Earnings Call: Q1 2013

May 8, 2013

Dear ladies and gentlemen, welcome to the Brenntac AG Results Call Q1 2013. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. I now hand you over to Mr. Steve Holland, who will lead you through this conference. Please go ahead sir. Hello, everybody, and thank you very much for dialing in for our review of the Q1, 2013 earnings. In this call, we will provide you with the details on our Q1 results. I'm on the phone together with Jorg Muller, our CFO. And as always, we'll be happy to take your questions after the presentation. Obviously, we came in a little short in Q1 with our results relative to analyst expectations. In very general terms, we see this related to further weakness in the world economy Specifically attributed to the shortness of the quarter. Let me explain more about this in more detail. After more positive sentiment From the global economy towards the end of 2012 and early into 2013, it now feels the economy is softening again. This is specifically true for Europe where industrial production fell by minus 2.9% in the 1st 2 months of 2013. I would of course make an exception for Asia where the environment is currently more positive. In addition, we have a more technical effect with the number of working days. We discussed With you already when releasing the full year's results, Q1 was an unusually short quarter, almost 3 business days short of the previous This quarter partly driven by the Easter holidays. Generally speaking, our gross profit generation flows by working days. So the shortness of the quarter impacts us mostly. We don't explicitly mention this for a quarter. So it's normally about a marginal of 1 business day swing. However, this time there's almost 3 business days swing and we experienced this in Q1 and it's particularly unusual. Gross profit grew by 1.3 percent. And if we adjust for the number of business days, growth was stronger at 4.9%. Operating EBITDA totaled €64,700,000 Against some pressure in the European segment, we saw a very positive quarter in Asia Pacific as well as contribution from our acquisitions, especially Altiva and ISM Cellcap Group. If I move on to Page 5 on the operating highlights, On this slide, we show how this translates into a full set of numbers. Gross profit of €477,900,000, 1 point 3% above previous year's Q1 on an FX adjusted basis. This corresponds to a 4.9% increase on a per working day basis. Whilst gross profit very much flows by business day, a fair share of the expenses just flows by month and does not benefit from the shortness of the end quarter. Consequently, this impacts EBITDA negatively together with the further cost developments. Operating EBITDA totaled €164,700,000 3.3% below previous year on an FX adjusted basis. EBITDA gross profit conversion was 34.5 Compared to 36.1 percent in Q1, 2012. Our cash flow for Q1, 2013 was €70,500,000 After €78,800,000 in the previous year. Though the financials have suffered this quarter from the weakness of our economy and the technical effects, I see a confirmation of the robustness of our business model. In terms of acquisitions on Page 6, we already executed one acquisition this year. On 12th March, we were delighted to announce the acquisition of the assets of lubrication services called LSI. The company is headquartered in Oklahoma City and generated sales of €105,000,000 2012. It serves the oil and gas industry to a network of facilities in 6 days and cover many of the U. S. Shale gas areas. The acquisition is an excellent addition to the core product offering of our oil and gas business. The investment amount was €33,000,000 LSI will be consolidated into our financials starting in the Q2. I will now hand over to Georg for a discussion on our Q1, twenty thirteen financials. Good afternoon, Steve. Thank you. As Steve already mentioned and I'm moving to Page 9. As Steve already mentioned, the gross profit totaled €177,900,000 €477,900,000 And in terms of growth rates that represents a 1.3% FX Adjusted increase over previous year. All regions with the exception of Europe contributed to the growth of the gross profit. If I move from an absolute figure to a per working day figure, on a gross profit per working day basis, all regions, including Europe, Delivered growth in the Q1. Operating EBITDA totaled €164,700,000 representing an FX The decrease by 3.3%. EBITDA to gross profit conversion ratio came In at 34.5%. Steve already highlighted the impact of the short quarter and specifically So stronger impact the number of business days have on gross profit than they have on the expenses, and that obviously also impacted our conversion ratio for the quarter. Moving to the next page to the income statement items below EBITDA. Depreciation for Quarter amounted to €24,200,000 mainly due to an increase in the acquired customer basis. So driven by Acquisitions, our amortization increased to €10,000,000 for the quarter. Financial result is an expense of 24 €56,000,000 and the €24,500,000 financial result include an expense of €1,500,000 €1,000,000 for the revaluation of the Seongjung related liability. Otherwise, the financial result is About in line with previous year's financial results. Overall, earnings before taxes €106,000,000 about 10% below previous year's Q1. We show a tax rate of 34.2 percent for the quarter and that is in line with the 34 Percent that we generally indicate as an adequate tax rate. Profit after tax stands €69,800,000 about 12% below previous year's quarter. On the following pages, on Pages 10 and 11, I would like to provide some Information on a few structural changes we have in our income statement in 2013 compared to what we have shown in the past. Here on the first Page 10, I show you the effect from the first time application of IAS 19. You might have heard the same topic Some changes mandatory. This led to a minor change in personnel expenses and a very slight change in our Financial results, just a couple of 100,000 on a quarterly basis. To give a consistent picture between the years, we The Q1 2012 figures accordingly. So if you compare to the figures you noted last year, you will see slight And these come from an adjustment of previous year's figures related to IAS 2019. Similar, not exactly the same topic, but a similar topic is on Page 11. Following a shift in management All responsibilities in course of last year, we reallocated a few cost items between the regions to reflect the new structure. Yes, Lee, a reallocation between the regions is fully neutral on a group level, but you can see the impact on the regions on this Page 11, you see there is a slightly positive effect for Europe and the counter effects are borne by Asia Pacific and by All other segments, America is not being affected at all. Same as for IAS 2019, previous year's segment figures accordingly to allow for better comparability. Moving on to our cash flow statement. On the page, we show you the usual details For operating cash flow, overall reported cash flow provided by operating activities amounts to EUR 33,700,000. If you go through the lines line by line, you'll know that interest payments continue to decrease partly because the interest rates have slightly fallen. On the other hand, this was compensated by slightly higher tax payments. Regarding working capital, we had a lower outflow for current Assets and liabilities in the Q1 2013 compared to previous year's quarter. With respect to investment cash flow on the subsequent page, spending for CapEx in the quarter was €21,900,000 in the line where we show purchases of consolidated subsidiaries and other business units. So the Position line, you find a 0 in the cash flow statement for the quarter. It's due to the fact that ITVIA was already paid in the Q4 last Here, while the acquisition we undertook this year, Lubrication Services Inc. Has been paid only in the Q2 this year and not In the Q1. No major news on the balance sheet picture, which is on Page 14. Just as a reminder, if you look into our intangibles, keep in mind that the majority of intangibles is related to the acquisition of Brantac Group by BC Partners. It's not related to acquisition. We have undertaken out of the roughly €2,200,000,000 intangibles on Balance sheet, an amount of €1,200,000,000 is actually related to the BC Partners acquisition. Subsequent page gives you the information on net debt and leverage. Net That increased marginally during Q1 by €12,900,000 to a total of €1,495,000,000 at End of the quarter. The slight increase is mainly translational driven by the stronger dollar at the quarter and The translation of our U. S. Dollar denominated debt comes home with a slightly higher euro amount. In relative terms, Group leverage remains at 2.1 times. It's below the leverage we had a year ago that was 2.2 times End of Q1 2020. I would skip the time series for leverage, and I would skip So maturity profile for our indebtedness. A few words on working capital, which is on Page 18. Trade working capital end of quarter amounted to EUR 1,110,000,000,000. In terms of working capital turns, we turned the working capital 9 point One times in the quarter. It is below the 9.6 times we achieved in the Q1 of previous years. But also here, this is partly driven by the fact that the quarter was very short in terms of number of business days because The sales figure was impacted in the way that we showed lower sales for the quarter. The free cash flow calculation on Page 19, as Steve already mentioned, we delivered a free cash flow of around 13. €70,000,000 up to €78,000,000 a year ago, the difference is almost entirely driven by I would hand back to Steve for a discussion of the segment results. Thank you, Bjorn. Now let me take you through the developments of the segments The Q1 2013. Business in all segments demonstrated resilience in challenging market conditions and a short first quarter. Europe's operating gross profit decreased by minus 2.3 percent on an FX adjusted basis and the operating EBITDA came down by 5.8%. However, the fact that the ops gross profit per working day was 1% ahead of previous year's quarter This clearly emphasizes the impact of the lower number of working days. In North America, Pollen Micro operates on a relatively stable trend line against Strong Q1 2012. After the operating gross profit grew by a moderate 1.2% and operating EBITDA could not reach prior year's level with minus 5.5%. Expenses grew mainly in transportation expenses and rent. We continue to expand our infrastructure in North America. Latin America delivered a 7.9 percent FX adjusted gross profit growth. At the same time, operating expenses increased partly driven by higher personnel costs and increased headcount. This resulted in negative EBITDA operating development of minus 3.1% on a constant FX basis. In Asia Pacific, it shows a 27.9% gross profit growth, but the EBITDA operating increased by 30.4%, This is driven by a mix of strong organic growth and the contribution of our successful acquisition of ISM Sarkat Group in the region. So let me reiterate. Our group operating gross profit growth for the Q1 2013 amounted to 1.3% and the operating EBITDA in the short Quarter could not fully reach previous year's level with minus 3.3%. Turning to page 2223. Let me address the outlook. Despite the somewhat difficult Q1, we remain fully convinced with the business model and the structural growth opportunities. The macroeconomic, which looks quite promising at the last year end, have softened. This is a stronger challenge than we expected at the beginning of the year. Having said that, we continue to believe that the group will show growth in all relevant parameters on a full year basis. We see the biggest macroeconomic headwind in Europe With a full year EBITDA is currently expected on or slightly above previous year's level. Well, how are we addressing this situation? Well, we will continue to capture any growth opportunities from outsourcing and our market position. At the same time, we are accelerating the alignment of processes in Europe, We will help us to redirect existing customer resources to increase product productivity and growth. We will not overreact on the cost side given that trends are stable. However, we will clearly reinforce tighter cost control. As to working capital, this is to a large extent a function of sales and chemical We will expect it to continue to grow in the course of 2013. CapEx should be slightly above depreciation and will be sufficient to The organic growth of our group. Fantasy free cash flow is expected to grow based on different elements mentioned above. The acquisition pipeline is progressing as always. We are working on a number of transactions and I am confident that we will see further deals later this year. So now let me address the current trading environment. Not surprisingly, the high number of business days in April generates gross profit and EBITDA growth. Gross profit growth over previous year was in the range of 7% to 8%. Gross profit per working day grew by 5% in January, 6.9% in February, 2.5% in March and 0.7% in April. In closing, we continue to be The group will grow all relevant earning parameters in 2013 on a full year basis. Despite the ongoing difficult Under economic conditions, Brenntag remains very well positioned to capture new growth in both established and emerging markets. We're now happy to answer any of your questions. 13. 13. The first question comes from Mr. Andy Chu from Deutsche Bank. Please go ahead, sir. Good afternoon, Steve. Good afternoon, Georg. Two questions if I may. Could you just clarify what the organic number is please for April? Obviously that just to be absolutely clear that plus 0.7%, I guess, is your reported number. But without FX, what is the number please? Yes, I can take that. The 0.7% FX adjusted sorry, again. So 0.7 percent gross profit per working day growth for April is FX adjusted, but it does include acquisition effects. If I strip out the acquisition effect, I'm at about minus 2%. Just to show the full picture, I would add what we also had in the presentation that April had roughly 2 working days more Then April previous year. And on an actual number basis, gross profit in April was 7% to 8% above previous year's Okay. Now that's clear. Thank you very much. And then just in terms of the outlook, the outlook statement says that the group's operating EBITDA It's expected to grow on a full year basis potentially at a lower rate than on average over recent years. So just could you just clarify as I mean, you're looking at 13% and a 14% trend in the right hand column on page Slide 22. Yes. Is this I mean, on a total basis, is it on an organic basis, I'm sort of struggling a little bit to sort of decide for that. And I guess the broader question is since results a month or so ago. I mean, I guess what's changed in terms of so dramatically given that a lot of industrial companies are probably talking About things getting a little bit better sort of flat into Q2 and a sort of second half recovery. I know you don't have any visibility, but what's changed in the last few weeks that's sort of Is it the April run rate that's made you a little bit more cautious? Yes. I'll try to address the questions, Andy, I'll just jump in if I'm not on the point. The when we say we expect Growth on a full year basis that obviously would include acquisitions. If you see the trend more as a 2 year trend We really don't plan as most of the analysts don't plan for acquisitions in the model. Next year's growth would probably be an assumed organic growth. When we make the statement that we expect growth at a little bit lower rates, it probably means that where we generally indicate an organic EBITDA growth in any given year of say 6% to 9%, then obviously even the lower end of the range this year is a pretty challenging figure. Okay. What has changed? I would not only attribute it to the April run rate, I would attribute it to the March And April run rate. So it's more than just 1 month. And actually, I see it kind of confirmed in what other companies report Over the last couple of days, and that basically made us a little bit more cautious. I Also noted that a few companies made a statement that they expect a recovery in the second half of the year. I'm not sure if you would join their view of a recovery, but I would say that comparables get a little bit easier in the second half of the year. That helps in terms of growth And of course, towards the second half of the year, you have a little bit more lead time to deal with cost control or other growth projects. Okay. Perfect. Andy, I think Steve wants to add the answer. Andy, I think it's also quite interesting in terms of looking at our numbers. I think probably for the first time, we've actually seen one of the characteristics that we saw in 2,008 from the European segment. And in 2018, what we saw was generally a flattish to slightly negative Position on customers who were taking small lots. And we saw an inflow of business from customers who were pretty much Previously almost buying from manufacturers directly. And so these are the higher volume lower margin accounts. And I think in the 2 or 3 months we've actually seen this type of change, which is more reminiscent of 2,008, which really makes us feel The recession in Europe probably is starting to bite a little bit in terms of various intellate customers. And we see that The buying behavior of perhaps some larger customers has become rather more short term. And I think from those that know the rationale the way we operated in 2008 is part of the resilience elements of Brenntag that during the recession that we do actually acquire more business from parts The market which were previously maybe exclusive to manufacturers. But there is that little change, which makes us feel a little bit more cautious About Europe because of the change in buying behavior of some of these customer groups. Okay. And maybe just one more for me at the Tommy, what do you think the conversion ratio if you were to adjust that the working phase would be? Would you be sort of flat or Slightly down or up from the sort of 36.1% last year? It becomes if I I say that and it becomes a little bit artificial to do working day adjustments on the cost base. But our estimate is that The conversion ratio, if you were to do these adjustments, would be about flattish. Okay. So also again, Andy, just to probably just emphasize The point on that in terms of cost, we were pretty unhappy with Latin America actually in terms of you look at the developments of gross margin, You can see that that's I think I come from real quick collections around about 7.9% increase in Gross margin and it came that translates into a negative number on EBITDA. We didn't really expect to see that. And therefore, as far as cost control Latin American region that's been addressed. Okay, great. Thank you so much. Thank you. The next question comes from Mr. Rob Flank from JPMorgan. Please go ahead sir. Hello, Mr. It's a point of clarification. Could you give the figures again please for the months And 3rd March April in terms of what you think the best indicator is perhaps it's organic Changing gross profit because it was all done quite quickly and maybe how that compared to Q4? Thank you. Okay. I'm not sure I fully got the question, but I'll call out the figures and you Just ask if I didn't fully answer the question. Okay. If I talk about gross profit per working day growth rates, Yes, ex adjusted but including acquisitions. January, plus 5% February, plus 6.9% March, plus 2 point 5% April plus 0.7%. If I do an acquisition adjustment and call out The organic growth figures for the same period? Can you just do it more slowly, please, Georg? Yes. On January, plus 1.2 February plus 3.2 March minus 0.5 April about minus 2. And therefore, what Steve is saying is that March, April Earn is indicative of what you're seeing in terms of a slower economy. I would agree. Yes. Yes. Okay. Thanks, Lars. The next question comes from Mr. Gerhard Orsigarnel from Exane BNP Paribas. Please go ahead, sir. Good afternoon. Georg, I also have a question of clarification please. Did you talk about the EBITDA growth rate when you said that The lower end of the 6% to 9% would be probably difficult to achieve this year? That would be my first question. And the second question would On further cost reduction measures, I can see that you've further reduced the headcount in Europe since the end of the year. So is that something a legacy of the last program? Or is this something that you is it a part of a new program? Or do you plan anything else in Europe given that the economy is now weaker? Yes. For the Gerd, for the clarification, I was referring to an organic EBITDA growth rate, Which we generally indicated structurally in our business with 6% to 9%. And the statement was that will be difficult to reach this year. Okay. With respect to the cost base, you've had some insight. Well, as far as the cost is concerned and in particular headcount, what we're doing in Europe Particularly is looking at the structure of Europe in terms of how we're organized. And we're looking to harmonize the structure so that we have A me too position in every country that we operate. Therefore, people will recognize Brenntag in a more Uniform way. Inevitably that means that there will be some reallocation of duties and some people will move jobs around. Now our view is that The structural opportunities to grow in this business are still very significant and we expect to capture new services and grow market share and grow new products. Therefore, we would prefer to allocate those trained resources in terms of doing exactly that. If at the end of the day there are some inefficiency gains which Are available to us as a result of this realignment then we will certainly look at taking those, because Clearly, we also expect it to be relatively defensive in our cost base when we're in a low growth market. Okay. Can I just ask a follow-up question? Do you see any market share gains in Europe at the moment from your increased I think you've also increased your salespeople Especially in Specialized Chemicals? Well, I think for the market it's quite difficult to measure that because a lot of Competitors don't necessarily publish results which are easy for us to monitor so closely, but our view is that we have increased our market share. Okay. Thank you. Thank you. The next question comes from Mr. Paul McKenzie from UBS. Please go ahead, sir. Good afternoon. It's actually Rory McKenzie from UBS. Just a couple for me. First of all, it was really useful to hear the working day impact on the conversion margin. Can you maybe talk What the underlying drivers of the change in OpEx there were? I mean, you mentioned cost inflation for transport and rent. So might be sort of kind of expand on that and maybe give the outlook there? And then I've got a couple of follow ups as well actually. Yes. Actually, I would say the with the cost development in the major regions, with the cost development In North America and in Europe, we are pretty satisfied. On a net basis, we basically have A flat organic cost development in Europe and North America Q1 over Q1. And yes, where we see a little bit of inflation in transportation expenses, where we see some additional rental is because specifically in North America, we are increasing our infrastructure. On the other hand, the personnel reduction measures under Tevaikin last year To show their full savings effects. Steve already mentioned that with the Latin American cost development, we are not To help you and that will be addressed, but it's in the overall group context of lower relevance. Asia does have some organic cost increases, which is not Too surprising, yet the business is also growing mechanically. Okay. Thanks. That's clear. So I'll just ask, do you still expect to see, I guess, an expansion Conversion margin over the course of 2013, is this kind of the main working day impact reverses over the next three quarters? 1st of all, I would confirm that the working day impact reverses, but it will not reverse fully in Q2. It will reverse only over piece by piece Over the 3 quarters, I would say we are not nervous at all about the conversion ratio. But if we Can achieve an increase will probably depend on some gross profit growth. Okay. Okay. Thank you. On that gross profit growth, I mean, you talked about the group overall and the exit rate. But I guess, could you maybe speak about North America specifically? Because that does look to kind of slow on an underlying basis, Maybe even an organic decline in Q1. I would say it's more a comparable Big than a trend topic. If you look into our into trend lines for North America MGP into trend lines over the last 12, 15 months for gross profit per working day. The challenge is that North America is running against a pretty strong Q1 and then even more and even stronger Q2 2012. Actually, the 2020 development is pretty Okay. Okay. I think it's also fair to say, if I may add, that certainly in the 1st part of the year, we saw relatively Weaker performance within our oil and gas business. And since the year has gone on that has now returned to more normal levels. Okay. Okay. That's very useful. Thank you One moment please for the next question. We have a further question from Mr. Andrew Chu from Deutsche Bank. Please go ahead, sir. Hi, there. Steve, I wondered if you could just maybe elaborate on what happened in LatAm on the cost front. Maybe just Comments on volume and pricing trends too and also any sort of updates on France? Thank you. Yes. Andy, with respect to Latin American cost development, Nothing that really sticks out. I would say probably the region overestimated the growth perspectives. They built up headcount partly in countries like Ecuador and that increased the cost base and Ultimately, the business did not come in to the full expected degree. We'll deal with that. It's pretty Relevant for the region. It's not relevant for the group overall due to the limited size of the region. And we have made the experience in past that you Can adjust the cost base in Latin America reasonably quickly. Volume and pricing, Where we said that in the quarter, the gross profit increase was +1.3%. Actually volumes grew a little bit stronger. Volumes grew by about 2.5%. And what you see here So that volumes are growing a little bit stronger than gross profit is exactly what Steve mentioned that you see the That we also saw in Europe 2008 that you get a lot of cut over volumes, volumes that are bulk or semi bulk That were distributed by producers before and now fall into the distribution space. They give us an interesting margin but a lower than And that's why you see a little bit of margin dilution. So it's more a mixed topic than an actual pressure. And as far France is concerned me. France is probably one of the most challenging markets we have in Europe. And clearly, Spain and Italy have been challenging for quite Some time now, but I would say France as the largest economies is really not in great shape. And we are taking steps within our French operation to increase efficiency throughout the operation because it has to really cope with a relatively weak industrial demand throughout France. And We think that the French business is really a primary focus for us in terms of business recovery. We don't really see any increasing demand in the French economy in the near future. Has your question been answered? Yes. Could I just ask one last question please on the cost base and looking at looking for the rest How we should think about Q1 as a starting point? I think you had €330,000,000 of expenses for Q1. That if I've got the right number. It was €295,000,000 in Q4. It seems rather low versus a run rate in Q3 of Around 3.15, so sort of Q1 levels. Is it right to annualize Q1 as a sort of run rate or Any reason why that's not a sort of a sensible starting point? Thank you. Andy, I couldn't fully follow the figures you called out The different quarters. But irrespective of that, I would say, yes, Q1 does not include any specific one off items. So in that And Q1 is a good proxy for the cost development going forward. Mind you, in a few countries, You get wage increases starting Q2. So you will have a little bit of wage cost inflation. And then everything will depend on volumes obviously. Okay. And just maybe finally, just on the cost reduction front. Clearly, no need at this stage as you see it To do anything further on cost, but what are the sort of trigger points for further cost reduction? Is it the sort of gross profit per working day falls Sort of minus 5, minus 3. Is that the sort of trigger point for further cost reduction? I know you're very proactive as well. So maybe a sort of something Behind the sort of thinking of when you might do something on the cost side. Well, Andy, Not surprisingly, we are a planning organization. And today, we do have various plans and contingency plans set aside for Any deterioration in the business environment, which is beyond where we might expect it to be today, we are Actually more interested in increased levels of productivity and growth. But despite the sort of doom and gloom sort of feeling around the Generally at the moment, we still believe there's structural growth opportunities for us and market growth opportunities as well. So rather than sort of taking our capacity to grow, We prefer to make sure we get that conversion of the efforts into results. But at the end of the day, we have to cut our costs to suit. And if there is a volume reduction in the marketplace, then we would react And take down capacity where it was required. But at this stage, we don't have these significant plans to do that. Okay. Thanks very much. The next question comes from Mr. Simon Mesnaught from Berenberg. Please go ahead sir. Yes. And I just wanted to clarify an aspect. In 2012, I think you had some one off expense In Q3, but also in Q1. And I think the total was something like €14,000,000 Now you made a comment that You think you'll be able to grow EBITDA in EBIT13. And I was wondering if that's against the underlying EBITDA of 2012, I. E. Excluding these one off costs. And also the same applies to the conversion ratio. So if you exclude this one off cost last year, Would you still be comfortable that you would be in line at least in line with last year? Yes. Simon, it's Georg. The answer is How to put it, it's not that easy. If you read the forecast report from the quarterly report, so forecast report just That said, we expect growth of all relevant KPIs. So that would be on top of the reported number, not necessarily on top of the adjusted number. Still having That said, I think we would be disappointed on our end if we couldn't grow the adjusted figure. And would that all So, Clyde, to the conversion ratio or would that be more challenging to keep the conversion ratio in line with last year, again excluding these Yes, it was wonderful. I would say, as I said to a slightly different question, I would say we are not nervous about development on conversion ratio at all. So I I wouldn't see anything falling from the cliff, but an improvement over previous year on an adjusted basis It will depend on some gross profit growth. And also, I might add, you have to be aware that As we grow our business in North America, we have to invest in infrastructure and we will seek to grow our business further. And when I say we have to invest in infrastructure. We are looking at developing new markets and new products. And so the conversion ratio in North America will be affected by higher rents and some storage costs and what have you. But notwithstanding that, we expect to see an increase in EBITDA as a result of those Thank you. That's clear. The next question comes from Mr. Markus Mayer from Kepler Cheuvreux. Please go ahead sir. Yes. Two questions remaining. First of all, you mentioned that the buying behavior of your large customers is now more short term. Does this also mean that there's a certain effect then on the Going into the down trading means that your customers are looking more cheaper products? And the second question is then again On the one off costs, you said Q1 was not affected by one off costs. Does it also mean that there have been no one off integration costs? Well, if I can take the first part of your question, this isn't about cheaper prices per se. What we're saying There are a group of customers that would say normally be buying directly from manufacturers. But there are if you like customers that are On the customer, does it make sense to buy, say, 20 tons from a manufacturer or buy 5 tons from a distributor? And as those customers have less forward visibility In terms of their own order book and their tendency is to come towards the distributor sector and acquire smaller quantities as opposed to buying a larger quantity Having that product in stock, as a result of tying up their working capital, that just means that that is an average order size On a larger order than we would normally have because most of our business is in very small lots. And therefore, the average price and margin is somewhat lower, not just the price, but It's somewhat lower, not just the price, but so the margin is normally lower. So I don't see it's been lower prices per se. I think it's more like a new group of customers Generally coming to distributor sector when forward visibility is reduced. Maybe a follow on question on this. Does it also mean that the channel behavior of your customers, meaning ordering Lower volumes, but then more regular in general is still valid and means that in general your gross margin is higher than For normal years? Yes. What would normally happen and so we're starting to see evidence of this is But we get the larger customers coming like that was I've just described. But also and our smaller customers Also sometimes reduce their order with order quantities and order those more frequently. And therefore, we do apply volume discounts. And therefore, as we're buying a smaller quantity, should expect to pay a higher price for that volume. And over the period of time, That generally translates into a mix, which suggests higher gross margins for the small lot accounts. Okay. It's Georgak, Markusik. Question on the one offs and the integration costs in Q1. There probably were a few integration costs in Q1, but they don't stand Out by any order of magnitude and given that we typically do 4 or 5 acquisition transactions each year, you will each and every quarter see Some integration costs, so there is nothing which we would suggest to adjust. Okay, very clear. Cool. Thanks. Thank you. There are no further questions. Okay. Well, ladies and gentlemen, thank you very much, Niv, for attending our call today. And I think we'll call the call finish at that point. Thank you very much. Thank you. Thank you. Ladies and gentlemen, thank you for your