Q3 2019 Earnings Call
As a reminder, this call is being recorded.
All lines have been placed on mute without any background noise. After the speaker's remarks, there will be a question and answer session. If he would like to ask a question. During this time.
Please press Star then the number one on your telephone keypad, we ask that you limit your questions to one question and only one related follow up if you like to withdraw your question press the pound Keith. Thank you I would now like turn the call over to Greg Peterson head of Investor Relations.
Thanks, Amy and good morning, welcome to those of you joining us for our third quarter 2019 earnings Conference call.
This morning, we'll refer to a slide presentation, that's posted on our website at www Dot Alcoa Corp. Dot com.
Well use non-GAAP measures and that slide presentation, and we've reconciled to GAAP measures in the appendix of that presentation.
Well also make forward looking statements this morning, including demand product development in capital expenditure plans and the timing of those plans.
Acquisition expansion and modernization plans and our expectations with respect to the costs and benefits of those plans and the timing of those benefits will also talk about production levels share repurchase it's different in rates and our future revenue price levels earnings cash flow tax rates and other financial metrics, we wish to cautionary.
These statements are predictions and actual results.
Intervention may differ materially we refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 30, Onest 2018. This document discussions important factors that could cause <unk> actual results to differ materially from those contained in our four look.
Statements, we disclaim any obligation to update any forward looking statements, except as required by law.
A replay of this call will be available later today on our corporate website.
On the call with me this morning, our partnership Haagen, our chairman President and Chief Executive Officer.
Andy Beck, our Chief Financial Officer, and Eric can sodium our chief operating officer and with that Martin. Please go ahead.
Thanks.
I think we've lost Martin on the call his sorry about that.
His line is to show in connected in moderated.
Okay.
Okay, well, let me take over here and Oh I'll do the prepared comments myself I'm sorry for that will get Martin back on the line a week we.
I appreciate your interest in Agco and will begin to remarks on slide three where are you find a summary of our third quarter year to date results encode produced solid results in the quarter, despite continuing challenging market conditions price increases as well as cost control initiatives in productivity improvement efforts allowed us to offset the impact.
Well were sales and production volumes in the third quarter are weak results in South America reflected the challenging industry environment, including interruptions in the government subsidized finance program in Brazil weak macro economic conditions in Argentina, low levels of production as well as higher material costs associated with.
New tier three technology tractors were aggressively addressing these cost in order to improve our current result.
We're continuing to invest in initiatives will drive long term benefits and raise the efficiency of our factories and improve our service levels and strengthen our product offerings. We're also continuing to return cash to shareholders and the first time on for 2019, we completed $100 million and stock repurchases demonstrating continued optimism.
And our long term results.
Slide four details industry retail sales by regions for the first three quarters of 2019, and North America industry retail tractor sales were flat in the first nine months and not 2019 compared to last year with higher sales of smaller equipment offset by lower sales of high horsepower tractors and combines.
The prospects of lower yield in the uncertainty regarding the outcome of trade negotiations are both contributing to weak demand in the March farm sector.
We expect North American industry retail SEC tractor sales to be relatively flat in 2019 as compared to last year.
Conditions remain supportive of the dairy sector in Western Europe and industry retail sales increased modestly in the first nine months of 2019 first half growth was partially offset by weakening market demand throughout the third quarter for the full year 2019 industry demand in Western Europe is expected to be flat compared to 2000.
18 industry retail sales in South America decrease during the first nine months of 2019, the benefits of improved grain production in Brazil, and Argentina were offset by interruptions in the government subsidized financing program in Brazil, and low levels of demand in Argentina for the full year 2019 Indest.
Three demand in South America is expected to decline compared to 2000 anything.
[laughter].
Echoes 2019 schedule for factory production hours. This as shown on slide five total company production was down approximately 3% for the third quarter versus the same period in 2018 compared to the prior year production was lower in North and South America and higher in Europe .
The full year 2019 were targeting a production decrease of approximately 1%.
And finally, our September order board for tractors as relatively flat in North America, and down in Europe , and South America compared to a year ago.
Moving on to the next slide eight.
Martin.
Yes, so I think I'm connect it now thank you very much for doing a wonderful presentation.
Thank you Martin.
We'll continue with the prepared remarks, and you'll be ready for questions. So.
On slide six we look at Echo's regional net sales performance for the third quarter and first nine months of 2019.
'cause sales were down 2% compared to the third quarter of 2018, excluding the negative impact of currency translation, which negatively impacted sales by approximately 3%.
Europe Middle East segment, net sales were up 3% and excluding negative impact of currency translation compared to the third quarter of 2018 sales growth in France, and Scandinavia was offset by declines in the United Kingdom and in Eastern Europe .
Echoes.
Third quarter 2019 sales in South America decreased approximately 14% compare to the third quarter of 2018, excluding negative currency translation impacts weaker market demand in Brazil, and other South American markets resulted in a decline.
Sales in North America decreased approximately 1%, excluding favorable or unfavorable impact of currency translation compared to the levels experienced in third quarter of 2018, lower sales apply horsepower tractors were partially offset by higher sales of utility and compact tractors net sales and our age.
Asia Pacific Africa segment decreased about 12% in a third quarter of 2019 compared to 2018, excluding the negative impact of currency translation.
Sales were lower in both Asia, and Australia part sales were approximately $363 million for the third quarter of 2819, and we're up about 8% compared the same period in 2018, excluding the negative impact of currency.
Moving on to slide seven we examine agco sales and margin performance echoes adjusted operating margins were relatively flat and the third quarter, 2019% compared to the same period.
Last year, despite lower levels of production and sales net pricing, which is pricing over material cost increases.
As well as our expense reduction efforts supported margin improvement and offset the impact of lower sales and production volumes.
Europe Middle East margins improved 130 basis points compared to third quarter 2018, resulting from the benefit of pricing higher production in the region as well as ongoing cost control efforts North American operating margin expanded modestly despite lower sales favorable pricing material.
Cost performance and lower warranty costs, all contributed to the higher margin.
In South America third quarter operating results did not improve as expected primarily due to much lower sales and production levels, resulting from weaker market demand. Our focus continues on developing the thought supply base for our new tier three technology products in order to improve the regions profitability.
The forecast for the fourth quarter in South America assumes improvement in the market conditions and our results for the versus the third quarter of 2019.
And our Asia Pacific segment, lower sales resulted in a decline in operating income of about $6 million.
Slide eight details that goes grain storage and protein production equipment sales by region and product.
Sales in this product group decreased about 1%.
Excluding negative currency translation impact and the first nine months of 2019 compared to 2018.
Globally grain and oilseed equipment sales grew about 4% on a constant currency basis with growth achieved an all regions, except for North America protein production sales decreased approximately 7% on a constant currency basis, which is the largest declines were in the Asia Pacific Africa and.
Any Europe Middle East region.
Global trends towards a growing population an increase protein consumption should make our grain and protein business, an attractive source of profitable growth WRECO and the years ahead.
Slide nine lifted AG because investments in both capital expenditures and research and development, we're continuing to make strategic investments to refresh and expand our product line upgrades system capabilities and improve productivity in our factories, we intend to increase the level of engineering expense in 2019 on a constant.
Currency basis to execute our product development plan and meet new emissions requirements in both Brazil, and Europe are spending plan as needed to maintain our competitiveness and to support the long term growth of our business.
On our 2019 capital expenditure plan reflects investment to support our new product initiatives and is projected to be higher than in 2018.
Slide 10 addresses that could free cash flow, which represents cash used in operating activities less capital expenditures are seasonal were promise for working capital are greater in the first three quarters, the year and thereby rough resulted in negative free cash flow in both the first nine months of 2018 and 19.
I mean.
For the full year 2019 were targeting another year of strong free cash flow.
At the end of 2000 September 2019, our North American dealer month supply on a trailing 12 month basis was relatively flat for tractors and was improved port hay equipment and combined.
Losses on sales or receivables associated with our receivable financing facilities, which is included in other expense net were approximately 10.6 million during the third quarter 2019, compared to 6.7 million in the same period in 2008.
As we focus on returns for shareholders, we expect cash distributions to continue as an important component of our long term capital allocation plan over the past six years, we've executed share repurchases of nearly $1.3 billion, which had the which has had the effect of reducing our share count by over 25%.
During the first nine months of 2019, we completed $100 million of share repurchases and expect cash generation to fund additional share repurchases in the fourth quarter.
Our updated 2019 outlook for the three major regional markets has captured on slide 12, and reflects the lower forecast from the South American market.
Harvest in the first three quarters of 2019 in Brazil, and Argentina or improved from 2018 levels, we expected to see market recovery in the third quarter. However, the interruptions in the government supportive Nance program in Brazil Limited sales are in the first three quarters of 2019, we now expect South American enough.
Three retail sales to be down approximately 10% in 2019 compared to 2018 versus our prior forecast, which was flat in North America 2019 industry and unit retail sales are expected to be flat compared to 2018 levels. The late harvest.
Lower crop production estimates as well with ongoing trade concerns are weighing on sales of large equipment.
Low horsepower equipment sales, which tend to be tied more to the general economy have been more resilient and are now expected to be up modestly in 2019.
The dairy and livestock fundamental supported improved industry demand in Western Europe does the first half of 2019, a hot dry summer and lower wheat prices contributed to weaker farmer sentiment and softer demand in the third quarter, we expect fourth quarter sale industry sales to be down and full year 2000.
18 industry sales to be relatively flat in western Europe compared to 2018.
Slide 13 highlights the assumptions underlying our 2019 outlook.
The priority for 2019 continues to be managing our cost and continuing to invest in our products and business improvement opportunities are Martin market forecast for the remainder of the years Im softer demand in Europe and modest improvement in South America with a stable industry demand in North America. Our plan includes market share improvements.
Price increases of approximately 2% a consolidated basis.
At current exchange rates, we expect currency translation to negatively impact sales by about 4% in 2019 engineering expenses are expected to be up approximately 10 million on a constant currency basis compared to 2018 operating margins are expected to improved by approximately 100 basis.
Points due to the benefit of our pricing productivity in purchasing initiatives.
As we mentioned in our press release. This morning during the third quarter 2019 anchor recorded a noncash adjustment to establish evaluation allowance against this Brazilian net deferred income tax assets of approximately 53.7 million or 70 cents per share in the fourth quarter 2019.
We are targeting an effective tax rate of 32% to 33% and excluding the charge. We took this quarter. We're now forecasting an effective tax rate of between 31 and 32% for 2019.
We also expect interest and other expense to be down about 10 million in 2019 after excluding debt extinguishment cost that we incurred in 2018.
Slide 14 list our view of selected 2019 financial goals, we are projecting to that 2019 sales to be in the $9.3 billion range, we expect gross and operating margins to be improved from 2018, the lower sales forecast is pressuring our full year earnings target.
However, we are increasing our focus on cost and maintaining the 2019 earnings per share goal of approximately $5 in 10 cents.
We expect capital expenditures to be up approximately $25 million compared to 2018 level and free cash flow to be in the 275 million that $300 million range.
That now conclude our prepared remarks, operator, we're ready to take question.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad again that is star one to ask a question.
Your first question is from Seth Weber of RBC capital markets.
Good morning, Mrs. Emily Mclaughlin on first at this morning.
Good morning about good morning, how are you thinking about the margins in North America in the fourth quarter I think during the Twoq you call you talked about three keeping a little bit weaker due to cost and some product launches and mix and fourk reversing that trend.
But with reached a little bit stronger just wondering how some of those expenses, maybe got pushed into the fourth quarter.
A little bit, but we're still expecting margin expansion in the in the fourth quarter in North America, We've got.
Some new products that we're introducing and the high horsepower range.
And those.
Should help us with.
A good increase in sales as well as a margin expansion, we're looking for margins to be improved approximately 200 basis points over the prior year in the fourth quarter.
Great and can you provide little additional color for what's going on in Brazil, and why we havent seen a rebound and industry volumes. Despite the resumption in Oh government subsidized financing program Paula I think the problem is the administration.
As a lot of that a lot of questions.
Our customers the farmers lack confidence I would say overall once we see improvement because.
The demand is still there.
The question I'll call. It is how well the administration and she now me.
Finance subsidies for.
This thing.
Okay. Thank you.
Your next question is from and you can of JP Morgan.
And your line is open and you May proceed with your question.
Apologies I was Amit this is Tom Sevenish on Friday.
If I could just push you on Brazil could you just comment on where I coast Q3's audience ended up by the such expectations coming into the quarter, Yeah, what drives the magnitude of the underperformance on what level of call. Since you have going into two inch to Angie.
Sure.
No going into the third quarter.
The phenomenally program was reinstated and so our assumption was that that would spur higher demand and so we expected the market actually to be up and in the third quarter.
When ended up happening was the market was down about 17% and the third quarter.
Also markets outside of Brazil.
And other South American markets were also down and so we just did not accomplish the sales numbers that we had anticipated and that was the.
The primary primary drop in our sales versus what we had anticipated, whereas within that South American market.
Okay. Thank you and point of clarification on your sales guys. I. Appreciate some of this will be down surrounding but the down 2%. It would seem to be short. So my point 3 billion for the full year.
I will say implied Q4 guidance looks to be up mid single digits, Despite FX headwinds and the productionized interpreting that correctly.
Yes, so were looking for kind of mid single digit increase in sales on the.
In the fourth quarter.
We are expecting again.
Good improvement in North America, where the market there should be some late buying activity in North America.
Due to the fact that farmers will have completed their harvest and also have some government eight payments that could spur some like you're buying we have some improvement in our European sales forecast enough in the fourth quarter as well.
There's.
Some impact that we think from.
The Big trade show Edgar technical being completed and that should spur some activity late in the year as well as well as we were deficient and some getting some of our our products out of our factories at the end of the third quarter, which should help us in the fourth quarter.
Well, we do think our Asia Pacific sales will be down and our South America sales will be relatively flat, we do expect that the market although down in the third we're anticipating that the market does recover in the fourth quarter.
Thats very helpful. Thank you I'll close enough.
Your next question is from Ashish group of Stephens.
Hi, Good morning, Andy Martin and Greg.
Good morning.
Good to be with you can you guys comment on the inventory levels, they seem a bit higher.
Do you think maybe Andy it's related to what you had said that.
Thats. The Threeq you shipments are a bit lighter than you were hoping for.
And then I have a quick follow up.
Yes, I think thats, a that's a part of it secondly, as you can tell the markets are tending.
To be a little weaker than we had earlier anticipated in our we've brought some of our sales forecast down and so some of that.
Resulting and.
Producing more earlier in the year than than we should have been so now we're taking those actions are reducing our production in the back half of the year in order to get those.
Inventories back into the level, we want so we should have a sizable reduction in inventories in the fourth quarter and that is a key focus for the company here.
Finished the year with our inventory levels now.
Great and then just quick follow up.
Just in terms of the market dynamics as things have been unfolding this year.
Do you see any risk to year margin expansion opportunities for 2020 in beyond most of those seem.
Sort of.
Not related to market conditions, but more so.
Any specific opportunities.
Thank you so much.
We're very bullish on our opportunity to continue to grow margins and we've we put that focus in place about this time last year and the organization responded very strongly to it lined our incentives and goals throughout the organization. So that the organization is focused and aligned behind this and this.
Devon is demonstrating as you can see from our results demonstrating margin improvement even in the in a very challenging year, we're going to go into next year with that same focus.
And the organization is going to have.
A fuller hopper of initiatives going into last year than we did going into this year.
Thanks, Good luck.
Thank you.
Your next question is from Jerry Revich Goldman Sachs.
Good morning, everyone. This is Ben brewed on for Jerry.
Good morning, Ben morning.
It's just hoping you could update us on your precision AG product plans, how was the precision planting business performed this year and what's the magnitude of sales tail. When do you expect over the next couple of years from any other smart AG products in your portfolio.
Hi, David can you answer this.
Yes, again, so we're very very happy with the addition of precision planting into the Echo family. The products continue to be star performers for our customers and the business is growing faster than our original business plan when we purchased the business.
While also maintaining very strong margins, we've got a couple of focus areas for that business. One is global expansion of the products that exists or ready and the primary market that was had low penetration was Europe and so we've spent a lot of found the effort Foundation building there by doing many many test plus throughout many countries through year.
Hi, gathering the agronomic data on farmers fields with.
Side by side test of our technology versus others to have data for farmers to show in their farming conditions in their climate in their farming practices. What the advantages are so the global expansion is is moving forward and we've invested in a very robust way to have it be sustainable and then the second engine for that business is the country.
Hi, good innovation of new technology, and we have a launch every year in January .
We call Winter conference in about five five to 6000 of the most progressive farmers from all over the world.
Voluntarily come to that program to get educated on farming practices agronomy and how the new technology being innovated can help them be more productive and profitable and we are excited about the new launches that will be coming out again. This year. The pipeline is full and that business is not only doing well for itself.
But we're bringing that culture into the rest of agco to help us continue to accelerate our efforts on precision AG.
Got it and in North America was nice to see margin expansion. Despite a production cuts can you bridge for us the performance a little bit.
Little bit more granularity than what you mentioned earlier, how much better where margins.
Any benefit from the new product line up more granularity on price cost et cetera would be great.
Sure or a number areas that we performed better than we expected in the third quarter in North America.
First of all our sales were higher and some of that was part sales and so that certainly is a margin drivers. So that helped us our material cost performance was better than anticipated and then our programming cost for marketing and sales programs.
Or less expensive than we anticipated. So there are a number of things that drove those that margin improvement.
And we as we said we expect to have a good solid fourth quarter as well so.
We had the new product introduction in the fourth quarter that should help continue to drive or performance.
Great. Thank you.
Your next question is from Jamie Cook of Credit Suisse.
Hi, Good morning, I guess two questions one mark.
Your comfort level, what sort of the channel inventory out there and based on what you see today, how you think about sort of industry outlook for 2020 in a different markets and then my second question is on South American margins potentially for next year assuming.
You know markets stay in South America at these levels, how do we think about sort of the margin improvement that we can get issued just fix some of the.
Supply chain issues that you've been having over there. Thank you.
Hi, Jamie as usual.
You know exactly that we don't want to answer questions for the next year, but to still assembly just fine.
I can add on this so let's talk about the inventory levels to be honest it's nothing.
Exceptional so we face this problem pretty much.
On a regular basis and we have had a good in managing these so.
Demand is slowing down of costs have set a need to catch up and thats the process.
Now back to the in the end until his inventories in the area of components and materials for the production I think pretty much in line.
A finished good inventory.
I think another major problem now we need to make sure that be how the our distribution to manage inventories, which we are doing.
We don't typically note de thus with.
With with Clouddocs. They don't have hard times, so satellite to on all of a sale by big discounts. So we try to avoid when it comes to South America I'm slightly optimistic for next year because.
Just not doing so well for quite some yes now in the low and I think one should expect and a ton of owned soon and lumpy. If one of the market is positive for the good thing is we have a great new team in charge in Brazil.
You have very capable and very motivated and all your people and.
I think the new COO also does help them in order to make sure that they do that I'd things and we think we are doing.
We just to make it to internal.
Okay.
Cost management.
Engineering Kodaks localization helps a big.
Oh, thanks, and so on this pretty much on schedule.
Thank you.
And then just any way to end the basically the precise forecast what 2020 .
You can expect some.
At December when it come to New York.
Okay. Thank you I'll get back thank you.
As a reminder, if you like to ask a question. Please press star one on your telephone keypad again that star. One for question. Your next question is from Chad Dillard at Deutsche Bank.
Hi, good morning, everyone.
All right.
So can you talk about your comfort level with European dealer inventories, perhaps you could talk a little bit about just how to think about inventories as a percentage of next told on sales where they today versus more normalized levels.
Yes, the most probably best distribution that.
See in you up.
With most of our.
I'd say all of our ideas being exclusive with our brands, we have a vastly closer relationship and we basically introducing new.
Officially intelligence in order to help dealers to be become even more efficient which includes also.
Hey tool, which allows customers to.
Specified that effect.
That's really like you know that from the automotive industry. So we will be the first in our industry to half that and so therefore, we have first of all transfer them CV know what's going on at second.
Our ddas and you'll buy most probably the most professional in the vote and therefore I'm not too concerned about inventories in Europe that values have caused by companies. Those so there are certain countries, which they have more risk like UK, because nobody knows exactly.
And how the Brexit come and we do the very best in order to be Pat but.
I might be surprises, but in general I think in good shape.
Got it and then I think you'd mentioned that you're seeing some tailwinds from just better comps in terms of materials.
How should we think about that cadence as we go into 2020.
And then also just just thinking about the right level of engineering spend as we look towards.
The next 12 months.
In terms of.
Yes, sure in terms of material material cost.
We've seen steel prices come down, particularly in North America stayed relatively flat in Europe throughout the year, they are still going up.
In South America, So I would say our performance from that standpoint continues to improve throughout the year as as those pressures.
Have lessened.
And so looking into next year again will be more focused on that when we talk about it and in December but.
Right now the.
Steel prices seem fairly stable, but we're going to be looking for the.
And focusing on our forecast when we get into our 2020.
Budget as we're working on that right now.
The other question was bad engineering costs.
Still again working on or engineering budgets for next year I wouldn't expect a significant change and that level of engineering expense that as compared to this year.
Okay, what I would like to point out is you so check our margin improvements wise that margin. So I'll follow up Rps all of them down.
Our men margins went up so we outperform our competition and that is because of an excellent team being fully dedicated on a project call to margin 10. So that means we still in the process of doing Oklahoma and you will likely to see also into future.
Your next question is from quoting is upon us at Morgan Stanley .
Hi, Thanks.
I'm just wondering if you can give us a little bit more color on the Asia Pacific weakness it sounded like it was predominately driven by the G.S. high protein side, but just any additional color and especially given your outlook for sales to also be negative in a in the fourth quarter and not division.
You have you kind of seen them stabilized or do you think we could still see.
Some continuation and also how much of it is.
Being driven by concerns about asaph and if you can also just comment on the margins as well that's held up pretty well. Despite the decline. So how we should we thinking about margins in that segment for the year. Thanks.
Okay very positive when it comes to mind.
Two.
According to your right in terms of the concentration of that business.
Everyone in China, and most of that Chinese business is in fact, the protein production side to GE OSI and the African swine flu is has had a significant impact and the way that business typically players in that region is the third and fourth quarters have been heavier further sales so.
You saw some some of that in the third quarter, you'll see more of the softer sales in the fourth quarter end.
We do though expect based on Eric's comments around focused on cost we do expect to see our margins up a little bit in the fourth quarter. Despite.
Modestly softer sales so.
Look for the full year margins in that region to be kind of in the low to mid sixs, which implies somewhere close to nine per centers or margins in the fourth quarter.
Thanks, and then I think you also.
Lowered your pricing to the low end of the prior guidance for the year. It just curious what regions.
Our our being most impacted by that change or where you might not be getting as much pricing is you originally anticipated right. So it was slow we went from we were seeing two two and a half and now we're seeing too and it probably is right around that 2%.
There was really pretty much all regions or just a little bit less than what we thought the biggest area or the region that had to.
Biggest reduction was in South America, and not based on where the market is going to down versus our original expectations of being up more in the third quarter.
Is the real driver so.
Everywhere, but.
Most significantly in South America.
Okay, great. Thank you.
Your final question is from Stanley Elliott of cycle.
Hey, good morning, everyone. Thank you guys for fit man.
A quick question with all the new products you guys have coming out in North America can you talk to kind of some of the changes you made at the distribution level kind of how you're feeling now about the new dealer base, especially with more of the production class products.
Within the portfolio moving forward.
Good question Stanley, We've actually got a two pronged attack in North America over the last few years, we've been really accelerating our focus on the compact utility equipment and going after the customer what we called rural lifestyle.
Customer and once we've added somewhere between 2025 dealers each year that are focused on that segment typically closer to the urban settings, and having a footprint that's more cater to to that segment and weve seen nice share growth and and happy with how that business have developed.
But to the heart of your question is on the large AG production AG category.
We've made a few changes one is we've changed the contract structure, where we've been able to put in more accountability into the contract for performance and and then secondly, we've been able to we're bringing in the different brand in North America, and selecting our best and brightest dealers of of.
Of the area so theres no.
Prequalification, just because you're nacco deal you don't get qualified on the new products you have to step your game up to a higher level in terms of all aspects of the large AG experience to be able to qualify for for that opportunity and we really like the response, we're getting from all of our dealers and in turn our customers as as they.
As they move into this new chapter of our large AG business in North America, We think the combination of stepping up the game and our dealers and bringing in these new products is exactly where customers are expecting.
From from from Agco, and Thats, what were focused on delivering.
Perfect and then Greg I apologize, if you mentioned, but on the on the prior question about the kind of the opportunities on protein production I understand why you have the headwinds now can you talk about maybe some time frames when you should start to that business accelerate.
You as as other countries start to kind of modernize some of their protein production to more westernized standards.
Right.
And the next year.
Next year.
Great guys. Thank you very much appreciate the time.
Hi, Thanks Stanley I will turn the call back over to Mr. Peterson for closing remarks.
Thanks, I mean, we want to thank everyone for your participation today and encourage you to.
Get back with us with your follow up questions. Thanks, and have a great great day.
Thank you for participating in today's teleconference. At this time you may now disconnect.