Welcome to the Nokian Tyres Q1 2022 interim report. Throughout the call, all participants will be in a listen-only mode, and afterwards there will be a question and answer session. Today, I'm pleased to present the Head of IR, Päivi Antola. Please go ahead with your meeting.
Good afternoon from Helsinki, and welcome to Nokian Tyres Q1 2022 results conference call. My name is Päivi Antola, and I am the Head of Investor Relations in Nokian Tyres. Together with me in this call, I have Jukka Moisio, the President and CEO of the company, and Teemu Kangas-Kärki, the CFO. In this call, we will go through the Q1 results and the impacts of the war in Ukraine and the resulting sanctions on Nokian Tyres. This all will be presented by the CEO and CFO, followed by Q&A. Jukka, please go ahead.
Thank you, Päivi. Welcome on my behalf, and I will go through the prepared notes in the presentation, starting on the cover page that the war in Ukraine overshadowed Q1. Our operating environment is highly uncertain, but nevertheless, the tire demand in the global markets was good in the first quarter. I move to page two. In terms of our net sales, they increased by about 22% in comparable currencies. That meant that the year began with a good demand in all markets, and in late February, the war in Ukraine started to impact the operating environment. As our supply chain is quite long, so it means that the first quarter's tires mostly were made already in 2021 in the final quarter, and indeed, strong momentum of the tire demand already in 2021 continued to 2022 in the first quarter.
Our segment operating profit was EUR 66.5 million, up from EUR 50.3 million a year ago. Price increases were made to combat the cost inflation, and that led to higher average selling price. Teemu will talk about that a little bit later. Also important to mention that our Heavy Tyres business had the all-time high first quarter in operating profit. I move to page three, which is financial highlights. The profitability in terms of operating profit margin, 16% in the first quarter versus 14.7% a year ago. Equity is 70% of our balance sheet versus 68% at the end of financial year 2021. Cash flow from operating activities was negative, mostly because we tied money into receivables and inventory.
Gearing at 3.1% meant that EUR 53 million and capital expenditure in the first quarter was EUR 14.1 million, down from EUR 17 million in 2021. We expect that the capital expenditure will remain at EUR 100 million-EUR 120 million on ongoing operations. We will not invest in production in Russia. However, we have activated and started to speed up the investment in new capacity in Eastern Europe and also look at the other options to improve our supply capability outside Russia. That includes, of course, building and continuing to build the capacity in Nokia, as well as ramping up our Dayton factory and investing there, as well as also increasing capacity in Heavy Tyres in Nokia.
The capital expenditure most likely will be mostly focused on the final quarter, last two quarters of 2022, and there we see and will most likely see an acceleration of capital expenditure. Now I hand over to Teemu to talk about the profitabilities of businesses and also a little bit more granularity into financial performance. Teemu, please go ahead.
Thank you, Jukka, and let's start with the Passenger Car Tyres business unit. The demand continued on a high level in the first quarter. Our net sales reached EUR 350 million, and segment operating profit on a level of EUR 74 million. The top line growth was on a level of 28%. No major difference between reported and comparable currency change. The net sales was increasing in all main markets, and all-season tires was the main driver for increasing volumes. We were able to increase our average sales prices in all markets in order to offset the higher raw material and cost inflation.
When we started the year, our forecast for the full year in terms of raw material headroom was on a level of 20%, and now we see that it will be more than 30% because the cost inflation continues to rise in H2 this year. If we then move to the next page where we can see the breakdown of our net sales by quarters. Here you can see that the volume component was up by 9% and our price mix on a level of 19%. Here you can see a strong development in the price mix as we have been discussing in the past quarters. We have increased prices and continued to do that in all markets.
Now in the first quarter, we were able to see a strong momentum there. Currency aggregate impact was flat due to the fact that all other currencies except Russian ruble strengthened and therefore the net was close to zero. Moving to the bridges. Here we can see that on net sales level, the volume contributed to the top line around EUR 22 million, and the price mix was on a level of EUR 47 million. Moving to the segment operating profit, if you look at the price mix EUR 47 million compared to the material headwind minus or negative development of EUR 28 million, here we can see the positive delta between the price mix and material headwind. Moving to the Heavy Tyres business unit.
In the first quarter, we recorded all-time high segment operating profit for Heavy Tyres. Top line was on a level of 66% growth with comparable currencies almost 15%, and segment operating profit on a level of almost EUR 13 million, same level than in prior year. If you look at relative profitability there, it was slightly lower than in comparison period. In Heavy Tyres, the strong demand continued in all product segments as we have been discussing in earlier quarters. Naturally in Heavy Tyres, we have increased also sales prices and continue to do so in the coming quarters. Maybe the final comment from Heavy Tyres is the strong development in safety. We have recorded over two years without lost time injuries, which is an excellent achievement.
Lastly, looking the Vianor business unit performance. The start for the year was low in the first quarter, which is not the main season. As we have been discussing, the two main seasons are Q2 and Q4. In Vianor, the net sales was on a level of EUR 57 million, minus close to 2%, and our segment operating profit was on a level of -EUR 12 million. That was all from the business units, Jukka.
Thank you, Teemu. I move on to page nine about the operating environment, which was severely impacted by the war in Ukraine, and we took several measures to address that matter. If you look at health and safety, the top priority is to ensure the safety of our employees and colleagues in Ukraine, but also to give support to all Nokian Tyres employees independently where they are. Constant communication. We established constant communication about the situation in the organization, so we have weekly calls on the situation and address and respond to questions that the people in our organization have. We've also provided donations internally, externally to help the humanitarian efforts in Ukraine. Operational measures, most important thing is to comply with the applicable sanctions. Also we've established a crisis management team.
We meet frequently, daily or every second day, and we've established and activated contingency plans, and they are ongoing. We take care of our personnel and management in Ukraine and Russia, want to secure the control of our factory in Russia. We've stopped investments into Russian production. We have also stopped the sales and distribution of Heavy Tyres to Russia, and we have initiated actions to diversify our manufacturing footprint, and we've also done cost reductions. In terms of financial actions, the board made the proposal to change from dividend to EUR 1.32 - EUR 0.55, and that saves about EUR 106 million for investments to new capacity in Europe. We've also taken measures to secure the company liquidity, and we have a strong balance sheet.
As mentioned, 70% of the balance sheet is equity that will then support the company through this difficult time. On page 10, as mentioned, the preparations for new supply capability started. We are evaluating all options. Some of them are shorter term, some of them are midterm and longer term. Obviously, we look at the owned greenfield opportunity, also the joint venture opportunities with other tire companies and then contract manufacturing. These plans have all been evaluated, and we are working on those, and we started to expedite the plans to invest in new production capacity in Europe. As mentioned, the dividend proposal cut funds this activity by EUR 106 million already in 2022.
At the same time as we have initiated already in 2021 the increase of capacity in Nokia, Finland by adding shifts and also investing in equipment, that will help 2022 volumes but also 2023 capability from Nokia. The ongoing Heavy Tyres investment will help Heavy Tyres expansion plans in 2023 and 2024 as well as the Dayton plan, where we have already in 2021 invested for or ordered the equipment, and they will then come progressively during the course of this year and early next year to help the capacity build up in Dayton to four million tires. Our priorities in coming quarters is to adapt in the fast changing and highly uncertain operating environment. We want to comply with the applicable sanctions, so this is priority number one.
Also protecting the safety of our team. We want to maintain the control of our factories in Russia. We want to protect our cash flow. The board is evaluating long-term strategic paths, and this work is ongoing right now, and as soon as there are decisions taken, we will communicate them promptly. From the point of view that we have strong products, we have a good portfolio, and although there will be difficulties in short term in terms of capacity and capability, we will do our utmost to ensure that our products are supplied to customers. At the same time, because we have strong products, we want to establish a more diversified and improved supply capability to meet the expectations of our customers and consumers in years to come, and this work is very much ongoing.
As I said, board is evaluating the long-term strategic paths, and as soon as the decisions are taken, we will communicate them promptly. I move to page 12, assumptions for this year. War in Ukraine and the resulting sanctions will impact and are impacting our operating environment and causing uncertainty. There will be restrictions in manufacturing and also supply capability from Russia and to Russia particularly that will be visible in H2 2022. Raw material logistic costs are expected to increase significantly and however the demand for Nokian Heavy Tyres products are estimated to continue strong. Therefore, the guidance for 2022, which is on page 13, will be as follows: the war in Ukraine and resulting sanctions cause significant uncertainty in Nokian Tyres operating environment.
Nokian Tyres net sales and segment operating profit in 2022 are expected to decrease significantly compared to year 2021. Those are the prepared comments. Päivi, I'll hand over back to you.
Thank you, Jukka. Thank you, Teemu. Maybe before we go to the questions from the audience, a couple of questions which certainly are in the minds of people listening to us. First one to Jukka, to you. When will there be more information on the future plans regarding Russia?
Yes. Thank you, Päivi. That is an obvious question on everybody's mind and our minds as well. Therefore, we are working, as I mentioned, the board is evaluating a strategic path and evaluating various options and what to decide. I believe that this work is very much progressing quickly now. Once the decisions are taken, we will communicate them promptly. We will look at various options, and this work is ongoing right now.
With the new EU sanctions that were announced a couple of weeks ago, can the production in Russia still continue?
Production in Russia can continue, but there are multiple difficulties, and they become increasingly more difficult as we go day by day. One is the transport capability to take raw materials to Russia. Over 50% of our raw materials in Russia are coming from outside. It's also equally difficult to transport products from Russia to European Union or any other countries. That will be a difficult one and also the support to our Russian factory. The visibility is getting weaker towards the second quarter. Then when we work with the second quarter, we have more understanding that what will happen in the latter part of the year. This again takes me back to the board evaluation of the strategic paths that what are the next steps taken.
As I said, as soon as we have decisions and business taken, we will communicate them promptly.
How important or why is it important to keep the factory operational?
It's important to keep the factory operational, for the reason to protect our people in Russia, our teams in Russia. It's also important that the factory is not in the wrong hands because this is our important target that it would not go to the wrong hands. Finally, if the factory is there, perhaps the equipment or any part of the equipment can be used somewhere else, if nothing else. Therefore there are multiple reasons, but the most important ones are the safety of our team and also to ensure that the factory is not in the wrong hands.
There is a big question about the strategy going forward. You talked a little bit in your opening words about the short term priorities, but what is really the strategy going forward? Or too early to say anything?
The strategy going forward, we can talk about the matters that are cornerstones that are important and untouched and will continue to help our company and also serve our customers. One is that we keep on building the Nokian capacity. The new shifts, more tires, more also new equipment coming in. Productivity, de-bottlenecking of the passenger car tire part of Nokian is very important. It's ongoing. That will help. As we said, our ambition is to supply Nordic markets from Nokian and also then use the Nokian capacity to ensure that we get the right winter products and our products to North America. That is one key target. The other key target is to ensure that we increase the capacity and ramp up the capacity in Dayton.
We achieved the first milestone, which is four million tires and be at the same time, and that is again part of the Board's strategic path assessment that how do we add more capacity today and beyond the four million, how and when that can happen. Then, Heavy Tyres investments which are ongoing Nokian and taking Heavy Tyres from 2021, EUR 250 million net sales to EUR 300 million are very much ongoing. Those, we expect to benefit us all the time. The strategic options can be implemented when we have a strong liquidity as we secure that and also that we have a strong balance sheet.
Therefore allow the freedom to decide which is the most important strategic path for the company in late 2022 and in 2023 and 2024 and beyond. Having said that, we will not be successful without strong products and good innovations. Just want to come back to the fact that our winter tire and Hakkapeliitta is a great product and has been performing extremely well. Also, we will launch to the markets a new friction tire R5, which comes in the autumn. Those are both very, very strong products and we work our utmost to ensure that there's availability to customers and consumers of those tires.
Also that we will continue our innovation work because, despite this current uncertainty and demanding time for the company and also war in Ukraine, which impacts all of us, there will be a future for the company that will be built on new products and our strong team capability. As we have the financial muscle and we have the strong balance sheet, we will then rebuild this company in a different way into the future. More of that once the board has decided and worked on the strategic path and those are ready to be announced.
Very good. Thank you. Now operator, we would be ready for the questions from the audience, please.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. Our first question comes from the line of Giulio Pescatore of BNP. Please go ahead.
Hi. Thanks for taking my question, and I appreciate that the environment is very difficult and I mean, I really appreciate all the effort that you put in place to sort the current situation. I would appreciate a bit more color at the same time, with regards to the future of your Russian operation. Maybe a first, a short term question, then a longer term one. On the short term side, can you maybe comment on the capacity utilization that you currently have in Russia, and at what level of production the factory is currently operating? For the future, I do appreciate that your balance sheet is solid, that is strong, you have enough cash, but why not selling the Russian assets? Have you received any interest for potential sales?
Maybe perhaps with an option to buy that again at a certain point in the future and using the cash to then accelerate the capacity expansion in Europe and North America. Wouldn't that be the best option in the current state? Maybe one last question on the Vianor network in Russia. Can you maybe update us on the state of those dealers? Thank you.
They want to take the Vianor, but I can comment on the Russian capacity utilization. It's a declining one, and we will see less and less of the capacity utilized in current quarter. That's our visibility currently. About the future, yes. The option you mentioned is something that the board is taking note of and also using as one option in buy or watch. Again, as I said, this is a topic we will come back and communicate on the Vianor.
The Vianor business in Russia, they are independent businesses. As we have communicated about, the future of the Vianor brand in Russia still valid. We just continue with the Vianor business in Russia.
Thank you.
Our next question comes from the line of Thomas Besson of Kepler Cheuvreux. Please go ahead. Thomas Besson, you may go ahead and ask your question. If you have your line on mute, please unmute.
Sorry for that. Can you hear me now?
Yes, we can. Yes.
Yes.
Go ahead.
Okay. Sorry for that. I have three questions, please. First, I start with a brutal question, apologies, Jukka. I'd like to understand management's philosophy and ultimately auditor's philosophy on the Russian asset. I don't understand why it's not been at least partly written down, and why you talk about controlling the assets. It needs a philosophy of management that you can eventually use it again in six months, 18 months, three years, whatever. I'm a bit surprised. First question. Second question, I understand the board is looking at various options, but can you give us an idea at least of the range of cost, I mean, and method of implementation for these different solutions?
Because it's very difficult to apprehend how you're going to be able to substitute this factory. Third and last questions, have you been able to produce in Russia and ship the tires outside of Russia before the sanctions sufficiently for the winter tire season in 2022? Basically, is there going to be enough Nokian winter tires in the Nordics and Western Europe or not? Those are short questions, the three questions. Thank you.
If I start with the asset question and if I understood the question correctly, why we have been commenting on the assets. First of all, it is important for us to keep the asset in our hands and in this kind of uncertain environment. There is naturally discussion that what is the value of the assets and is there any need for impairment. As we see the situation at the moment, we control the assets and we have been doing our impairment test. At this point of time with the information we have available, there is no need today to make any impairments. We continue to control our operations in Russia.
About the various options and timing. Obviously the question is can we substitute that kind of factory and we will look at the options. As said that, greenfield investment or joint venture or even subcontracting, short-term, that kind of factory cannot be completely substituted. We can work on a plan to progressively rebuild the company and then rebuild the capacity which is in Russia. Can we use the Russian capacity? I think that the question is can we use the equipment elsewhere? That is maybe also a relevant question that can be done? We don't have an immediate answer on that, but that can be a possibility. Then about the winter tires. We will make winter tires, Nokian.
We try to do utmost that we service the Nordic markets and the North American markets where the studded winter tires as well as the friction tires are needed. We believe that strongly the market will be dependent on Nokian manufacturing and any complementary we can either outsource or do things differently, but relying on Nokian capacity.
The subsequent question is, if I may follow up on my first question, maybe I wasn't clear. What is, Jukka, your philosophy about this asset today? I mean, at the beginning of the conflict, you were talking about continuing to use this asset, eventually having some clear minuses, but also some pluses. Given the situation today, why are you not clearer on this situation and still talking about controlling an asset? I don't even
Understand how you can do an impairment test on an asset that you practically cannot use.
That's normally-
It's both practical and philosophical, the question, but maybe I missed something.
No, I think that you understand, and your question is correct. I believe that as we said that we work on the options, and once the path has been cleared and decisions are taken, then we communicate, and at that point of time, the clarity in terms of what will be done and what can be done will be there. At this point of time, it's important for us that the factory is not unintentionally or by accident going to wrong hands. Once the strategic path decisions are taken, then we believe that we can be much clearer. That is something that we are working on together with the board right now.
Okay. Thank you very much.
Our next question comes from the line of Artem Beletski of SEB. Please go ahead.
Yes, good afternoon, and thank you for taking my questions. I would have a few ones. First starting with sort of the capacity path when it comes to Nokian and U.S. factory. Could you maybe provide an update when you are planning to reach this six million tyres in Nokian and basically four million in U.S.? Do you think that it's possible to be basically the run rate for you starting from the beginning of next year, for example? That is the first one. The second one is related to new guidance. I fully understand that visibility is extremely poor, but could you maybe, as before, provide a bit more granularity in terms of significant sales and EBIT decline? What it actually means is basically more than 20%.
The last one is relating to trade receivables. I think that the level at the end of Q1 was EUR 430 million. How big portion of this was relating to Russia? Could you maybe a bit talk about, sort of, say, payment terms in Russia right now and and basically credit-related risks, how you manage those ones at the moment? Thank you.
Okay. Thank you. Maybe I start with the capacity in Nokian. Obviously, the important thing is to train the shifts and so on. We've been achieving that, and more or less all the shifts have now been trained, and the last trainings have been completed. Now we have some equipment coming to Nokian during the course of this year, ordered already in 2021 with the ambition that we will increase the capacity. We believe that we should be ready with the installments of lines and so on towards the end of this year, and then we ramp up and achieve as high as possible in 2023. We believe that we are somewhere between five and six in 2023.
If we are lucky and we are really doing well, we can achieve higher, and if there are some issues in the startup and so on, we can achieve lower. There is the range, 5%-6%. In Dayton, equipment are coming. One line was installed in March, and then latter part of the year, more equipment will come, and they'll be installed and so ramped up, and there we move step by step. We will then complement this with the subcontracting and various other arrangements for 2023 so that those will be again part of the strategic path decisions that we will then seek to communicate as when the decisions have been taken.
Heavy Tyres will ramp up some of the equipment during the course of this year, so they should get additional help in 2023. Teemu, please go ahead.
With regards to trade receivables, our trade customers had a strong year last year, so their financial position has been good. Now this year we have been increasing prices in Russia twice and they have been willing to take tires and paying in advance in order to get the benefit of not paying with the higher prices. In that sense, the trade receivables and the payment behavior has followed the previous pattern. In that sense, we don't see any major short-term risks at the moment.
Teemu, there was a question about the guidance, and the word significantly.
Mm.
Anything you would like to say about that?
Just to give you some kind of a ballpark number, I think this year most likely be similar like year 2020 when we hit by the COVID. Maybe this year the net sales could be higher and the segment operating profit lower, just to give you a flavor.
Okay. Very good. Thank you very much.
Our next question comes from the line of Michael Jacks of Bank of America. Please go ahead.
Thank you. Good afternoon. I have two questions. The first one is just going back to capacity utilization in Russia.
I appreciate that utilization is on a declining trajectory, but where does the current level of utilization put you in relation to break even? Can you please quantify the current level of fixed operating overheads in the region? That's the first question. My second question is, which markets are you currently able to export tires into from Russia? Then my final question is just with regards to the announcement where you mentioned that the export ban would likely to start showing the full impact in Q3. Can you just highlight what's different, in Q2, given that the ban already started on the eighth of April? Thank you.
The capacity utilization, we would not like to comment on the current quarter. We only can comment that it's on a declining trend and that is impacted by a number of difficulties I mentioned. Where can we export today? Now basically a transition period between announcing and the sanctions and then becoming valid is three months. At this point of time, to the extent that there's transportation, tires can be exported from Russia to the European Union, mostly. That is of course something that is really highly dependent on transportation, whose availability is relatively low right now. That was, what was the final one?
It was about why we say that the impact will be visible starting Q3.
Yeah.
The reason is really the sanctions came into force on April 9. With the import, export of tires, there is a transition period until July 10.
Also the long supply chain of the products that, as I mentioned in the beginning, most of the tires that was sold in the first quarter this year were made already in 2021. Now, the visibility in the second half will be a lot clearer, lower net sales because the supply is not there anymore. The supply is mostly coming from Nokian, Dayton, Heavy Tyres. We have not got possibility to introduce subcontracting or anything in for the second half of this year.
Understood. Thank you. If I can maybe just ask one quick follow-up. Can you give us some kind of a sense for how Vianor will be impacted by the Russia ban? I mean, it is a business that probably has quite a high fixed cost overhead or footprint. Can you give any sort of detail or sense on that, please?
If we now talk about the Vianor chain in the Nordics, naturally, we need to find the right balance, how we allocate our capacity. Good to remember that in Vianor we are selling other brands than Nokian brands and most likely we are not able to fulfill Vianor needs with our own brands, then we will seek volume with other brands.
We also sell Heavy Tyres in Vianor, so there's a number of products that go through the Vianor outlet.
Understood. Thank you.
Our next question comes from the line of Akshat Kacker of JP Morgan. Please go ahead.
Thank you. Akshat Kacker from JP Morgan. A couple of questions are left for me, please. Just on the underlying Q1 results, specifically on the ASP of Passenger Car Tires. The price mix breakdown, it's very good to see the strong underlying result excluding the crisis. Can you help us understand the drivers of the ASP price versus mix in the + 20% that you have shown in the quarter? That's the first question. The second question is on the profit bridge for Passenger Car Tires and the cost structure in Q1. It looked like a very clean profit bridge for Passenger Car Tires with no special freight, energy, logistics, or extra overhead costs. Also, seeing that the raw material headwind was lower sequentially despite a stronger U.S. Dollar.
Can you just help us understand that a bit? Thank you.
The price mix in the first quarter was driven mainly from the price component, so the mix impact was smaller. There we were able to also increase the share of bigger rim sizes, but the majority came from the price component. In terms of the material headwind and you mentioned the energy cost, as our biggest production location in the first quarter was in Russia. There the energy was more stable than, for example, in Finland.
Okay. Thank you.
Now we are starting to run out of time. Maybe final questions if there are any on the line, please.
Okay. Our last question in that case comes from the line of Christoph Laskawi of Deutsche Bank. Please go ahead.
Hey, thank you for squeezing me in as the last question. Two on the impact of Russia as well. So the first one will be is anything stopping you from moving equipment from Russia to Finland, for example? Is that, outside of obviously availability of input factors, one reason why capacity is on a declining trend in that production facility? Then second question would be, you're flagging specifically the impact on Central Europe and Russia, obviously not necessarily Western Europe being adversely impacted. Is it fair to assume that you can keep the selling rate in Western Europe up, basically in the usual run rate because of the Nokian factory?
Is there an adverse impact which is not as strong as the other two regions as well? Thank you.
Thank you. The equipment moving, this is something that cannot be done right now, but obviously that is one of the molds as well cannot be transitioned right now. Our key product, some of the key product molds are in Russia, we cannot move them, so we have actually invested in new ones for Nokian and for Dayton. This mitigation has taken place. Equipment transition is not possible. However, as I just go back to Thomas Besson question that why is it important to keep the control of the factory, this is one of the reasons that can and when can we transition the molds and equipment. This is historically something that we've done frequently between the factories and so on.
Now it's not possible, but perhaps that can be possible at certain point of time, and that would help us tremendously and shorten number of things we want to do. However, then the Central Europe, Teemu.
We have been commenting that these sanctions and supply shortage will impact mostly Russia and Central Europe due to the fact that in the past, majority of the tires have been coming from Russia. Now going forward, we need to find the optimum balance, how we distribute the supply that we can get out of the Nokian factory and top of that other means like the offtake short-term in order to optimize our profit.
Thank you. Brief follow-up, if I may, just on what is preventing you from moving the equipment. Is this related to sanctions as well, or is it just no availability of transport is the key reason?
Related to sanctions and counter-sanctions, especially counter-sanctions.
Thank you.
Thank you. Thank you, Teemu. Thank you, Jukka. Thank you for all the questions. These are difficult times and the work continues. As Jukka said during the call, we will of course publish any decisions as soon as we have anything to announce. Jukka, to finish the call, anything you want to add, maybe come back to the short-term priorities and.
Maybe instead I would talk about the opportunity we have because we have really good innovation pipeline and new products coming to market. Our biggest and most important job is to ensure that we have a capable or that we have the capacity and capability to supply those products. That means that we have a accelerated way to look into investing and building the capacity and capability in those factories which are outside Russia and then find opportunities to outsource and then expedite new capacity build-up because that way we then build for the future. I think that would be the most important priority for the company.
Thank you, Jukka. Thank you all. Have a good day.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.