Q1 2020 Earnings Call

Usually you with con volume.

Given the strong margin for benefited from the continued penetration of new products in the backup and pricing gains we recognize on those trucks.

Turning now to slide 10 for a closer look at How's the strategic design of our supply chain is proving to be a resilient.

Coming into the global player.

Stepping back a bit.

When we designed the supply chain for Teva, we made certain that flexibility and agility in supply, but at the foundation of our strategy.

We were successful in implementing the structure, which allow core teva to enter this crisis in a very strong position.

In the quarter the industry observed supply outages in major geographies, including China, and India due for the covert 19 restrictions.

While many companies what impacted we experienced minimal disruption given our supply chain does that.

Because typically more than 80% of our total crap.

Protection sales are supported by multi source supply that LMC, including approximately 65%, but the bloody allows us to be proactive and not only how we think about sourcing product to meet customer dimmock, but also to optimize our son.

Right and limit their risks for outages in the children. We also have stage of formulation and packaging plant, which produced a final product as close to that end use market as possible to be responsive shifts in demand.

This element along with a broad logistics supply base and strategic inventory all along the supply chain realize additional agility in times of disruption.

Another example of this resiliency.

This is in the see where North America, and Europe on deliveries increased by double digits in the quarter compared to prior year.

With that I turn the call over to Greg will provide details on our financial position.

Thank you Roger turning now to slide 11, I'll provide more perspective on the strength of core Tevas balancing act.

We are taking during this crisis.

Our liquidity position starts with an optimized capital structure and a strong balance sheet.

As a financial policy, we aim to maintain a minus credit rating to support our customer financing program, which provides a competitive advantage in the marketplace.

And our seasonal working capital needs.

We rely on a 5 billion dollar commercial paper program to fund our working capital needs in a cost effective way.

Commercial paper is just one of our interior tools and funding working capital we have access to $6 billion.

Along with a 1.3 billion dollar repurchase facility that we renew annually.

In total we have approximately.

$8 billion on liquidity, including the $2 billion in cash and cash equivalents, we have on our balance sheet.

During the quarter, we recognize periodic tightness in commercial paper markets as a result of the global crisis.

Although our ability to access liquidity in the market was not shy, we did experience dislocation in rate and desired maturities that were not optimal for our needs.

This is let us to draw down 500 million on our credit facilities in the quarter.

This illustrated how the tools in our liquidity structure our effective.

I'm very confident in our liquidity position today, despite the global crisis and the impacts that is creating on markets.

However, given the uncertainties, we're taking prudent actions to preserve cash.

It starts with working capital.

Including driving better productivity in how we use our balance sheet to support our customers.

This concludes tighter risk management of inventory production SK, you optimization and supply chain effectiveness to improve our inventory position.

Additionally, we're working closely with customers to manage collections and drive down days sales outstanding and past dues and we're seeing good progress here.

Next is cash earnings as limiting spending to maximize our cash savings for the period.

We are taking actions to evaluate R&D investments and align those investments with near term commitments and returns, but are not sacrificing investments for above market accretive growth.

In addition, we now expect their capital expenditures will be approximately $500 million for the year. The low end of our prior guidance as your organization rationalize as capital spend with cash requirements and near term commitments.

These actions on cash conservation, we'll continue to bolster our already strong balance sheet.

Moving to a discussion of our outlook on slide 12, we're suspending our full year guidance due to the global covert 19 crisis, which is creating significant uncertainty for global markets as an organization. The environment is changing daily has this crisis unfolds create.

Impacts controller business that we are unable to quantify today.

There are several key areas that we are monitoring that will ultimately impact our full year financial results.

Given our strong execution in the quarter and heightened visibility on the progress of the northern hemisphere growing season I'll provide some observations on the first half as you know most of our full year operating EBITDA is recognized in the first half.

In terms of top line growth for the half. It is led by the market rebound in North America, and the expectation to see a combined 13 million additional acres between corn and soybeans with about 40% going to corn.

We are monitoring what ultimately gets plants at this season, given recent softening in commodity price levels.

We've had good visibility on pricing at this point for the half and are confident that we will deliver low single digit price improvements in corn globally.

For soybeans, we have previously said, we expected price to be down around $50 million for the full year.

On the basis of recent soybean deliveries, we are trending favorably to that estimate for the first half and expect that U.S. soybean prices will likely be down low single digits.

New product sales in crop protection are trending in line with prior expectations and we would expect first half sales from new products to be up approximately $120 million excluding currency.

Overall organic growth in the first half is estimated to be approximately 6%.

Looking at currency, we're seeing significant disruptions in global currency.

Specifically, the Brazilian real high when we issued guidance in January we expected to use a combination of pricing and financial hedging to mitigate any currency headwinds assuming at BRL. Two you SD exchange rate of 4.25.

In April the market observe grades that were in some cases, 30% above our assumption.

Our teams are focused on executing mitigation efforts, including pricing actions spending reductions and implementing financial hedging tools. However, given the extent of currency volatility. So far this year the full year implications are difficult to forecast.

For the half, we expect an approximate $150 million of earnings headwinds from currency.

Turning to cost for the year, we remain committed on the execution and realization of our synergy and productivity commitments and would expect to recognize approximately $115 million in the first half.

For the most part our cost of goods headwinds are playing out as expected with an estimated 150 million impact for the year from increased unit costs due to lower corn yield and higher soybean royalty costs.

So the half we expect to see about 75% of this headwind in our results.

In addition to our merger related synergies and productivity actions, we are initiating targeted spending actions across the entire organization.

This is to both preserve cash and create more resiliency in our results through these actions, we expect to achieve annualized savings of approximately $100 million, partially offsetting higher commissions and ERP costs.

For the first half we would expect roughly a third of those savings to be realized.

There are more details on first half indicators in the appendix for reference.

We will provide updates on key second half indicators, most notably currency and 2021 corn acreage expectations throughout the year.

I'll now turn the call back to Jim for some final comments.

Thanks, Greg the strategy that we haven't place is clearly delivering results. While we are in a crisis. We are not swayed from our purpose to enrich the lives of producers and consumers.

In light of the current environment. This purpose.

Drilling down by a new sense of urgency and an unwavering resolve that its scope across the entire organization.

We will do everything in our power to support our global teams are cut summers in our communities to ensure a brighter future awaits on the other side of this challenging time.

I'll turn the call back to Meghan for our culinary.

Thank you can let's move on your question I'd like to remind listeners are cautioned on forward looking statement non-GAAP measure it and pro forma for national apply to both our prepared remark and the following humana.

Operator, please provide the Q1 and traction.

Thank you are we do ask that you please limit yourself to one question.

Good morning, Jim and Greg in terms of coal in the full year guidance I know, there's some certain out a Q4 results in Brazil in terms of re I have you when you step pricing or two potential.

Well set that those FX headwinds and how much productivity can you get could you get so really what can you offset from the we I imagine that November December timeframe with pricing productivity. Thank you.

Right David Thanks.

So the question and you're right the <unk>.

The concerns we have looking into the second half of your really relate to our Brazil soybean business.

And we've had some.

Delays the growers are right now kind of unwilling to commit to taking some of the early shipments that we have seen in the past. So you know we recognize the revenue.

When we ship seed so over the next 90 days. This this whole scenario, we're really play out as or.

So one of the great tools that we have is around pricing.

And once we priced that seed and working.

With our sales teams and growers to take delivery as those deliveries get delayed sometimes into October November that's really the window that we face the currency exposure because we set an invoice we've got a price to abroad or okay recognize that revenue.

Two we deliver a much later in the year. So we're evaluating other tools that we would have available different hedging tools and other tools and maybe I'll ask Greg to just saying few words about how we're approaching that part of that means.

Yep.

Thanks, David and thanks, Jim.

There is there's a couple other things I'm going out here, we have we do have some natural hedges with respect to the local Steve production that we do in a in each of our regions as well as.

Our formulation and packaging I activities that we have within the region. So that is a bit of a natural hedge and then once we are able to obtain the a the commitments over the next 90 days from our customers to take product in the fourth quarter. That's when we'll look at Uh huh.

Are you waiting mitigation.

Pools and activities as Jim mentioned.

And next summer Vincent Andrews with Morgan Stanley.

Thanks, and good morning, everyone.

I'm kind of looking at slide 14, and 15 here in Latin America, and I'm, just trying to understand.

The difference between crop protection in seed in terms of 6% price versus negative 13% currency in crop protection and 16% pricing negative 9% currency in seed. So what's the mix effects. There are white wire those numbers, so whereas the currency numbers are different first of all and then why are you able to.

So much crisis seed versus crop protection.

Yeah, great goods and thanks.

For the question.

Clearly if you havent a number of effects going on here. Some of this is related to new products strong demand for power for ultra and.

And that allows us to drive stronger pricing based on product performance.

Then we also have the new crop protection portfolio products that are launching isoclast, new insecticide that is doing quite well until we get a nice mix effect associated with that as well.

Jim what else would you at no Jim I think because I'm, a big points I mean, c., we were getting tremendous benefit for mix and new technology adoption. In this that then that's a very much having a positive impact on our results. This year. So and then we've got the national benefit of being a Bruce locally as well so it gives us hedge against currency.

Great. Thanks Vincent.

And that somebody else to Jonas Oxgaard with Bernstein.

Hi, good morning, Thank you.

I was wondering it looks like your performance this quarter vastly outpaced a your main competitor.

I realize it's some of that might be north American pulling forward and realizing the prices in a different timeframe, but even Latin American Asian, or you're still outpacing that can you give us some highlights of what's going on here I guess, there's the share gain or is it your recognition.

Thanks.

Joining us for for the question Park part of it as it is as you have said you know we deliver seed to growers on on pretty much of Oh, you know as demand are real time basis. So in North America generally this market the seasons broke early and so.

Really whether dictates mother nature dictates kind of the flow of the business you saw it in one of the charge that are the Tim when it was mentioning were just in the last three days of the quarter. We had mid 100 million dollar dollars' worth of deliveries of seed in North America. So it starts with the story around the season.

It's really been favorable and we've gotten off to a great start based on time, but then I would add you had been intensity and a focus that our teams have had around the world you saw it in our momentum that we carried through the fourth quarter of 2019 Uh Huh.

It rides on the back of one of the best lining up some portfolios that I've seen in my time with with the business both in seed and crop protection.

It was also a and intensity and a focus on value.

And so we had our teams out there I'm focused on pricing for delivering on the value equation that we had.

And then as we said we'd made some key investments in markets around the world interchanges of our route to market. So that were more and more focused and and more connected to customers. So you know you know time like this where where this crisis has unfolded I really believe that that business model that route to market model is paying off.

In any huge way because we have a connection.

And the ability to react in it and agility that the way others go to market may not quite cat, Jim what else would you add to my comments I think he touched on the you know clearly execution in new technology every part of what we don't support.

The performance of or that here I think there. The question goes around market share or when I would tell you is I think it's a little bit early to call them right now just because the uncertainty than we have a way in terms of what the final planted acres of the so that'll be a something that we're going to continue to watch what we felt is very good about the.

Or book of business throughout the year, we hear a lot of positive momentum in many markets coming out of 20, Nike and it's set up for a new can really good start to this year and I would say generally are from performance overall I'm not just with new product technologies in crop protection, but in terms of the performance relative to the competition.

He has been really outstanding and been well received in the market. So.

We feel good about where we're at its too early to call he and and what we're anxious to a two a continued to deliver a especially in the northern hemisphere as the markets play out here in the second quarter.

Thanks Jos.

Hi back so my guess is a coffee <unk> tea marker.

[noise] I'm good morning itself <unk>, how many.

Hi, good morning, great.

I'm in terms of <unk> cost reduction programs. So you know you cheese, taking a 70 million I'll say 23 million you're trying to achieve can you tell how much of that is what else savings that are associated with like the shorter term programs you put in place to I'm cancer travel and delay nonessential hiring.

And I'll have to 230 million that you're targeting this year drifting bid on Yelp These savings will be.

Yeah headwind in 2021, because some of these initiatives are really shorter term in nature. Thank you.

Oh, great Great question. Thanks, It clearly, we really have three things going on with some of the spending reductions. We have the continues the continuation of carrying forward on the synergy programs that we've had in place. So so there's a there's a part of that that is still continuing to show up and moved and we're committed to not only this year.

But finishing out that overall commitment next year. So there's some durability in those savings as they rule is we continue to roll those through.

Then on top of that there's the new productivity program that we've announced or execute when initiatives that is beginning to drive some cost reductions associated with those productivity areas, you'll you'll be familiar with some of the the announcements that we've made around some additional restructurings globally to take advantage of that.

But the third there's no doubt that there are cost savings that are beginning to show up here the into first quarter and we'd expect to see more in the second quarter that are associated with the crisis. That's the stance that we've taken around working from home. So travel was much lower.

We certainly I'm, taking up a very hard look at that hiring through the remainder of your marketing promotion in or advertising spend are also being affected some of those costs you would expect it to return a little bit in into the next year, but by and large we're taking a real quick look and all of these expenses and.

What we've learned a little bit through this crisis is Ah we found some new ways to work some new tools to work and I expect that many of those costs will be able to count on has continued savings you're years right anything else that you would add to the explanation yeah I just want to.

At the I would separate the the 200 of synergies the 30 million of productivity you know that was in our plan and we're executing against that plan.

This is an incremental 100 that Jim talked about that doesn't result, as a crisis in specific actions that that we're taking that Jim mentioned, we're gonna take the opportunity to try to sustain as much of that as possible on it into a into 21 and beyond but.

Some of those costs will return as a as things come back to normal.

Thank you.

Mmm to kill Jackson with <unk> capital markets.

Hi, good morning.

Question, because it's like a second derivative butter me Abu Passthrough asking about at the last two months. So you know the 2021 set up in the late twenties set up. So you know if we get trend yields here and it's good crop in the U.S. and and the like corn ethanol are doing you know maybe you can talk about what you would see zeros for you know lower corn acres in 2021 and.

The U.S. how that could play outside for your Q4 degrees here and then how that study into threed intent to pull the full year guidance. Thanks.

Great Thanks, Joel or for the questions. So yeah. Apart part of the reason is before for that there is some uncertainty around to set up for 2021 and that has an impact on our fourth quarter shipments up seed both the retail brand. The we have been.

Shipping we see some no earlier than our normal first quarter shipments that show up in the fourth quarter and you know we're continuing to drive.

Our product portfolio and performance to try to get some some advanced sales out there. So it's the uncertainty of that corn market that that were really watching you know you've got a few things going on there you've got the ethanol demand situation. So we'll have a large harvest, we believe coming off this year and not having that ethanol.

The man to begin to take up that crop depresses some commodity prices on the opposite sides of that you have China and the purchases that they're making and we're seeing strong indications by China today on on what those purchases could could look like.

When we sit back and take a macro look at it our our assumptions right. Now is that we can see us five to 7 million acre decline in corn.

And so that it's little early to call that but but that's our working assumption right now.

If any.

Tim anything else you would add to that I think a you know Jim I think I think you're spot on I mean, we feel really excited about where we're at right now because we've got over half of the U.S. corn crop planted we got about a quarter or the the soybean crop, but you cant remember we've got I get this crop harvested and produce throughout the season in plus we've got two seasons in Brazil, We've got ace.

For corn Caesars spring season, and then we got the second so previously used in all there before we would even plane ticket.

Yeah, I agree with your Jimmy indications wouldn't would indicate a lower corn acres for next year, but it's still within that thing your range that weve operated in and you know we over a 10 year period, we've been in that 28, or the 97 million range for corn. So we're still in that singing.

Range or maybe just slightly below average over their tenure horizon. So we got a lot in front of those and clearly the economics of the crops are going to dictate as well as policies are going to have huge impact that a better to play out over the course of the year yeah.

Thanks, Thanks Joel.

Oh, I'm about to Adam Samuelson with Goldman Sachs.

I guess, thank you good morning, everyone I'm, Adam was hoping to get I, just any incremental color. It doesn't get a lot of discussion today around in less than kind of market performance. A is that now commercially in the market. It sounds like you're maybe a little less negative on so I see pricing and then you are.

In late January so just help us think about that and then just a clarification I think there was a comment.

Around North America crop protection as being a lower kinda value corridor. So there's a margin mix headwinds, but there's also an illusion just strong.

Enlist sales in the period in North America, and the slides and French fries, which I heard that right and reconcile that.

Great. Thanks, Thanks, Adam maybe I'll start with a high level, Alaska tend to talk a little bit about a then list and how we're feeling about that line up and.

And then and then maybe a rather than talk a little bit more about the fun part of that question from a pricing perspective, you're right, we're feeling a little bit better about the discipline and the focus that we've had a with our soybean prices in North America, especially we we had guided as as we entered.

It into 2020 that it would be a competitive market EM and by and large we've seen that at the same time, we deployed some very strong internal pricing disciplines that that allows us to manage our discounting was a much tighter controls that we've had in the past.

And so that's where we would estimate as we sit here today that will probably do better insight pricing than we originally planned and that's I think a real tribute to justify the internal discipline that we have out there. We still have a lot of that market ahead of us only about 40% of soybeans of our soybeans shipments have been delivered Uh huh.

Sure and that'll that'll play out by March through the rest of the quarter you want to talk a little bit about and list Oh. Yeah. This is on the pricing I just want to close out there, saying, we do we were going to go into a really competitive season. I'm. You know we had we had other players in the marketplace.

Indicate that really are with how many how they started the year. So we took extra steps to make sure. We had a strong process in place so that we'd be manage those discounts internally really good strong internal disciplined and you know I think I think why we feel good and why we've been able to maybe he or she gets reduced what we thought the discounting.

Might be as he is really I think a testament to the strong performance that we got and effect that we're carrying over I think relative to the competition. We've got the strongest a portfolio products in the marketplace in customers are supporting that so I wanted to reinforce that on price and redrawn any any comments around and list. When you know staffing list as well as a hard product lineup in the first quarter.

Sure Jeff tanks have done by the question. So they look to enlist up yet on track actually very excited about the launch here. We had said that about when people. Its end of the market would be enlist soybeans up that thing that data on track to deliver that as a part of our portfolio and the whole adoption of the technology, there too, but the demand for it.

This whole decides to do the because there will have that they've been shipped thinks they bumped also looks they are exciting. So we are on track for delivering against a bomb in sub inlet. That's true here, obviously, but what we're talking about with US and listed seen soybean, but we continue to go see good progress on that in cotton across the Globe me up them up opportunities. If you look like.

Enlist so the whole enlist system is on track to deliver a linked to the question on the crop protection a margin in the first quarter.

You are right up you mentioned that up if you think about product mix a lot of odd new product launches that the margin expansion is that you start seeing them in the second quarter ended the second half a in the fourth quarter than it does primarily in North America club it'd be have the hub beside business that people got good differentiated products, but the margin on those.

Lower than a new product ramp up because we have I would think the unfortunate digital dilute that we are on track for delivery against our crop protection new product launch up opportunities that we see that so I'll just start I reinforce that great. Thanks. Thanks Adam.

Oh, Okay, John Roberts, Yeah, Yeah.

Thank you [laughter] I believe the bundling incentives are recorded completely in the crop protection segment.

For the revenue that was involved how much was that total revenue in call and customers. It took advantage of bundling so far.

I was that split between seed and crop protection.

Yeah. Thanks, John for the question and you're right you do you do you see in that crop protection margin discussion. In addition to the mix that that Roger on just mentioned, we do have some of those incentives that show up against.

Protection revenue here in the first quarter will will benefit against that as those products start to flow growers started to take delivery of those of those he purchases. We are excited about the a the opportunity to work with a grower to understand our availability of that we're talking about eight.

Are we call. It so we get it we get this there's a seat opportunity we get to see treatment opportunity, we get herbicide set up a and then is the season unfolds additional insecticides and fungicides in row crops here, primarily in North America. We had wants that program last year and saw some in some initial successes but go.

We're really excited about some of the early successes, we're seeing now as we get into the season anything else you would add to that Rajan no. Jim I think you covered the main points. The one thing, which I would either that very excited about how this program is going to continue to evolve because one off on the good growth opportunities this will make sure.

That the crop protection business and how we have the footprint on the same site and come together now the way. The program has been administrated. It didnt have a pricing back I'm, a little that incentives for the fourth quarter, but didn't thumbs up although growth prospects as this gets sorted out again for the second season, there very optimistic about how we're going to had both out of business.

Thank you need to move up.

Thanks, Don.

And we'll hear from Duffy Fisher with Barclays.

Yes, good morning.

I was having a hard time just bridging into Q2 because last season was so late this season was so early just to get that split right.

If I take your 6% growth in the first half.

That would be about an increase of about $550 million year over year for the half you did about that exact same number in Q1. So that would lead me to believe that sales in Q2 are flat excluding currency. So one is that fair into if that's still level, how should we think about margins.

This Q2 versus margins last Q2 again, excluding currency.

Oh, Thanks, Duffy, you're you're you're you're right on kind of how those those sales are flowing kind of a year over here.

Again, we did carry some good momentum coming out of fourth quarter into first quarter and you see that the market recovery.

That we expected in North America, as we saw that 30 million acres of corn come back into the planted area. The other thing you have going on is our pipeline as Raj I mentioned, we start to see some of our newer products, that's showing up more in the yes in the second quarter. So right anything else you had a two to two the margin question yeah.

Absolutely.

Yeah as you a as you take that that a topline down to EBITDA, a there isn't a currency impact and that does translate down EBITDA as well, so so that that would or wouldn't be a negative, but but but the as we mentioned earlier. This additional spending actions that we're taking.

You know, resulting from come in 19, working from home, reducing or reducing travel and reducing non essential spend all of those actions are going to help us further offset some of that impact as well.

Thanks, Doug.

Okay.

Hi, Baxalta PK car was pretty good.

Yes, hi, good morning, good to hear from you.

I'm going to Jay.

You know you mentioned a couple of things about increased cost one was.

Then could you see the caused due to unfavorable yield from last year. So can you talk about that and then second one one higher royalty payments I, probably put roundup ready two what was the impact of that and then just related to these royalty payments, what's the long term opportunity for core people I could reduce your pay.

Payments to buyer and that's one of the key parts of.

Your Tcs what it many investors I just can you address that thank you very much.

Great TJ curfew, yes, we had guided as we as we built our plan for 2020, you know we guided that we would have some higher costs related to yields that we saw in 2019 and those are essentially unfolding exactly as as we expected that they want so nothing new there.

Those are those are flowing through about like we thought the royalties you mentioned in our plan for this year there about on track with what we expected. We're gonna have the units of Roundup ready to extend we had some slight adjustments, though as you you know we made to the announcement back in January of our successful.

The science evaluation of the enlist Ethree system.

And made a commitment to more aggressively ER launch in ramp up the enlist and that had a slight effect on our royalty rate is as we take up a tick up those costs into Cogs. The the final quite part of your question is a good win and I'll I'll start maybe asking I was trying to say few other words, we we know that.

As we pivot and bring the illicit trade in convert our portfolio from roundup ready to extend to enlist ethree Ah that there is a dramatic reduction in the the royalty rates are there that we pay to today, it's the timeframe by which we can make that conversion that we're still understanding.

But through the mid to late twenties, we ought to we ought to be able to rotate ourselves completely out of roundup ready two standard favorite unless or anything else rush on you would add to update.

I think good you hit it on the nail on the Hey, the one thing to clarify is that in could easily definitely limited only to that roundup ready to extend spike up out of business and that doesn't that string you would feed that nor do they changed but that really excited that BJ about the whole example, up enlist and that creates another opportunity.

But I still get royalty income coming in and I think I'd just point of time, we mentioned that 20% of the it says I'm going to be soybean and that in licensing. Unfortunately also continues to unfold and Frank. So if you have on track for than it was Greg anything else you'd add on one royalty yeah. Just so just a couple of things number one that.

Roundup ready to extend royalty largely it's going to impact the second quarter.

Because our soybeans are are typically delivered a more into the second quarter, there's only a little bit in the first quarter. So so just from a timing perspective keep that in mine secondarily. This increase in royalty rate. It was a noncash expense and is a it's an increase.

To to the cash rate because we're amortizing over over a shorter period of time. So it is a non cash rotating stuff.

Great. Thanks BJ.

Oh, My God, Yeah, right, that's why Nelson with RBC capital markets.

Good morning, Thanks for taking my question on parallel I just wanted to go back to the outlook for 2020, so arguably a FX is it's definitely a variable and then the back half of the here and Latin America and other regions are also variable.

And the destined to those two items I guess, what else would you call out as some things here and kind of particularly watching or particularly yeah has emerged as as greater concerns within the last a quarter or to back.

Great. Thanks for the question. It really is those there is two major factors. It's it's it's FX.

Rates related to our fourth quarter, Brazil, a business and we feel really good about the set up for that suffering you market and no one and our product performance and the banville seed and crop protection looks looks really good. So the demand side of that equation, we feel good about it's the.

It's the FX effect of about 30% of our revenue that we deliver a from Brazil and the second half of the year. The second element is related more to kind of North America demand for our seed shipments in the fourth quarter as we begin to take orders from growers, we began to book business and our seasonality.

It's actually overtime as we've we've launched our retail brands and Dunmore and retail or we see demand for corn show up in fourth quarter, and we'll just have some uncertainty if but as Jim mentioned, if if we saw five to 7 million acres of corn come out of the market going into next year still on AD.

Average about an average season or down around that 90 million acre 88 to 90 million acres. So it's not a not not a huge downside it's still more of an average season, but it is a change year over year and so we want to understand that demand change in that uncertainty before before we true up that guy.

And my last question today will come from Chris Parkinson with credit Suisse.

Great. Thank you very much can you talk a little bit more about a year chrome ramp I, just what you're hearing initially come customers and your penetration expectations for this year and then just you know over the intermediate term, let's say 21 22, what's the best way to think about that thank you.

Great. Thanks, Chris Tim you want to update on from from Crimewatch has been very successful and we've talked about.

You know essentially converting around 70% of our of our triple stack liner into from a this year and we've successfully been able to do that so I think what you see over the next two years, Chris is that it basically replaces the other triples and will become the standard chronically we offer.

And then that certainly across a across North America. So.

In terms of a contributor to performance and he was a contributor to a first quarter and it'll be contributor the first half performance and really helped us capture some price in value in the marketplace in it in a tough challenge a year so were excited and.

It is a very low receipt and it will become our standard going forward playing out about like we've done.

So with that I want to thank you for joining the call. We appreciate your interesting for example, and on behalf of the entire cavity and I really wish you good health and safety.

And that will take place today's call. We thank you for your participation.

[music].