Q1 2020 Earnings Call
Thank you for standing by.
Good day and welcome to the WD 40 company first quarter fiscal year 2020 earnings Conference call.
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At the end of the prepared remarks, we will conduct a question and answer session.
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Now, let's turn the presentation over to the host for today's call Ms., Wendy Kelly director of Investor Relations and corporate Communications. Please proceed.
Thank you good afternoon, and thanks to everyone for joining us today.
Our call today, our WD 40 company, Chairman and Chief Executive Officer, Gary Rage, Vice President and Chief Financial Officer, Jay Rembolt, and President and Chief Operating Officer, Steve Brad.
In addition to the financial information presented on today's call. We encourage investors to review our earnings presentation earnings press release and Form 10-Q for the period ending November Thirtyth 2019.
These documents are available on our Investor Relations website at Investor Dot WD 40 company Dotcom, a replay and transcript of today's call will ultimately be made available at that location. Shortly after this call.
On today's call people discuss certain non-GAAP measures.
Greetings and reconciliations of these non-GAAP measures are available in our FCC filings as well as earnings presentation.
As a reminder, today's call includes forward looking statements about our expectations for the company's future performance.
Of course actual results could differ materially the company's expectations beliefs and projections are expressed in good faith, but there can be no assurance that they will be achieved or accomplished.
Please refer to the risk factors detailed in our FCC filings for further discussion I.
Finally for anyone listening to a webcast replay or reviewing a written transcript of this call. Please note that all information is presented on its current only as of today's date January nine 2020, the company disclaims any duty or obligation to update any forward looking information, whether as a result of new information future.
Bench or otherwise.
That I'd now like to turn the call over to Gary. Thanks, Wendy Good day, everyone happy new year and thanks for joining us for today's conference call.
Today, we reported net sales of 98.6 million for the first quarter fiscal year, 2020 down 3% compared to the first quarter last year translational about foreign subsidiaries results from their functional currencies to the U.S. dollar had an unfavorable impact on styles in the first quarter when it.
Constant currency basis sales would have been relatively flat compared to the first quarter of last year.
Net income for the first quarter was 12.2 million compared to 13.3 million last year diluted earnings per share for the first quarter was 88 cents compared to 95 cents for the same period last year.
If you follow this quarter to quarter, you might not like the results this quarter.
Our business is one which fluctuations in performance about markets from quarter to quarter.
Not unusual that's why I don't we don't issue quarterly guidance and why I frequently caution investors not to follow us too closely quarter to quarter.
What's more important is that out long term strategic drivers continue to perform well armed and are in line with our expectations. As you know we aspire to drive consolidated net styles to approximately 700 million in revenue by the end of fiscal year 2025 and to do so well following.
Yeah, 55, 30, 25 business model we.
We'd like to remind investors that these long term targets are probably wrong and roughly right and that we acknowledge out 2025 targets. Our aspirational. We believe we can successfully bring those targets within reach.
As a reminder.
We refer to the brands that are going to get us to at 2024 hours a day to at 2025 brands.
Uh Huh WD 40, multi use product WD 40 specialist three in one WD 40 bike G. T 85, 1001 spot shot solve all lob at Niobec at 2025 brands are a cost strategic focus and the primary growth engine for our company.
The strategic driving number one is to grow the WD 40, multi use product have goal onto this initiative is to make the blue and yellow can with little rate talk about what we'll do more people in more places who will find will use is more often in the first quarter sales of WD 40, multi use product were 75.8 million.
3% compared to last year.
The decline was driven primarily by lower salaries in Asia Pacific due to the timing of customer orders in L. Asian distributor markets and in China.
Those these so these results might look disappointing I have no way reflect a trend in fact, we see lots of opportunities for growth as we continue to maximize the product line through geographic expansion increased market penetration and premiumization of the blue and yellow cab or rental.
[noise] premiumization creates opportunities for revenue growth as well as full gross margin expansion.
We see a significant opportunity to increase penetration about most successful innovation smart straw currently 41% of WD 40, multi use products campaigns, we sell a sold with the smart store delivery system.
Allergy active is to grow that number to 60% over the next five years. We believe this initiative represents approximately 50 million in incremental revenue opportunity.
Increase smart straw penetration is expected to drive accelerated revenue growth, which will begin to realize as we roll out smart straw next generation I've got about an 18 month period beginning in July 2020.
These innovations supports our objective to grow WD 40, multi use product to approximately 530 million in revenue by the end of fiscal year 2025.
Strategic driving up the two is to grow the WD 40 specialist product line.
In the first quarter styles of WD 40 specialist remained constant at 8.4 million compared to the first quarter of last year. However, we remain optimistic about the long term opportunity for WD 40 specialist and continue to believe we can grow the product line to approximately 100 million in revenue by the end of fiscal 2025.
[noise] outright has delivered some best in class WD 40 specialist products over the last several years as a result, we now have an exceptional portfolio products that we are proud to have where the WD 40 shield.
But then you like can with little Red top and that famous shielded away is has been creating positive lasting memory spread the 66 years, we now while in users around the World Trust the shield and they are making buying decisions based on that brand loyalty.
As Steve shared with investors in October last year.
We've been evaluating the brand architecture associated with that WD 40 brand of products that is the products in ally and that where the famous shield.
We needed to be certain that our prime repackaging that is to say the cala and the words on their WD 40 specialist cans was correctly communicating the product lines connection to its famous parents and helping our end users quickly find the solution. They are looking for.
After a lotta research and hard work by the tried we did this we decided on a new way forward for at WD 40 specialist product line.
If you turn to page eight in todays earnings presentation available on our website you will see a sneak peak of the new packaging. We've designed for at WD 40 specialist product line.
The new packaging will be comprised of a metallic blue can and distinctive red tall.
Ladies and gentlemen, we have lost connection please standby we will begin momentarily.
Sorry about that delay carried continue on thank you the technical Gremlins Gotta. So we'll start off again around the conversation of specialist. So after a lot of research and hard work by the tried we decided a new way forward Fred WD 40 specialist product line, if you turn to page.
Right in today's earnings.
Presentation available on our website, you'll see a sneak peak of the new packaging, we design Fred WD 40 specialist product line, the new packaging will be comprised of a metal blue can and distinctive red tall. We believed the new packaging drives major benefits. The new design leverage is the famous but when you look can it is simple.
And then clotted it clearly communicates the products purpose and it improves though in use his ability to find the solution now looking for both at the store shelf and online.
Oh ultimately, we believe the new packaging will give us stronger brand presence for the both the WD 40, multi use product and the WD 40 specialist and aligning them as now the blue and yellow brand with a little rate tall.
We expect to see these new improved versions of WD 40 specialist packaging on shelves in select markets by mid 2020, then available progressively around the world.
Strategic initiative number three is to broaden the product and revenue base strategic initiative number three includes maintenance products like three in one WD 40 bike and Gtld five but it also includes homecare brands such as spot shot in labor in the Americas, a thousand wanting the EMA and Novak and solve all in Asia Pacific Global.
I also these products included under the initiative were 11.8 million the first quarter down a little more than one per cent compared to last year as part of that brand architecture initiative WD 40 bike is going to get it make either this year as well it will be moved out of the specialist product line and where the new packaging.
Just outlined for WD 40 specialist however for external reporting purposes will continue to keep the WD 40 bike separate from the WD 40 specialist overall.
We believe we're on track to reach a combined revenue for the products under this strategic initiative number three of approximately 70 million by 2025.
Strategic initiative number four is to attract develop and rent retain outstanding tribe members. Our goal under this initiative is to attract develop and retain talented tribe members to growth and to grow I tried member engagement to greater than 95 same as.
As you might have read about you know recent annual report titled a culture that can a unique culture is very very important to us and something that we covered.
Capturing culture in brick and mortar is not easy I'm happy to report we did just that when we officially opened a new Milton Keynes offices in November .
MK whole as it's called houses approximately 90 tribe members and was specifically designed to reflect a unique culture, increasing engagement improved collaboration the tribe no doubt thrilled to be and then you work.
I firmly believe that our company's long term success is directly linked to the outstanding tribe members and their exceptional motivation and dedication to WD 40 company its products in fiscal year 2020, we will once again measured the engagement about tribe and we look forward to sharing the results of that engagement survey with you later this year.
Strategic issued number five is operational excellence at WD 40 company, a cornerstone to operational excellence ties closer to one of their core values to make it better than it is today with this our guiding mantra, we continually focused on optimizing resources systems and processes, while applying rigorous commitment to quality.
Sure sure its regulatory compliance and intellectual property.
Protection using our 60 530 25 business model as a frame what we measure ourselves against this operational excellence initiative.
That completes the update of our strategic drivers now pleased to pass the cold to Steve will discuss in more detail. After this quarter south results.
Thanks, Kerry and good afternoon, as Gary mentioned earlier consolidated net sales were 98.6 million in the first quarter and 3% year over year on a constant currency basis net sales would've been 100.8 million in first quarter relatively constant compared to last fiscal year.
Before I discuss what's happening in individual segments I'd like to remind investors about something Gary has shared with you. Many times that we don't consider all business to be seasonal it is quite common pro sales results to fluctuate from one period to another these fluctuations can be driven by a myriad of things, including the level of promotional activities specific programs.
Being run it customer locations the timing of custom road as well the impact of new product launches. This is all a normal part of our business and we are accustomed to these types of fluctuations and managed and as part of regular business activities.
So now let's start with the Americas net sales in the Americas, which includes the United States Latin America in Canada were down 2% into first quarter to 46.7 million.
That was a maintenance products decreased nearly 2% in the Americas, primarily due to lower sells it to be 40 specialist in the United States.
Sales of to be 40 specialist in the U.S. were down 19% due to the timing of promotional activities.
We were up against a very tough comparable period in the United States due to a successful WD 40 specialist holiday gift back promotion, we ran into first quarter of last fiscal year.
Maintenance product sales in the first quarter remained relatively constant in Canada and Latin America.
As a reminder, on maintenance products exclude all homecare and cleaning products sales of all homecare and cleaning products in the Americas decreased 6% in the first quarter compared to the prior year largely due to lower sales of Luverne spot, Chubb, which declined 17% and 8% perspective.
We continue to consider all homecare and cleaning products, except for those listed as 2025 friends as harvest brands continued to generate meaningful contributions and cash flows, but generally expected to become a smaller part of our business over time.
Total our Americas segment made up 47% about global business at the ended the first quarter.
Over the long term, we anticipate cells within this segment will grow between 3% to 6% annually.
Now onto the man that sounds in the mail, which includes Europe , the Middle East Africa, India increased to 39.2 million in first quarter of about 1% from last year.
Amaze reported results in the first quarter were negatively impacted by foreign currency exchange rates on a constant currency basis cells and the man would have increased to 41.1 million.
Both about 46 concerns about 6% compared to last year.
As you know we sell into the math through a combination of direct operations and marketing distributors net sales in all remain direct markets, which accounted for 63% of the region sales in the first quarter remain flat during the first quarter compared to last year.
The overall thousands direct markets remain constant for the quarter sales of 1001 carpet fresh in the UK increased by 30% during the quarter.
1001 continues to benefit from favorable impacts of digital marketing associated with the brand.
Net sales no remain a distributor markets, which accounted for 37% the region sales in the first quarter increased 3% during the quarter. This increase is primarily due to increased sales of WD 40, multi use product in the middle East. She is the timing of customer orders.
Total RMS segment made up 40% of all global business at the end of the first quarter.
Over the long term, we anticipate sells it in the EMEA segment will grow between 8% to 11% annually.
I want to Asia Pacific.
Consolidated net sales in Asia Pacific, which includes Australia, China and other countries in the Asia region decreased to $12.6 million in the first quarter down 15% from last year.
Changes in foreign currency exchange rates had an unfavorable impact on sales in the region on a constant currency basis sales in Asia Pacific would have decreased to 12.9 million in the first quarter down 13% from last year.
In Australia net sales were 4.1 million in first quarter over 5% compared to last year, driven by a higher level of promotional activities and continued growth of the base business.
Changes in foreign currency exchange rate had an unfavorable impact themselves in the region on a constant currency basis cells in Australia would have increased 11% from last year.
In our Asia distributor markets net sales of $6.2 million for the quarter down 21% compared to last year.
The significant decrease in cells is primarily attributable to the timing of customer orders in the region. We had significant fourth quarter sales in our Asia MD markets, which has resulted in a lighter first quarter.
Raise your distributor markets are not impacted by currency sublease since we sell our product in us dollars in this region.
In China net sales in us dollars decreased to 2.3 million in the first quarter down 23% compared to last year due to the timing of customer orders sales in China. During the course were also negatively impacted by activities associated with the seventh anniversary of the founding the People's Republic of China, which resulted in slowed me.
Okay conditions in certain geographies in constant currency sales in China were down 21% for the quarter.
We remain optimistic about the long term opportunities in China, Although we expect a lot of volatility along the way due to timing of promotional programs to building a distribution shifting economic patents in varying industrial activities in total our Asia Pacific segment made up 13% of our global business in the first quarter over the long term we expect.
Cells within this segment will grow between 10% to 13% annually.
And I will turn over the cool to Jay for an update on the point.
Thank you, Steve let's start with a discussion about our 55 30 25 business model. The long term targets. We used to guide her business as you may recall, the 55 represents gross margin, which we target to be at 55% of net sales. The 30 represents our cost of doing business, which is.
Total operating expenses, excluding depreciation and amortization.
Our goal is to drive our cost of doing business overtime toward 30% of net sales. Finally, the 25 represents our long term target for EBITDA.
First the 55 or our gross margin.
In the first quarter or gross margin was 54.3 per cent compared to 55.1% last year. This represents a decline of 80 basis points.
Impacts from sales mix changes and other miscellaneous costs, primarily in EMEA negatively impacted our margin by 70 basis points in the quarter.
In addition, higher warehousing and freight costs also primarily in EMEA negatively impacted our gross margin by 70 basis points.
Higher adverse <unk> advertising promotional and other discounts that we give our customers negatively impacted gross margin by 40 basis points during the quarter.
These negative impacts to gross margin were partially offset by the favorable effects of price increases, which we've implemented in EMEA and over the last 12 months in which positively impacted gross margin by 80 basis points in the first quarter.
Changes in major input costs positively impacted our margin by 10 basis points.
Petroleum based specialty chemical costs.
Visibly impacted our gross margin by 30 basis points period over period, However increased costs of aerosol cans negatively impacted our margin by 20 basis points and significantly offset the gains we realize due to the lower petroleum based costs.
Finally changes in foreign currencies.
Also had a positive impact and impacted our gross margin by 10 basis points.
Now I'll address the 30 or our cost of doing business.
In the first quarter, our cost of doing business was approximately 38% compared to 37% last year.
Both SGN a expense.
And advertising and promotion investment decreased period to period.
Our overall, our cost of doing business increased as a percentage due to the reported revenue declined in the first quarter.
For the first quarter, 75% of our total cost of doing business came from three key areas people costs or the investments we make in our tribe.
The investments, we make in marketing advertising and promotion as a percentage of sales are and P. investment was 5.7% in the first quarter.
And finally freight costs the cost to get our products to our customers.
Overtime, we expect our cost of doing business will move towards our long term target of 30% as revenues increase.
This brings us to EBITDA the last of our 55 30 25 measures you, but it was 17%.
Sales for the first quarter of this year compared to 18% last year.
Yeah that completes the discussion of our business model now, let's discuss some of the items that fall below the EBITDA line.
Provision for income taxes was 14.7% in the first quarter compared to 17.6% last year.
The decrease in the effective income tax rate was primarily due to an increase in excess tax benefits from settlements of stock based equity awards.
Despite the lower tax rate in the first quarter, we expect that our effective tax rate for the full fiscal year, we'll be in the 20% to 22% range.
And net income for the first quarter was 12.2 million versus 13.3 million in the prior year, reflecting a decrease of 8% changes in foreign currency exchange rates negatively impacted our net income by about $500000.
In the first quarter on a constant currency basis net income would have been 12.7 million in the first quarter.
Diluted earnings per common share were 88 cents for the first quarter compared to 95 cents for the same period last year.
On a constant currency basis diluted earnings per share would have been 92 cents for the quarter.
Diluted weighted average shares outstanding decreased to 13.7 million shares from 13.9 million shares a year ago.
Now a word about capital allocation.
Our capital allocation strategy includes a comprehensive approach to balance investing in long term growth, while providing strong returns to our shareholders.
In fiscal year 2020, we expect to invest approximately.
31 million in capital projects. This estimate is up from the 25 million, we shared last quarter.
Much of this capital will be used to procure the proprietary machinery and equipment needed to Mac manufacture our next generation smart straw delivery system.
We expect to return to our historic capital light business model over the next two years.
We continue to return capital to our shareholders through regular dividends and share repurchases.
On November and December the 10, our board of directors approved quarterly cash dividend of 67 cents per share, reflecting an increase of 10% over the previous quarters dividend.
This increase represents the 10th consecutive year. The company has raised its annual dividend.
Based on today's closing price of $191.81 the annualized dividend yield is 1.4%.
During the first quarter, we repurchased just under 27000 shares of our stock at a total cost of approximately $5 million under our current $75 million share repurchase plan.
As of November Thirtyth, we had approximately $40 million remaining under the current plan.
Now I'll turn to guidance.
Today, we are reiterating the guidance we gave on October 17 2090.
With that net sales is projected to be between three to <unk> and 7%.
Net sales expected to be between $436 million and $453 million.
Gross margin for the full year is expected to be between 54 and 55%.
Advertising and promotion investment is projected to be between 5.5 and 6% that sales.
The provision for income tax is expected to be between 2022 %.
Net income is projected to be between 65 billion and $66.2 million.
Diluted earnings per share is expected to be between $4.74 and $4 an 83 cents.
Based on an estimated 13.7 million weighted average shares outstanding.
This guidance is Ics breast in good faith and is believed by the company to have a reasonable basis. However, it is not possible for us to predict any reasonable degree of certainty the actual impact that fluctuating crude oil prices or foreign currency exchange rates can have.
These fluctuations could potentially have a significant impact on our 2020 guidance. This guidance does not include any future acquisitions or defense divestitures.
That completes our financial overview and now I'll turn it back to Gary Thanks, Jay in summary, what did you hear from US on this call Tonight.
You heard that our business is one in which fluctuations in the performance of our markets from quarter to quarter I'm not unusual.
You heard that foreign currency exchange rates continued to be a headwind window now consolidated global sales results, particularly in EMEA.
You heard that our long range long term strategic drivers continue to perform well inline with expectations and that will remain committed to have probably wrong and roughly right long term goal to drive consolidated net sales to approximately 700 million by the end of fiscal 2025.
You heard that we see a significant opportunity to increase the penetration of smart straw from Wolfe, 41% to 60% globally over the next five years and that growth is expected to lead to approximately $50 million in incremental revenue.
You heard that we're launching a new new packaging, Fred WD 40 specialist line.
Which we believe will deliver major benefits as it becomes the blue and yellow brand with a little red top.
You heard that our board of directors increase that dividend by 10% last month.
And you heard that we have reiterated our fiscal year guidance today.
In closing I'd like to share required.
From my my friend, So I'm incentive.
Nothing and no one can perform at a 100% forever, if we cannot be honest with one another and rely on one another say helped during the challenging parts of the journey, we won't get very far.
Thank you for joining us today, we wouldn't be pleased to now open the conference call to your question.
Ladies and gentlemen, if you would like to register a question. Please press star one on your telephone keypad. Please make sure. Your mute function is turned off to allow your signal to reach or equipment. If your question has been answered and you would like to withdraw your registration. Please press the pound key one moment. Please for the first question.
And our first question comes from the line of Linda Bolton Weiser from D.A. Davidson. Your line is open.
Hi, happy new year.
Hey, happy here Yeah.
So I just wanted to ask first about the new smart straw technology product that's coming out this year.
I think before you have been talking about June and now it seems like you said July I know, it's not a big deal, but is there any sort of delay that you're experiencing in and getting the product ready for market.
No nothing material, it's just a matter of timing of the launch will or will launch in July and then.
Over the next 18 months or so will progressively move.
Smart straw next generation, which is both smart sterle 1.5, and smart throw to around the world.
And as we shared Linda I'm as we then now how as we now have without all of the investments. We've made the production capacity, where now aggressively going to be moving our penetration from 41% to 60% and that will deliver approximately $50 million an incremental revenue I've.
The next few years. So we're excited about being in the position now when we're ready to go.
Okay.
And then.
[noise] can you just talk about I guess on the cost side.
Your can cost you you've talked about some of the impacts on your your can cost and it's my understanding that in the past sometimes you would reduce some of these want a medium term contracts in the beginning part of the year.
Is there any news on that front in terms of what what you expect on campus in the next 12 months.
We've built that into our our fiscal year guidance.
So we think were.
Are the price increase was as already been built in.
Okay.
Can you just give me I'm, sorry, if I I missed it can you just give me what the specialist WD 40 specialist sales were in the quarter I missed that number.
Yeah, we can when he is looking them up right now.
[noise] 8.4 million 8.4, thank you.
And just in terms of the packaging change for specialist.
As are the costs related to that somewhat material and I assume you havent figured into your guidance, but is there anyway that you can quantify or put some.
Give us some color on how much those costs are for the year.
They're not material this is going to be a phased or launch so what will happen is.
The product that's on the shelf will be replaced with add new packaging.
As as we roll it out the first one we think the when do we think the first one will be.
June or July June or July you'll see the first one on the shelf, but all the costs in developing the new packaging have already been absorbed all of the research. This project has been going on for nearly two years.
And so we're really excited about it we really believe that taking specialists to the blue and yellow brand with a little red top will give us say much better communication on the shelf weve simple simplified somewhat the communication. So it's a it's got to be a great rollout and what.
Pretty excited about it.
Okay.
And then.
Can I just asked I guess with regard to some of the issues on your sales line in the quarter. You mentioned it was timing of orders and we've seen that before are you pretty confident that some of those orders are going to come back into new be more specific to give us some confidence on the next quarter and also the slowdown in China have you seen that kind of alleviated once.
Our past that time period.
China There was a couple of things that happen number one was it was the there was the celebration of the 17 year of the Republic of China during that period of time things slowed up transportation change the positioning of Chinese new year. So we would expect to see I'm a healthy second.
Quarter in China, you. If you look at <unk> Asian market in the last quarter I had a very robust quarterly Niger at distributors businesses was up 27% China was up 22. So you know this the first quarter is always a little.
Softer in that region. The other thing too is that there's a larger percentage of distributor business in China. So it tends to be a little more lumpy than anywhere else because it's a smaller number of distributor customers buying large volumes, excluding China and Australia of course, so there's nothing here that we're concerned about we've reiterated our annual.
Guidance.
And I think will you know we'll be talking to you in three months time, and you probably will see a the a different picture and go if we thought it was any kind of any different to that we would tell you.
Okay.
That sounds good. Thank you very much I appreciate it.
Okay take care.
Your next question comes from a line of Daniel Rizzo from Jefferies. Your line is open.
Hi, everyone, how you doing.
Daniel will you be changing the packaging on other products or you're not considering like looking at like WD 40 bike or other things like that it to maybe I don't know kind of tweak the packaging sort to speak yes, yes, as I mentioned on the call Daniel we're going to be moving bike under the specialist packaging. So it will it will end up looking like the blue and yellow.
And with little Red top so you'll see that start to roll out to progressively over the year.
Okay. So I'm, sorry, I missed that and then I mean, you mentioned, what you what you're doing with Smartchoice and how important is I think you said, you're spending 31 million.
They get a correctly that that's 31 million over two years that you'll be spending to kind of sit to change the tweaks on the machinery.
Yes, that's our estimate for this years overall total capex budget.
So that's that's just this years right.
The majority of the the smart store investments some of it has already happened.
This second tranche. If you will is buying the machines to go on the line. So there's two parts to smart straw theres, one I use the machinery and the dies to make is the second part is the machinery that we actually put on the production lines to make sure that we efficiently applied to the cash.
So all of that will be done as we start to roll it out.
By the end of this year.
We did they should anything will that be somebody trickling into 2020, 2021 excuse me potentially.
Yeah, a little bit should trickle into 2021.
Okay, and then you mentioned mix headwind in EMEA I was just wondering what wouldn't if you could provide color on that is it for like increase distributor sales were just I mean, it's less specialist sales was wondering what the with them. If you were talking about with.
Oh, Yeah, there's oh, we had a larger percentage of our sales to our distributor markets.
So that's one we also had some a higher percentage with a couple of products that have thousand a 1001, which has a slightly lower margin.
The thousand 1000 to me or up 30% and that margin on thousand one is lower than out core product.
And then finally, you mentioned the excuse me.
I was wondering how easy we SRO was going.
That seems to be a fairly robust probably too I mean as it is taking share in house how's the growth trajectory on that.
I'll, let Steve answer that so easy reach easy reaches Greg very very nicely around the world and so as we expand distribution now into more markets, particularly when in the EMEA segment, we're very satisfied with the with growth and we expect that to continue to be a major growth rather than <unk>.
Oh.
Thank you that's it.
Thank you Daniel.
Your next question comes from a line of Rosemarie Morbelli from GE Research. Your line is open.
Thank you good afternoon, everyone happy new year.
Hi, Rosemary happy new year to you.
Thank you. So I was wondering what is your assumption for oil prices in your guidance.
It's in the current range I know that we've had some fluctuations recently, but you know we were a within the 60 to $70 ranges is is really the the place where we pegged our plan.
Okay, and whether it is 60 or 70 doesn't really change your bottom line all your top line.
Oh, there'll be movement or with both but they are captured within our range of guidance.
Okay.
And then I Miss and I apologize when you were and I believe I understood. What you said, probably I you reported 88 cents and I think that you'll see that excusing. Excluding some items. It would have been 92 cents first of all did I hear that properly.
And if yes, what are those items I missed that actually.
Yeah, I think that.
The reference was that we reported 88 cents had we been reporting under what constant currency a that that we had the currency rates that we had were in effect last year, a it would've been a 92.
Oh, okay.
Constant currency measure rather than a other other item.
All right that's helpful. Thank you.
So now the new packaging and especially side.
This is going to Kevin Nebulized revenues. So if I had probably you are going to take care the old cans from the shelves and then we play same with the new ones.
And so this is one thing how much cannibalization do you expect Oh no.
No no no no no there will be no. It's just a straight replacement. So there's no cannibalization at all.
Okay, and when you take backs that old Ken or packaging or can you only use a the projects studies in there and in order to we feel a new one then you'll see why.
We won't be taking any back Rosemarie. This is a pure replenishment as the all sells out we will sell in the news. So it's what we call a soft conversion. So there's no product coming back and there's no disruption in the flow styles, what we will see for a little time is both packaging on the shelf.
But over time that will that will evaporate. So this has no revenue negative cost negative impact at all.
Okay. Thanks, I told him is understood that.
And then you said that you are taking the putting that by kit and does the new specialist packaging or I am assuming also manage I said and as the specialties group why keep the financial data where it is not included and nothing to do going forward in.
Especially scoop.
Well, because we report it now and the other group.
And we wouldn't be a comparable because it wasn't in there before so we've decided to at this time to leave it out as it line on that side.
And when you think about it in the Big scheme of things. It's you know it's a couple of million dollars I guess, so it's not significant but.
Well look at it again at the end of next fiscal year. This once we've done the conversion to see if it makes sense.
Okay. Thank you Jesus.
Okay very helpful and good luck for the full year results never mind next suite quotas.
And I will the full year is what we're about what tying the infinite game.
Alright, thank you.
Thank you.
Ladies and gentlemen that does conclude ever allotted time for questions. We thank you for your participation on today's conference call and asset you. Please disconnect your lines.