have some effect in terms of the, the softness in the market in oil and gas. A lot of the major service providers who we support, are are are have difficulty. We probably would actually might have you said that has a knock on effect in our North American business. And I I but I think it'd be fair to say that our North American business is somewhat more broader base right now that it was, say, this time saved for 3 or 4 years ago when we we talked quite a a knock on that. So So whilst it's certainly not helping, it's not as crucial as, as it would have been in the past. In terms of end markets, I think geographically, we would expect to see an improvement in our age Pacific because of, in 2020. Particularly in the area of, for example, in China, and they may want you to say that, Henry said that because we we are finally getting to the point where the new sites are coming on online and therefore, our logistics costs will improve. We have made some acquisitions in our Asia Pacific region, which we feel will generate additional growth in 2020, and particularly, you know, our business in India is expected to have a much better performance in 2020 as well. So it's not particularly end market but more regions. The rest of the market generally, I think it's more a case of in will we see a recovery in industrial production in 2020? It's a good question. The rest of the market is relatively flat. In terms of outsourcing, we do see more outsourcing. What we're seeing is consolidation within major for us in terms of, they're looking at their their Johnson market partners. And we have a number of of, partners who we are doing literally more and more and more with as they start to deselect a number of regional players. So the outsourcing to some extent is by virtual consolidation within the distributor sector as well as consolidation with the manufacturing sector. The next question is from of my first name. Your line is now open. Hi. Thank you for taking my questions. Just going back to the trends that you see, it would be shed some lights going into 2020. So specifically, I wanted to ask about North America, which you started to deteriorate in queue. So you were practically the first one to call it out. Do you see any risk there that it gets worse, next year, and I do expect your identity to pay us off. Lastly, you talked about Asia getting better in it's specific to bad rental because of your investments in the past, how do you see this as a, as your end markets, in Asia in terms of demand getting better. My second question would be again on free cash flow, please. Last year, in Q4, we have seen very long inflow from net working capital. Is this a typical seasonal phenomenon? And what what would be a fair assumption for that? In terms of falling in enterprises and low growth environment that we have right now, It's fair to assume that networking capital needs might also be very limited in 2020. Thank you. I'm just continuing our display. I would say if you look at the, all the projections in terms of, like, the, person managers in the accident, but another another indices It's it does have a a look of of weakness, continued weakness towards end of this year. I think it's it's pretty certain that we're gonna take a view in terms of our operating costs in in the United States. I think the the the the thing about the United States is it is pretty flexible in terms of addressing operating costs where they need to be changed. And and our our management team will be looking at that, obviously, actively to to react say, if the market doesn't continue in early 2020. As a good stage, I don't see any significant turn in demand in in North America on my Jose, particular change on a global level relative to perhaps position versus China. In Asia. I think there's a there's a bit of Brentech story in Asia. You know, we are, we have made very good progress in Asia. I think sometimes It's easy to forget that, you know, we we started on 0. Now we're approaching a $2,000,000,000 business, if you like, in the Asia Pacific region. And, therefore, I would expect us to continue to grow irrespective of rest of the world growing at 2 or 3 or 4% in specific represents an opportunity for us, and we'd expect Asia Pacific to attend opportunity. Alright. Shah, on the free cash flow in the free cash flow pattern benefits in Q4 from a seasonal inflow from working capital working capital forecasting and therefore cash flow forecasting always a little difficult because it heavily depends on pricing. If if memory serves correct, then last year, we had some in Q4 inflow from working capital well ahead of 1,000,000. And that's not a unreasonable assumption to go into this year. Just keep in mind that on the other hand, the Q4 cash flow, we'll see some higher CapEx. The next question is from Christian Coors of Research. Your line is now open. Yes. Hello. Good afternoon. Thanks for taking my questions. First on MAX Lane. And given the current macroeconomic downturn and the chemical prices coming down, does this have any impact on your M and A strategy and all on everyday pricing, I want so you have, yeah, you have a nice, work in different inflow. Your potential M and A targets. Are they more willing to sell the business due to, the deterioration of the mechanical environment or as to the case due to the fact that they postponed also experienced a more convenient cash flow position at the moment. It's a it's a lower, ability or a lower willingness to sell the business. So what are the implications on your on the M and A side? And another question on working capital. Do you still strive for an improvement in the working capital turn And do you have an emergency place? And lastly, some years ago, you launched this gold purchasing initiative And I wonder, especially now with chemical problems under pressure and some suppliers, under pressure, is this not a good point to pursue the strategy and the ideas in place? It's going to come into M and A. We quite interested. We have a few convictions in terms of M And A because clearly, the slowdown in economic activity you may well think that might prompt some people to go and maybe time for sale. Certainly in chemical distribution, as you can see, the business model, the cash generative, And therefore, a number of targets here will believe that that even though their EBITDA is dropping, our cash position is strong. Therefore, the the the need to sell at the bottom of the market. It probably wouldn't be their first choice. We also have this dilemma in terms of there's so much liquidity left in the market in terms of cash availability to to, in terms of borrowing cash that the valuations have not really come down too much, in in recent months. And so it's a it's a dilemma into the reducing EBITDA and valuation is not really moving in the right direction. We'll put a group as a purchaser. Having said all of that, there are still quite a number of targets out there for us to acquire. And, we are more limited by capacity to acquire, I. E. The actual function of acquiring businesses is to limit our our ability to to, only to build it on these so many deals. And at this stage, we we certainly are not without the opportunity to buy businesses at appropriate prices, for for our for our, tools evaluation purposes. So it's, it's an interesting market, but market is still open for us. One of the question was, I think, was on, purchasing. Yes, you're quite right. That there was initiative a few years ago relative to producing our average pricing. I'll look in the best possible product pricing. We have moved on quite some way, actually, in that regard. And, we have a, in house digital marketplace developed, since the, the pricing initiative a few years ago. And the sort of visibility of pricing, is actually now across all of Brent Ag in a digital sense. And therefore, you can imagine that we are now in a position that we can take advantage of the best possible deals that the group has to offer, and work with our suppliers on in a much more, global way. So we we are already operating, a, an increase in more optimized, opt to optimize purchasing, And, one question was left regarding working capital So, I mean, this year, as if I'm not mistaken, this was mostly driven by lower chemical prices. So you use this strong, the strong, improvement. But do you have also any any, any intention to, get to work and turn up again? The as you rightly point out, this year's cash flow is pretty strong and this cash flow is strong from working capital reduction, but it is very much helped by by chemical, plastic plants. We are also working, on improvements of hooking capital return. Globally. Let's guess in terms of measures, pretty granular, pretty quickly, but to call out team's we work on improved usage of inventory cost quarter. So inventory is at 51 country but can be used in other countries. It's made possible to to to other countries. We are talking about payment terms, harmonization, their, their customer is also the tire. We are talking about reduction of payment terms particularly for smaller customers and we are, for example, also talking about improvement upcoming processes. Okay. Thank you very much. The next question is a follow-up of Mutlu Gandogan of ABN AMPO. Your line is now open again. Okay. Thank you. David, just want to get back to one remark you made on the North American Oil And Gas business. Can you update us on the share the oil and gas business of the overall North American business? Okay. Yes. So pretty much around about 22 or 23% of the North American business would be a fair guide. Alright. 22%. Has the earn I mean, the fact that the share has come down, is it because the earnings has come down or that the other business has grown or maybe both both the drivers? It's particularly that the other businesses have grown. Right. Okay. So because you've done several acquisitions within the business. Just wondering, is there any risk of any, impairments towards the end of the year? No. I I mean, it might not be showing to our acquisitions with oil and gas, but nothing that we we're we have at the moment is we're doing impairments. And I'm not sure whether you're confused with lubricants, maybe we have made a lot of lubricants acquisitions, which not in the oil and gas bucket. It's it's confusing. The lubricant business is basically distribution. Oil and gas is actually oil and gas processing. Right. Right. Yep. No. Indeed. Right. Okay. Thanks. Hello, Jim. Listen, I think we've run to the end of our questions. I might just like to say on a personal note, but this is my last quarterly call. So I'd just like to thank you all for your professional interest in KFC during this call. Sometimes stuff, but, always there. So thank you so much for that. I wish you all the very best for the future. Connect now.