Q4 2019 Earnings Call
Ladies and gentlemen, welcome to the cat four and cancel fourth quarter analyst call.
According I transcript off the call will be available and uncut uncapped first website <unk>.
During this call transport and can't put Pops, Chief Financial Officer, well do it for each one slide presentation, but it's available and the Investor Relations section of the company's website.
Oh, so the company's what likes to point out that the car will include forward looking statement. So please refer to press at least that's associated with such statements.
Oh, no excuses meeting over to Mr., Don Casey CAD, <unk> and capital Pops, Chief Executive Officer. Please go ahead Mr. King.
Thank you operator, and good morning, everyone.
Thanks for joining the category cat quarter for 2019 results for school well make a few comments before I turn things over to Allen Nicholson, our executive Vice President operations.
Operations, and Chief Financial Officer, Okay Corporation.
I will provide a more detailed overview our performance in Q4.
Joining me today, our Kevin Hi, crush, our senior Vice President sales and marketing Steven Mackie, Our executive Vice President of North American operations, and Brian you at our Vice President.
Sales and marketing.
Focus my comments on 29, P.S., a year, which overall was a very challenging here for both our core businesses virtually cattle poultry core net operating loss of $31 million 2019.
Throughout the year, we experienced decreasing availability of chips and increasing cost due to the significance all curtailments in Colombia.
Oh prices fell sharply over the course of the year, reflecting elevated inventory levels and we hear global demand in certain regions.
In the market driven downtime taken in the latter half 2019, our focus is optimized our production performance, reducing overall costs and maximizing fiber utilization in the coming months as we look to fully capitalize on the projected improvement and market conditions in 20 2021.
[noise] walkers are projected to remain challenging for the first half of 2020 market conditions and prices should gradually improve in the back half of the year as global inventories continue to become more balanced with demand.
For chemical overall, we reported an operating loss of $294 million in 2019, the very difficult operating results overshadow the transformational global diversification undertaken by the company during the year with the acquisition of EDA and further expansion in the U.S., so could be sawmill acquisition in Nashville.
Caroline.
We're already starting to leverage benefits from this diversification strategy well maintaining focus on improving productivity maximizing fiber utilization and reducing cost of debt levels. So we're well positioned to fully capitalize as market conditions improve.
RBC operations continue to face several challenges. However, we remain focused on working diligently to minimize the financial impacts of these constraints on RBC operations at our world business.
Global lumber markets show modest recruitment late in 2019, particularly in the U.S. demand in China was weaker but Japanese sales rebounded in the second half a year after a relatively slow start.
European Summer, Nevada is also subdued due to global or regional issues, but our operations performed well in the year generating EBITDA of $112 million in 2019, we expect governments are cool the baby tenure sale in Q1 [laughter] looking ahead recovery in the U.S. housing market is expected to.
Continue at a 2020 and the repair and remodel markets appear to be steady as well increase is also expected in 2020.
Well supply from Europe to North America is increasing and there has been new U.S.. So sawmill capacity added, albeit much less than forecast. We don't expect this additional supply to outpace increased demand in the coming here.
Overseas markets are forecast to be met both Japan, and our European markets, improving modestly modestly on the other had we expect China to continue to be challenging boy to increasing amounts of European fiber as well as a CRO virus impact which is currently impacting the country.
We continue to monitor the growing virus and expected to have an overall impact on lumber and coal demand, particularly in China and southeast Asia.
Additionally, we show blockades of Canadian rail infrastructure have impacted our supply chains and monitor be monitoring those events closely and implementing mitigating actions to the extent possible.
The U.S. Commerce Department released a revised beauty rate calculation for accounted for in January which when finalized would reduce our cash deposit rate from 20.5% of 4.6% as a result of the first administrative review.
Well the dispute is resolved commerce will continue to do annual reviews of the duties with the cash deposit rate reset at that time until there was a settlement we will not receive a refund any duty amounts. So lastly, despite it being a very.
Challenging year this past year to see the least we're thankful and grateful for their support that amendment in the dedication I were excellent employees, our contractor base and of course the communities that we operate.
I will now I'll turn it over to Alan to provide an overview of our financial results [noise].
Thank you Don and good morning, everyone.
I mentioned to Camborne capital call on your quarterly results were released yesterday afternoon. These results come together with our overview slide presentation in Investor Relations section of the respective companies' websites.
In my comments this morning, I'll expand on a number of Don's points and also speak specifically to several quarterly financial highlights.
Our lumber segment reported an operating loss of $27 million for Q4 compared to a loss of $67 million for the previous quarter.
So it's included an attitude expense at $44 million restructuring costs of $3 million on a 17 million dollar reversal of previously recorded inventory write downs sufficient.
After adjusting for these items the lumber operating loss was $3 million.
In Western Canada operations continued to be impacted by prolonged market and fiber related challenges. Despite a modern uptick in us housing activity towards the end of the year, which contributed to a 7% increase some pricing for most western SPF dimensions.
The company's U.S. <unk> operations experienced some more challenging quarter in Q4, as a result moderately lower prices across most grades as well as the impact of capital really that nine times, So office operations.
Our European lumber business continues to generate a solid financial results notwithstanding a modest decline in European benchmark prices during the fourth quarter seasonally higher production volumes on a market that are really this decline in unit log costs contributed to lower unit manufacturing costs.
In early 2020, the U.S. Department of Commerce announced luminary results for the 2017 and 20. His team first period offers you.
Lemonade determination the company anticipate some material reduction in a security deposit rates effective in the third quarter of 2020.
Corresponding recovery of approximately $217 million, reflecting differences between the current cash deposit.
Let me read as determined in the first better for you.
This recovery approximately $77 million has been previously recognized in the Companys financial statements based on managements estimate at 80 accrual rate over the first period of reviewed.
Our pulp business reported an operating loss of $24 million in the fourth quarter compared to a loss of 44 million reported in the third quarter with results continuing to reflect weak global Oh pricing.
Well purchasing activity from China picked up during the quarter weaker prices in North America Europe contributed to a modest decline an average sales realizations compared to the third quarter.
Gold production was up 64% in the fourth quarter. Following the market related curtailments taken in Q3 fiber costs showed a small decrease quarter over quarter with the impact of lower market prices for saw mills kits tied to poke price is helping to neutralize the effect of an increasing proportion of higher cost although.
Thanks.
Capital spending for the fourth quarter totaled approximately $70 million and included $43 million in lumber and $27 million income or no.
Total span and 2019 was just over $300 million on included $200 million than the lumber business on a $103 million income were Oh.
Excluding post capitalize major expense or a major maintenance and 2020, we currently anticipate capital spending of approximately $150 million in 2020. Following the completion of are you at 125 billion dollar organic growth program and several other major off bids in early 2020.
At the end of the fourth quarter, Tom Corrick, excluding count portfolio had net debt of approximately $960 million and available liquidity of close to $380 million comp portfolio ended this fourth quarter was not that 50 it Mr waters with available liquidity of 83 million.
Lastly, Pamfour pokes directors approved the convenience of a quarterly dividends of six in the quarters census share for the fourth quarter and without thoughts on the call up you yeah. Thanks, and operator, we're now ready to take questions from Dallas.
Thank you.
We will now take questions from a financial analyst.
The question. Please press star one on your telephone keypad.
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Well participants registered the questions. Thank you for <unk>.
Your first question comes from Michael <unk> from UBS. Please go ahead.
Morning, Dan Good morning, Alan.
Morning Omar.
I wonder just to start.
If it's possible to just get a kind of at current read on conditions and the lumber market Tonight, I guess I'm.
Interested in your kind of thoughts on final demand on kind of where inventory sets and then the impact of kind of transportation issues and then what seems like warmer than normal winter in terms of their impact on the market.
For sure sure Markel.
Some of those four comments or questions or for sure I mean, I think you know clearly the recovery that we've seen in North America has taken longer than we expected to start I mean, clearly I don't know, whether we all misread it or or walk, let's take a for the prices to move up like they have done recently as people are part of it longer than we expected we knew.
We felt it throughout the year that emad was increasing Oh, I think we've kind of seen that drove the year. It's been maybe slow to get going but certainly the last four or five months, it's picked up quite a bit and we're seeing that lot into Q1, 2020 days, which is positive and you know you would've seen the housing start numbers in the private owners all looked pretty good.
The only real negative on the demand side or not so much negative just really uncertain. At this time as was glad you know the CRO Iris what really what that's really going to do to supply change worldwide and really applies for both and for lumber Oh, that's something that we're keeping our eyes on everyday and every actually every minute and then of course, what's happening here in terms of some of the walk.
Okay. So I mean those are.
A couple of current issues that were faced with but overall demand I think it's been relatively good err on the supply side.
Clearly, that's taking longer to show what impact as well and I think that that's a plato really with inventory levels being a bit higher than what we would have expected them to be throughout the year. Oh, we do think we're making progress on that now what I would say now that inventory in the supply chain notwithstanding some of the supply chain current issues is relatively low occur.
Across the space and I would say that pretty much on the retail side as well as on a builder side and I think that's that's helping us as well. So if you look at an overall I think we're setting up pretty good here with probably inventories as long as had been for sometime and looking forward and looking into the into this spring here with the you know this the.
Go building season, so we should.
Should see and combined with a relatively mild winter as you mentioned market. So let's set up not to be too bad for sure I guess I'd be my comments on that in terms of transportation I mean, that's that's always a challenge. It's a challenge right now with the blockades as you know, we're keeping an eye on that we're doing a lot more trucking oh, clearly to try and mitigated as best we can but.
Yes, I guess on that I will tell I wish the impact will be.
Yeah, <unk> I guess now and I'm just asking it makes no sense objective judgment, but you know two years ago. Clearly transportation was was a big factor in the run up and I'm lumber prices I'm just trying to get some sense. If you think this is is having a material impact right now.
On the transportation.
Yeah, I don't know not all that much no.
And then just switching gears.
I wondered if you could talk a little bit about.
What's inside that 40 million dollar cost takeout program over cans.
Yeah, maybe I'll, let alan speak to that and.
Yeah no. Good good morning wouldn't know US absolutely. So this is something that a the team's been very focused on as we ended 2019, recognizing the challenges we faced.
And just as a matter of note we have been encouraged by some of the progress we've made on the on the fiber side, but as we look forward clearly motive is generated free cash flow.
Through the trough as well as obviously during the cycle. So the 40 million really is targeted a lot of Ryan increased operational reliability and all of that the benefits you got enough I'm stable production as well as well as targeting and create usage of chemicals and all feel a very much targeted on improving fiber yields as well so those are.
Those are the main themes.
And cost reduction isn't there as well liquidity motivated.
To that closeness out as well.
Okay, and then I was a you know I notice that the announcement I think kinda Croft and the other day about kind of closure because a lack of fiber supply.
I'm just curious if we look out the next two to five years.
How do you feel about kind of fiber supply for your pulp mills in up in the province.
Yes, it's a very good question I think from from our perspective, I think we clearly had some shelves to the system last year as I mentioned, a few minutes ago, when I think where we're confident here Mark is that we've made some headwinds securing.
Additional fiber supply.
Particularly in second half of last year, and we signed a lot of that fiber up to long term contracts, which gives us increased security Orion and the sawmill residuals volume in particular, but we've also been able to secure a respectable flames Oh more high cost tool kits admittedly. So we're we're feeling pretty good as we look I.
The next couple of years, we have a few contingency plans in kiss.
There is more rationalization, but right now we're feeling pretty good at by that not not contemplating any material curtailments or anything like that in the foreseeable future.
Okay and that just finally on the Oh.
On the supply side lumber was up and NBC.
Can you give us some sense of where you think we're at in terms of kind of rationalizing lumber supply so that it.
Is it matches up with available would supply in the province, and also whether you think that the lower duties.
We'll bring any supply back into the market.
Oh, maybe let Steven talk without just before we got a couple of quick things first of all you know I think as we've said all along I mean this this has been evolving over and over years right. As result of the beautiful and I think that we're going to clearly need to see more rationalization British Columbia. No question about nowhere is going to be and nobody is going to be at this stage of the game.
Not sure Oh, you know, we were not sure probably 100%, where that's going to play out.
Do I do believe that we're going to see more mills would need to shot over and above our baby operation for sure and and so that's I think that's going to happen and that's no theres no question about that and we've also got the spruce beautiful under some challenges.
Mr., Bruce Riedel, too, but but maybe Stephen you much closer to that in probably have some or add to that.
Ah shirt onto Marty Mark I mean, I think you didnt cover it well Dawn I think we would characterize it mark is that we've not yet seen.
Full impact rationalization across the BC operating landscape. So a lot of activity last year some permanent some temporary.
And obviously, we we've got more to do there we think as an industry and there is a there is certainly capacity that is still going to come out to align with the available sustainable and economically viable long term timber supply. So we would expect more that's probably about all I would say at this point.
Okay, Alright, and then just on the duty lower duties.
Although and whether the lower duties or go to allow more mills to maybe operator increased capacity as a weird.
Yeah, I don't really the issue now is not so much though market levels is availability of fiber and that's a constraint that weve never seen before and so I think that's going to be a huge limiting factor as we move forward market is going to really limit any upside opportunities to increase capacity anywhere I mean, there's just no. There's no everybody economic wherever there's a lot.
Okay, that's great I'll turn it over.
<unk>.
Next question comes.
Okay.
Please go ahead.
Thanks, Good morning, guys.
Few questions.
To start with.
Maybe help me connect the dots on the on the Q4 results. It it looks like your price realizations.
From Europe sequentially were down quite a bit more than the benchmark price it.
You quote in the M. DNA I'm, hoping you can give us some context, there and then following on that it still looks like the EBITDA margins were really robust and I gather that's partly better productivity and lower fiber costs, but I wonder if there's anything else that fed into a strong margins. Despite price is weakening.
Yeah, maybe just quickly, though the turnover down here, but I think and eat a couple of things that are.
Important as to know as we've had over the quarter.
So little Cruella cost side for sure no question about that so some of that.
But we're not calling from from that.
Definitely prices are off to some degree for sure be just fees based on partly with the what's going on globally through the through the quarter, Oh, but some of that.
Obviously lower positive now.
Similar to what's happening in North America.
Oh, so I think that.
Focus will work its been accomplished or the differences spent on a cost side.
Oh, Yeah, I think so I saw on a again, we're just starting just to tie in some of your comments around the mill nets. So certainly there was a modest reduction and realizations, but a general statement, we continue to see more moderate price movements and not not region.
But what more than offset that was the a higher production volumes. Obviously after the seasonal downtime in Q3, but very strong productivity and with a two also reduced log costs as well that somewhat reflected market conditions and not another area as well.
It looks to us that you produce your stated capacity. There is there an updated capacity number for Vito, we should be thinking about.
Yeah. So are.
Did you notice thing.
I think weve guy to close to 1.2 million board feet here for 2020 and beyond this I kinda modified cost.
Okay that helps.
On the Capex number for 2020 can you give us the split between pulp in lumber this year, Oh, yeah, it's pretty soon or to where it was for 2019. So about two thirds of is really a pertaining to to the longer segment and Ah ones are Oh.
Okay.
That's all I have freight and I'll get back into queue. Thank you.
Uh huh.
Thank you. The next question comes from.
Please go ahead.
Good morning.
Well I can you can you give us a senses to how are your our and our volumes into the big box channel has been sparing this year and maybe what sort of volume growth. They are pointing you to for for the full year.
For sure Amir I, maybe if it's okay I'll get to Kevin's really close to go to work on vessel.
Maybe Kevin Charlotte.
Our here good morning, actually we had a fairly steady year in 29 team.
Oh, no, 6% to 7% growth in volume and our outlook for 2020 is still to be that afford to 6% growth in volume.
Great. Thanks thinks like Kevin and Nexstar side was about a you know you referenced mass timber demand in India, Mdna, how meaningful could that be in the next two years and how are you positioning your mills to kind of service I growth.
Yes, so it sounds like yeah, we're pretty encouraged with the ever the development of the mass timber in that new space, especially as it into non residential and we see it as all incremental demand that we would not have previously participated in and it's going to its still early days and a lot of its.
Into like projects I get schools and a in.
Public to public structures and so while we are participating in a and B C that growing over the next two years and we're quite optimistic about that let's say.
Maybe Kevin I think that might be worth.
Two is here is around our reviewing a future Amanda Masterbrand in North America.
Even out Europe, obviously, but I. If you were ask us a soft lumber board, who does a lot of work around that as you know, we see that potentially be close to 5 billion.
Right now around walk away to 1.4 billion kind of thing. So what was really encouraging to me I think to the industry guys I speak with some areas around that type of customer base that we're having to deal with though and you start to talk about some of these global brands like Microsoft Amazon at Walmart and land lease out of Australia, which one of the biggest develops in the world.
Talking about some pretty high level customers that were all learning to deal with but you start to get that behind it like we're seeing the upside is.
Don't they gave us currently predict where it might end up here and it's not going to be tomorrow, but you think about you rollout over the next two three years, which is a timeframe you indicated it looks pretty darn positive.
First out quite aware.
Great. Thanks, Don that's a that's a that's really helpful and a and next quite just switching to the pulp side I'm. Just wondering if we can get an update on how the JV with a.
Late life Sela is going and you know just generally what initiatives side do you have underway to a increase that sort of bio products that you can get out of the pulp mills.
Yes, so it's something on its moving steadily on as you probably will notice from artists really.
We are in a Prefeasibility studies is that's where the focus is today the one the long cautionary note outlined.
Paul JV recognize more Ryan to fiber availability, just given the the landscape in British Columbia, not something obviously, though we're working through right now, but lots of positive developments and not biofuels. This to your point and were very keen to participate in a in the way that hopefully we can and forward the business.
Great. Thanks, Alan just a final one from me you know the release mentioned, you're assessing long term recovery boiler options that and North ward.
What can you speak to what those various options would be a what's sort of capital investment could be required there and would we expect to get some volume gains with that as well.
Yeah, no. So it's a good question so.
As we guided before we we are looking out longer term solutions to the recovery 400 situation that we haven't Norphlet currently we have to recovery borders there today. So they auctions included resurfacing refurbishing, both those waters or building.
Oh.
Major you boiler.
Yes. The two currently 61 set as well so lots of work being undertaken into looking at both of those options both of them our strategic long term in nature, but.
But we are planning to make a decision.
And those in the next 12 to 18 24 months near term to cost, it's really hard to put a fair number on it but.
You know depending on which of those two options. You go you could be talking anything between 150 200 million a an upwards right and so that's clearly there is we're very mindful office, we look.
This and obviously doing the right thing or the new one if we do teledyne, obviously would bring additional benefits Oh, we're still working through there as well. So you would get additional benefits attached to the higher spend.
Great. Thanks, Ellen that's a that's all I had I'll turn it over.
Sure.
Your next question comes from Paul Quinn.
Please go ahead.
Yeah, Thanks, very much morning, guys.
Well.
Hey, we expected a week southern yellow pine prices in Q4, but they seem to be continued to be week here and only just started to pick up is that surprised you Neil what are you expecting going forward.
Sure.
Paul Yeah, we did see that that we've seen pricing in Q4.
When you start looking at the southern yellow pine production, which I think is increased.
It was like 1.9% year over year and the bulk of that really occurred in November and December. So I think some of the increase applies what we're seeing some of the and the results of that and so I I think addresses some of that some of that's commentary however.
When you start looking at the breakdown of the wins, it's a it's a we're starting to see improvements on the whitestone. The two by eight to buy tend to lay 12, and a and so we think that that's going to.
We are starting to see that the last couple of weeks outside of January and I also looking forward I don't know FA, you're up a aware, but a there is some news that number out of the U.S. will be part of it you leave reductions in China and that should play out in Q2. So ray currently it's a 25% and.
Theres, an opportunity for that to get diminished down to zero or some kind of phased approach. So that should help support some of the southern yellow pine pricing as people for.
Okay. So I'm just trying to understand this extra comment.
He described exports to try to being pretty difficult given that slowing economy, there and the corona virus, but <unk> I guess would that duties coming down you expect more exports out of.
I've southern yellow pine him containers to China despite that.
Yeah, I mean as soon as they contain the virus gets contained we got some pretty good demand and interest a end customer base is actually quite encouraged with this latest announcement. So I think long term and hopefully into later into Q2, we should see some that demand and we've already got interest for orders already this week anticipation of it. So we are starting to see.
Actually translate into into commerce.
Okay. So that maybe that helps you in <unk> in the second half of the or in the short term here do you think there's a risk of of increase European imports as they get back up.
Not able to get to China and come to North America.
Yeah, I mean, we're seeing a little bit of course that European supply coming into a into the U.S. and.
I think theres, a limited to the upside on that but we're also participating in that from our operations and we see that as an opportunity to expand markets and participate in markets that we couldn't <unk> otherwise be it so.
If you think about you right, Kevin we were talking with us.
There's a lot of charter off while a little is your view of course over the life never quite fun lustful 18 oppose it out and even to the best case scenario. So 50% over was a peak. So five so it's a good acreage I probably would have still a long way off or what we've seen that had experience with <unk>.
Yeah, I would note that starts in 2005 or little bit higher than they are right now, though so.
And demand was higher.
Maybe just trying to feed a you seen prices come down, but the margin seemed to be pretty pretty robust what do you the anticipation for for 2020, given the increased.
Lumber production coming out of Europe for for the salvage side.
Oh, yes, so yes I think.
Today, I think our team our quietly optimistic I see look forward. The clearly prices are lower today, as we mentioned earlier, but.
[laughter] plant the local price gains here as we get into second quarter, and then continue into right.
For the balance of the year so.
Certainly a pretty respectable at all.
Okay, and then just laugh and lumber on that capacity, a curtailments or capacity reduction that needs to come out of the BC into your I mean, we saw material move in that in 2019, I know somewhere around 2 billion.
But oh, how much more do you think needs to come up.
Yeah go ahead.
Yeah. Good morning, Paul you know I guess.
Stayed away from an actual number in that this question earlier, but if there's still a significant components. So I think when you look at the impacts of the mountain pine beetle wildfires or some of this was Bart implications as well as you know got other constraints on base some of those Oh being announced today in terms of care, who recovery plans and stuff.
It will impact available resupply in the northeast.
I think it a were it we need to see at least another billion board feet equivalent come out and that will happen you know the timing on that will be yet to be determined but probably at least another billion feet.
Excellent okay. Thanks for that and then just maybe switching over to the pulled side you mentioned and.
They do Youve got some additional sawmill residuals secured at the end of 2019, just wondering how much volume that is in and what's the like those contracts.
Yeah, we can go into specific contract details you'll appreciate all but in total we got the equivalent of two sawmills volumes.
Fourth quarter. In addition to locking no oh current existing volume's up to longer term deals as well.
Okay, then just see the maintenance schedule on the pulse I'd, just nothing for PG pulp and paper because the long <unk> the long outage in Q3 last year.
Yeah, it's really a function of aren't getting months turnarounds.
Just a function of timing Paul.
Okay excellent. Thanks, very much guys best of luck.
Yeah.
Thank you in the next question is a follow up from <unk>.
[laughter].
Thanks.
Don I Wonder can you just help us with a central European spruce beetle.
The impact on bolt.
And potentially on North American operations, and I guess, one of the questions I have around this is is this.
Lumber comes to North America are there any limitations in terms of.
What do you can be used for could be used for any you know any building product at all what it did meet spec wouldn't meet code.
Yeah, I think youre, certainly will be less room eco than that it wasn't field, but just like we experienced here in North America going back with a beautiful.
Mostly will be for construction use right, where where we really saw the impact NBC it'll be the same for them, which actually course.
Peter.
I'll get to that a second what would be just that they sit here from an appearance standpoint.
For Jay grade, a which wouldn't probably views were but for appears grade for the home centers, what ought to be a challenge right because of that loose and checking and all the same defects that we see here I'm. So yes, with so probably primarily be used the application probably would be mostly for industrial items real creating all that kind of stuff or for new home construction or and to some degree.
Maybe some are but for the most of our those would be used for is actually.
You know because Sweden as early as you know there, mostly a small animal or is there and they do a much better driver or they do a very good job managing that that are there there are land base there.
To others because of that and so we haven't seen any real impact whatsoever from appeal than any of our operating areas and don't really expect to see any because of that and so we've got a lot of capability there as you've seen some of the numbers.
Terms, oh, the values I value side, which we always Oh, what are the things are really got us.
Interestingly in the first place is the way they can differentiate out of the commodity business right. So it's really actually for us is going to be a real advantage here for me to because there's going to be less high grade available in Europe overall, because a lot of a pass you should come from central Europe, not only from northern Europe.
Okay and then.
Got it sounded like you guys saw and pick up any kind of incremental supply coming out of the U.S. south in the fourth quarter.
I know some of the projects down there have had startup issues. So if we just think sort of.
Year on year in 2020, how much would you expect kind of that U.S. south production can go up.
Steven what are you in this work on that what are you talked to Mark Yeah sure Mark. So I mean, if you're the U.S., hoping total or accounted for a specific either for the for that region as a whole yeah. We think that a the capacity has been slower coming online in the U.S. So maybe it anticipated.
These capital projects as I think we have all experiencing there they're more challenging than maybe a you'd hope that they would be take longer to execute certainly lead times from vendors and contractors have presented some challenges down there and with the significant capacity you know ads across the industry was really that's the whole industry doing major capital.
I guess it has caused some delays for sure not only for us, but I think we're off to the industry, we're largely through our organic capital growth plans now and we're encouraged about just executing well and really giving the engine opportunity to Ron and I realize the benefits that we've expected those Ferguson, we're going to will we'd expect our numbers about four or 5%.
I think that the industry could be a in that range probably more overall.
Okay. That's helpful last one for me I would just we've had a lot of wet weather in the South recently I just I wondered if there's any impact you're seeing on kind of logging and and log supply.
Oh, Yeah for sure. It's a it's been incredibly a went down there and we are seeing some tightness in supply why overall in terms of our regions. They were pretty good shape. We've we've got adequate seems fine, but what we are seeing that pop off.
For some others down there.
Since flat.
Does that translate to log prices.
I know you know, we're pretty flat still again in our operating regions. We've got a significance or you know available supply in and our expectations are still from a modest increase in a in one cost in the U.S., so but really quite flat overall.
Okay. That's helpful. Good luck, there's your guys.
Okay.
Thank you.
A question.
That's for closing remarks.
Alright. Thanks, so operator, thanks to everyone that joined the call and we very much appreciate your support and we will look forward to talking to you at the end of Q2, thanks very much.
Ladies and gentlemen.
Hello.
We thank you for participating.
Okay.