Q1 2020 Earnings Call
[music].
[laughter] Corning and locum Tenens PPG industries first quarter 2020, earning conference call. My name is Alyssa and I will be your conference specialist today.
All participants will be in listen only mode. So do you need assistance. Please check my conference specialist by pressing the star keep followed by zero. After todays presentation, there will be an opportunity to ask question.
You asked the question you made press Star then one on your telephone keypad to withdraw your question. Please press Star then too. Please note. This event is being recorded I would now like turn the conference over to John Bruno Director of Investor Relations. Please go ahead.
Thank you and good morning, everyone. Once again this is John Bruno we appreciate your continued interest in PV and walking into our first quarter 2020 financial results Conference call. Joining me on the call from PPG Art, Michael that Gary Chairman, and Chief Executive Officer, and Vince Morales Senior Vice President and Chief.
Financial Officer, our comments relate to the financial information released after us equity markets close on Monday April 27, 2020, I won't mind I will remind everyone that we have posted a detailed commentary and the company presentation slides on the Investor Center of our website PPG Dot com.
The slides are also available on the webcast site for this call and provide additional support to the opening comments, Mike one Vince will make shortly following management's perspective on the company's results for the quarter, we will move tweak today's session. Both the prepared commentary carrying discussion. During this call may contain forward looking statements reflecting.
The company's current view of future events and their potential effect on Pbds operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ the company is under no obligation to provide subsequent updates to these forward looking statements.
This presentation also contain certain non-GAAP financial measures. The company has provided in the appendix other presentation materials, which are available on our website reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures for additional information. Please refer to ppgs filings with the S.
Now, let me introduce PPG, chairman and CEO, Michael met Gary.
Thank you John and good morning, everyone I'd like to welcome everyone to our first quarter 2020 earnings call.
First and most importantly, though I hope you in your loved ones are safe and healthy.
Before you have we experienced a crisis as broad as the coven 19 pandemic.
PPG operates in more than 70 countries around the world and every community where we operate has been affected by this virus.
We have 12 factories in China with one located and move on.
Our PPG people have been managing through this challenge since January working around the clock to protect our people and our customers.
Throughout this crisis, we frequently hear about PPG employees going the extra mile at work and in their communities I could not be more proud of our employees around the world, but worked tirelessly to keep each other safe and healthy throughout this unprecedented time.
And our locations that have remained operational we have and will continue to employ stringent health and safety measures, which are at a minimum in alignment with the local health and government guidelines.
From a business perspective, we will not know the full impact of the pandemic on PPG for some time, but we are working with urgency and have taken proactive actions to limit the impact as much as possible to employees customers and shareholders. While also continuing to support that communities and support agencies and need.
Given the breadth and urges community needs, resulting from the cobot prices.
Jay has increased and accelerate our charitable contributions around the world.
Last week, PPG, and the PPG Foundation announced plans to contribute more than $1.5 million to organization supporting the immediately community relief efforts and emerging recovery need.
It depends on mix.
We're also donating personal protective equipment anti bacterial coatings and other resources, where health as needed.
Contributions will touch each major region, we serve.
We believe that even as we respond a difficult market and business conditions is vital to remain in active partner in our communities and help our most vulnerable neighbours at this critical time.
Now, let me turn to our financial results.
Last evening, we reported first quarter 2020 financial results for the first quarter. Our net sales were approximately 3.4 billion and our adjusted earnings per diluted share from continued operations or $1.19 cents.
These results include a significant impact on the business interruption caused by the co bed pandemic.
We estimate that our sales and earnings toward.
Per diluted share were unfavorably impacted from the effects of the pandemic by approximately $225 million.35, respectively.
For the first 10 weeks for the quarter, excluding our business in China.
Most of our businesses and major regions were performing at least at the financial expectations. We set in January.
During the second half a March we saw rapid and wide ranging deterioration in global demand.
Many of our large OEM customers were forced to shutdown.
A number of architectural paint stores were mandated close or materially alter the way they service customers.
And miles driven than the number commercial flights fell sharply with many countries and states imposing stayed home orders.
Materially impacted demand of our customers products and services.
And then a matter days led to a quick and steep decline in sales for our automotive OEM.
Automotive refinish aerospace and certain parts of our global architectural business.
These lower demand levels have continued well into April.
We took immediate decisive actions to help mitigate the lower sales activity, which included across the board salary reductions with our senior leaders impacted the most.
Temporary shutdowns of various manufacturing and distribution operations.
Temporary employee furloughs reduced spending across all businesses and functions.
We also deferred many non essential capital expenditures.
While many of these actions were difficult they are necessary basis, a breadth and uncertain duration of the crisis. Many of these mitigation actions were implemented during March so only had a modest impact in the first quarter. We expect these mitigation.
Actually the have more meaningful impact in the second quarter.
From a liquidity perspective.
Record level operating cash flow in 2019, and historical disciplined approach to capital allocation has our balance sheet properly positioned that whether the crisis.
We will review more details on our forward looking expectations on a few minutes, but let me quickly summarize the results for the first quarter.
In aggregate, our net sales in constant currency were down 5% compared to the prior year.
Sales volumes were down 8% with about 6% of that decline estimated to be associated with the pandemic.
Our selling prices were up 1.4% higher with broader increases in our performance coatings reporting segments and more targeted activity in industrial coatings.
Flat net sales were negatively impacted by unfavorable currency translation, a more than 2% or about $75 million as the U.S. dollar generally strengthened versus other emerging and major currencies.
We expect unfavorable currency translation to continue into the second quarter.
And be in the range of $130 million to $150 million based on recent exchange rates.
Looking at some of the business trends in the first quarter and China sales were down about 30%.
Most of our end use markets experienced significantly lower demand, including automotive OEM or regional builds were down about 50% and first quarter.
Since early March in China, we've seen a measured recovery in demand patterns, our factories in China have been running at 70% to 80% of capacity utilization for several weeks moving closer to our 2019 levels and mirroring the needs of our customers demand.
We've also learned a lot for the restart in China, which will be able to leverage and optimized as other countries are beginning to restart their economies over the coming weeks.
An aggregate <unk> <unk> region sales volumes declined by high single digit percentage compared to the previous year, driven by a lower demand and most and use markets to the pandemic.
The automotive <unk> automotive refinish and industrial coding business experience steepest declines, there's a customer shut down.
Through mid March organic sales were slightly higher compared to prior year and the architectural <unk> coatings business, but then fell sharply as many countries in southern Europe, including France mandate enclosures or retail paying stores.
Architectural business and northern Europe.
Perform salary for the entire quarter and I protect them, a marine coding business and modest sales volume growth reflected that unfortunately businesses are linked cycle in nature.
And the U.S. in Canada region sales volumes were down in mid single digit percentage, including the unfavorable impact on the pandemic.
Sales volumes were strong in certain in use markets, including our packaging and architectural D.I. why it's going to businesses, which we believe both will be more resilient through this crisis.
And the U.S., the automotive Oh, we and refinished businesses, where most impacted by the pandemic than the first quarter.
With the vast majority this <unk> impact occurring in March.
Finally in our Latin America region sales bondage, where modestly lower down a single digit percentage as a pandemic had left impact on this region during the quarter.
We saw a positive sales volume growth in both packaging coding and Mexican P.P.G. <unk> businesses during the first quarter.
During the quarter about 25, new concessionaire stores open in Mexico, bringing the total to approximately 4800 stores, which I would remind you has a much higher variable cost structure.
[noise] ferment earnings perspective, our first quarter adjusted earnings per diluted share of $1.19 cents is lower by 19 cents compared to the prior first quarter.
As I said earlier, the estimated impact them covert 19 reduce our adjusted U.P.S. by 35 cents.
Despite our sales buying as being a lower by 8%.
Oh gross profit margin rose to 43.5% or 70 basis points higher on a year over year basis.
It's really supported by higher selling prices.
Continued excellent progress on cost savings from Atlanta, previously announced restructuring programs.
Unfavorable foreign currency translation during the quarter lower earnings by more than $10 million, which is impacted by abroad number occurrence she's evaluating against the dollar.
Leading the Mexican pay so that fell by about 20% in the quarter.
Now, let me ask Vincent provide some commentary on I liquidity position and some thoughts of the second quarter.
Thank you Michael.
Echo Michael's comments I hope everybody is healthy and remaining safe.
With regard sort of financials first let me discuss our balance sheet.
Because we've discussed many times on these calls we have a conservative approach to managing our balance sheet, which is especially important during these times.
There's a quick reconciliation Oh remind everyone that we ended 2019 with approximately 1.3 billion of cash and short term investments on hand.
We supplemented are beginning of the year cash balance with an 800 million dollar mid March borrowing from our revolving credit facility.
As barring was completed out of an abundance of costumes and our expectation of uncertainty in the debt capital markets.
We subsequently ended March with an elevated cash in short term investments balancing by 1.9 billion.
Including the 800 million revolver proceeds.
[noise] as we recently reported in mid April accompany on it into at 1.5 billion 364 day term loan and utilize the portion of the proceeds to fully repaying the revival boring with remaining 700 million and proceeds further supplementing or quarter in cash balance.
The company's 2.2 billion dollar revolving credit facility.
Who's currently I'm drawn.
The strategic actions provide ample liquidity what does this crisis for an extended period of time.
[noise] also during the first quarter for commercial teams heightened their focus on cash.
As a result, we load of working capitalism per cent of sales by 120 basis points first the first quarter of 2019.
[laughter] 'cause included strong.
Quarter ran accounts receivable collections.
In a rapid response to lowering demand through the minimum <unk> seasonal women to rebuild.
With regards to receivables, we did increase our bad debt reserve during the first quarter, reflecting uncertainty regarding the breath of the crisis in eventual customers liquidity, especially for many small customers globally.
Today through April the near the end of April we haven't experienced any unusual bad debt trends and we will monitor this reserve accordingly.
And the second quarter, we plan to continue to optimize our cash and overall liquidity.
With respect to working capital, we expected drawn down or finished goods inventory and are dramatically minimizing the purchases of raw materials based on our reduced manufacturing operating rates.
It was reflects the current lower codings demand we are experiencing.
[noise] with respect to cast uses as Michael mentioned first with capital spending and we are differing all non essential capital spending and currently anticipate full year cap x. in the range of $200 million to $250 million.
Second we remain committed to rewarding our shareholders dividend payments.
<unk> 16 or board approved of 51 cent per share dividend to be paid in the second quarter.
Next we will continue to look to optimize or short and long term for that portfolio basis. The capital Denmark. It's we've created flexibility to access these markets at the time of are choosing.
Yeah.
Finally, given the low level of commercial visibility. We're currently prioritizing maintaining apple equality over acquisitions and share repurchases will continue to monitor you have to turn on environment here.
[laughter] turned back to Michael how we're going up the animal we are expecting commercially for the second quarter.
Because we look ahead overall, we are currently experiencing continued expect global economic activity, so significantly different tracks in the second quarter.
When we then anticipate moderate to me an improvement from this lower base level demand as the year progresses, and there's economies began the process of getting restarted.
[noise]. We've we've provided in today's presentation materials are expected qualitative second quarter and pay some recovery expectations for each of our cousins businesses.
He's expectations are based on our past experience.
And what we are currently hearing from our customers relative to their potential to restart <unk> <unk> an hour midterm order books.
[noise] overall, we expect Arguer hit coding volumes to decline, 30% to 35% of the second quarter.
Shutdowns continuing throughout April in a large portion of may.
Measured start up of activity later in the quarter.
These estimates are obviously based on when we know today and will likely changes the quarter progressive.
However, we wanted to provide as much real time information is reasonable to the investment community.
Highest rates of demand declined will be in the U.S. in Europe.
All of my Latin America.
Really offset by the early recovery underway in China.
Because he said on the presentations five we're expecting the packaging coding architectural D.O.Y. protective emerine codings businesses to be more resilient.
Also some sub segments in the general industrial business are expected to be resilient or even possibly grow.
However, this will be more than offset by weak demand another general industrial some segments.
Activities Alot declined in trade or professional painting.
And very weak demand and automotive refinishing automotive over yeah.
Aerospace New building after <unk> sub segments are also very weak, partially offset by growth and military which represents about 30% of people use airspace systems.
A few data points and then like those with regards to these assumptions.
Global industry automobiles are expected to be down to 50 per cent year over year in the second quarter.
We do expect bluebottle builds to begin to recover from this very depressed level much more quickly than other end markets.
<unk> currently in China.
<unk> be done notably for the full year.
Well, it's packaging Codings architectural D.I. why have experience strong marches star from March excuse me and good April demand.
Matching similar trends that occurred in early.
2008, 2009, great recession.
[noise] well staying home mandates currently in place in many countries miles driven is expected to significantly follow your every year.
The entire second core.
Many of our body shot customers in Europe, and the U.S. had been operating in less than 50% of their <unk> capacity for the past four to six weeks.
Architectural trade in professional painting is currently impacted by the regional economic slowdown.
And after and this will initial serves as the original quarantine mandates are lifted demand is expected to remain somewhat subdued following more of a w. shaped recovery.
About 34% professional retrain painting is for commercial or non residential activity.
Maintenance represents the majority of this activity and we anticipate we'd commercial maintenance with many of the larger key and use markets such as hotels and hospitality.
Retail restaurants office complexes universities in airports likely differing painting.
Start a new build commercial projects will continue.
Expecting her pocket of activity once he's inflight projects are completed likely later this year or nearly 2021.
[noise] with regards to residential painting, which is about 70% of overall demand.
The largest portion is also repaying and some portion of this will likely be the first or canceled.
This includes the effects of social distancing long within consumers repairing their individual balance sheets.
We also expect to have a knock on effect and slow new home construction. After the current in process construction is complete.
[noise] as I stated earlier, if somebody's lower trade business impacts will be offset by higher D.I.Y. similar to what happened in 2000 on.
Also, albeit still very small we're seeing triple digit percentage increases in digital use by consumers.
Strategic move to more of a delivery model for architectural painting being validated as most in the industry are now tied in this in the primary fulfillment option.
[laughter].
Finally miles flown globally or down dramatically and demand for aerospace products as heavily impacted.
Especially in the after market.
Also some of our Oh, we m. customers are beginning to resume production, but delivery rates are expected to be lower than precrisis levels.
And therefore, we expect an extended recovery timeline in our commercial airspace, we EM and after market businesses.
In addition, we include some details when we're currently experiencing during the early stages of the China pandemic recovery in our presentation materials.
[noise] regionally demand continues to improve in China, and others is expected to return to growth and the second half of 2020.
Consistent with the timing from the great recession. Your your automobiles in China are expected to be comparable in the second quarter.
And retail auto sales, increasing on a sequential basis now for a number of weeks and approaching levels close to 2019.
Other n. use markets in China or in different stages of recovery, but all are directly improving.
Also data shows the traffic congestion to China is nearing 2900 levels, which should a demand for auto refinish.
Finally were we provided US further reference are aggregate coding segment earnings trajectory during the great recession.
During the desk for that recession, which was the first quarter of 2009 recordings earnings decline about 66% on the volume decline of just over 20%.
The current shape of this pandemic related economic crisis is broader.
Even at the abrupt near full stop.
Certain economic activity, which is why we expect volumes to be down 30% to 35% and the second quarter of 2020.
[noise] as Michael mentioned, we're continuing to aggressively manage all elements of costs within our business.
Actually are variable consumer variable costs.
Me two thirds of our costs structure is variable or semi variables.
Oh, so we continue to execute against our restructuring programs and expect about 20 million incremental.
Savings to be realized in the second quarter.
We have accelerated many of the actions in these programs and now expect to achieve higher savings for the full year of 2020 about 80 to 90 million.
Continue to closely monitor the macro economic environment.
Be fully prepared <unk> implemented for the cost reduction actions if necessary.
Our target is similar to the 2009 time period, where we actually the gray recession.
It was as much stronger company.
Finally, do the high level of uncertainty and lack of midterm visibility we have suspended all financial guidance previously provided.
Now turn it back over to Michael for some fine or five.
<unk>.
As we look ahead in the coming quarters will be faced with an evolving and uncertain economic environment.
Too early to predict it full picture.
Back to the current virus.
I did this uncertainty, though we continue to carefully reduce can manage costs and focus on cash generation.
Identify additional weight to simplify and streamline the business processes and work with our customers to meet their needs.
The environment again to stabilize we'll we'll have opportunities create more value and fully leverage our scale for the benefit of our shareholders customers and employees.
I'm confident that our team will deliver by using our diverse global footprint and continuing our focus on cash margin management and earnings.
[noise] why we will be prudent and the first some capital expenditures, we are continuing others that will help us support feature organic growth.
In addition, we remain committed to research and development investments and new technologies, and Digitization, which has proved to be effective with our customers as we exit this crisis.
Most importantly, however is that P.B.G. people are committed to operating safely and providing the products and services that our customers account on that is what inspires us and we call it that P.B.G. way.
It will continue to prioritize the safety wellbeing of our employees and support that communities, where we do business.
Finally, as I recently stated during an annual meeting at the center of our company's purpose statement as a commitment to protect and beautify the world today. The word protect is taken on even greater significance to all of us.
Bare focus on protecting our people our customers and all of our stakeholders I'm confident that with the continued efforts of our people around the world we'll get through this unprecedented time together. Thank you for your continue competence M.P.B.G. This concludes they're prepared remarks and now list that would you. Please open the line for questions.
We will now be cannot flashing their names or something yeah.
Die then line on your <unk> sound.
Yeah.
Oh, yeah, they got their hands have to fly pressing me Keith.
Oh your question <unk>.
[laughter] Hopkins today kind of fun game. It tag later, Thank you Bang. Please go ahead.
Thank you good morning.
Well events, how can we think about detrimental margins are both in Q2, and then it back half the year or they were quite high and Q1, I suspect I'll behind cute too, but perhaps lower in the back half the year.
Warning David How're you.
Events, you know I think one of the markers I look at is what we provided in.
And the earnings information relative to Q1.
We had a nice about 90 million lower up segment earnings.
225 million lower sales for the segments. So the detrimental margins there were a bit more than we're accustomed to but but they reflected the someone nontraditional rapid decline and demand.
You know <unk> a couple of points. We we do have that I mentioned I variable cost model may have our businesses.
As we look at Q. too, though just due to the nature of this crisis. We did we are effectively paying our employees for those have been furloughed for their first two weeks. So it's kinda temper somewhat our ability to to react to the lower demand on the cost basis.
<unk> also given the staggered timeline of recovery by each of the regions.
Some of our businesses no aren't able to as aggressively man or some of the costs holes, because we need a little support has China starting back.
With all that being said I think we're hoping to do better than what we doing two one relative to the detriment David.
So we're targeting.
A better.
Sacramento into two than we had Q1.
Very helpful and Michael Jackson back half year, if the gate the case recovery occurrences you expect.
What do you expect the 30% plus line declined cue to to be cool could they be cut in half seen Q3, perhaps down 10 to 15 per cent every year.
Well, David I think it's a little early to predict that.
We see a lot of positive signs in China now of course, China has a lot more ability to to control their environment than we do here in the states you know they have apps that allow people to say that they're a good to go into restaurants, whether or not we develop anything like that here in the states will be open to.
Further discussion, but I would tell ya.
Thing I see in China miles driven or up flights in China are more full every day, there's more <unk> China flights. So I see a lot of positives, but I think is just too early to predict that.
Thank you very much.
[noise] next question today comes from 10, some things hobby I can't eat there. Please go ahead.
Yes. Good morning, Thank you and I hope everyone's doing well.
We are in D.. Thank you gotten some good you here. So I guess more stuff on you know your outlook for two volumes down 30% to 35%, Michael just give us as fast as to how much of that decline is due to customers being flat out just shut down for parts of the quarter and willing to to that how do you expect volumes to kind of play out by the <unk> I guess I'm asking because it looks like you're baking in some.
Level of improvement in June.
Sure and you know really if you think about it by the major segments, R.O.M., guys or down in Europe, and the U.S. and they won't be restarting until may 18, or any of it when they do come up you know they've told us that they're going to run it slower rates as they try to figure out how to maintain the social distancing. So we factor.
That in.
The second one of course is you know are a large oh, we Airbus and Boeing customers. You know Boeing has taken extended period of down time, airbases back up and running but there each have cut their production rates.
So that has an impact and of course M.R.O. It for the airline business is still unknown right. So we're gonna wait and see the good news is that there are planes flying even if they're flying empty they will need M.R.O., so we'll be watching that carefully.
If you look at refinish I've noticed and if you look at the gasoline sales. So last week gasoline sales have improved so people are starting to drive more what will be really looking for his congestion to improve so get back to a normal rush hour in the morning Rush hour in the afternoon that'll be important to our business.
So I think those are the most important things you know if you look at the rest of our customers, they're not really shut down there just having a moderate their production rates for the time B. and so they were Billy come back quicker will probably be likely.
You guys are we already seeing staggered start ups by region different parts of our business on it very public and though.
Periodicals. So so that we're we're making our best cast of what what's that that's going to look like as we get further into the corner here.
Okay I guess when my second question, you know and Slide 11, you basically have the financial crisis play book and so looking specifically at four Q2 thousand eight and you know the first quarter of 2000 or nine.
Yeah, but declined between three to four times greater volume declined you know obviously the business portfolios change meaningfully. Since then can you just give us some insight on how the changes may change the changes may in the Powerpoint changed the magnitude of these decline.
Yeah <unk>. We included on flight 11 gone to it as is is the coding segments. Only so so that we have different regional splits and and businesses are different a little bit different size than they were then.
Yeah. This is the Codings business only.
As you can see volumes were down again as I mentioned my prepared remarks about 20% the first quarter bow nine segment earnings were off over 60%.
<unk>, there hasn't been well I'd say a significant shift.
We have lowered our our break even points in in many of our businesses with the restructurings we've done in the past a couple of years, but this this this crisis is broader and when we saw auto nine crisis was centered on housing and auto because obviously affects some of our aftermarket businesses that that were in fact, it but not to the degree they are so it's really.
Hard to draw complete comparison, but the point I'd makes it as we did lower breakevens in many of these businesses. So we're trying to manage around that.
X. so much.
The next question today comes from Christopher Parkinson of Christ's. Please. Please go ahead.
And thank you hopefully a everybody's doing while I'm just very quickly on the raw material trends you just got depleting inventory due to the weaker demand environment I can use discuss roughly you know on your implied raw material savings and whether or not you'll actually see the benefit in two q. or if this is more <unk>.
This is going to be more of a second happened potentially end up one q. 20 ones for just any color on what you expect like raw basket I would be incredibly helpful. Thank you.
Yeah, it's a christopher the lower raw materials will not have a material impact on q. too you know, we're gonna be buying very few raw materials. You know we were coming into our busy point of the season right and the plans for gearing up for you know a regular paint season, so him in Tories, where moving up as they always do it that.
Period of time, so now with lower demand rates, we have plenty of inventory said the plants that will be starting up will be running at a lower rates and plus you know when you think about it from a life and fight those standpoint, a lot of those raw materials don't flowed through for 50 or 60 days, so there would be minimal impact and.
Q to you should expect to see more much more impact in Q3 in the back half of the year.
Thank you and and just a quick follow up just on packaging. It does appear you're kind of fairly well in the U.S. and in the like you're still experiencing what I'd say a little bit in noise in Asia, and just Chinese improving one would assume that's now southeast Asia can use quickly run through just globally food versus beverage and then just highlight of what's going on in Asia.
On a Billboard basis. Please thank you very much.
Yeah. So beverage is continuing to be strong you probably saw the best can numbers in the U.S. They were up eight per cent in the first quarter.
But the 3%.
Beverage up in Europe is a up low single digits food is recovering they had a bad year last year because of a week harvests. So we expect them to be up low to mid single digits as well we are seeing recovery in China. So that's providing some good tailwinds. So.
So and then the other thing that you probably don't put a lot of recognition end, but aerosols is as a good segment for us and so with aerosol cleaning products and things like that that should also be a positive. So all the demand trends in packaging our moving up.
But we are seeing those in the second quarter, though it was Thailand.
You know big food packs, a region and we're seeing that down to the virus.
Very helpful. Thank you.
Next question kind of time, Kevin Mccarthy F.B.I.P. Please go ahead.
Yeah. It's good morning, I think you need a comment that two thirds of your costs were either variable or semi variable.
Did you speak to the outliers in your portfolio a in terms of businesses that would be materially above that level or materially below.
[noise], Yeah, Kevin events.
The businesses that have the highest variable cost structure.
Hi, Hi, specs cost structure excuse me.
Our businesses, where we have lisa's unemployed like architectural business.
Regardless of the of the demand up or down any given day, it's hard to flux those businesses.
The businesses that are strictly Oh, yeah have a higher variable cost structure.
We are able to.
Produce our folks at those facilities based on demand.
We are able to ratchet down production, there's typically less distribution involved it's usually straight from our factory to their factory. So I I'm stuck it into the into the categories of lower lower a fixed cost those are we on businesses in our industrial segment.
Okay. That's helpful and then on slide nine at the bottom I think you provide useful framework for the expected sequence of recovery and your various businesses.
Do you speak to the Oh, Yeah, and then and refinish blocks there so to speak what why is it that you would expect so yeah to recover quicker than than refinish does that based on the credit crisis experience or or what you're seeing here today.
Yeah, I think it a lot of it has to do with the fact that the card aging of the fleet is almost 12 years and we expect people to continue to a one or buy new cars. We also see that happening right now in China. So you think about China car sales they incrementally improve each of the last.
Oh half a dozen weeks and actually last week, they were a almost flat with prior year and so our experience has been that you know people still need vehicles, there's a likely positive about it. This is that people are going to shun public transportation for some period of time, which means they're going to want to either.
Buy a new car or they're going to want to continue to maintain the car. They have so I think those are going to be positive for us to coming out of this.
One other great generation, Kevin is it because refinished businesses just distribution business, we do know there's inventory to change.
People were expecting as Michael alluded to earlier a normal season.
Typically oh the district distribution channels stock up go ahead of spring that stock up did occur.
But then again, we had a rapid decline I've demands. So we we do know we'll have have to work through inventory in the in the entire channel as well.
That's helpful. Thank you both N.B. well.
I can't go Kevin.
The next question comes from John Roberts Ah, Yes. Please go ahead.
Thanks.
You guys all sound well so that's good to hear.
They trade architectural paint or pro apply you indicated that completion of in progress construction would provide some help here in the current quarter is it possible to September quarter will be very depressed as well because once that rolls off it'll offset a recovery and some of the maintenance painting that might come back.
You know John if you're looking for normal commercial projects, they're typically nine to 24 months or even law even longer. So we expect those to to carry forward for the most part.
Certainly through Q3.
They haven't been stopped will be restarted and carry through two three if not in a 2021.
On the residential side you know the home building occurs in weeks instead of months on so we do think after the current slate of homes are that that are in progress are constructed a <unk>, we'll see a little bit of a avoid there but that will be again after probably the summer.
<unk> <unk> <unk>, what do you expect trade pain to be sequentially up in the September core, yes different way to frame.
To Michael's common earlier, it's the visibility is just not there for us to make those comments on you know that four and then in the bad debt reserve is that concentrated in any area, what kind of assumption, so you're making <unk> more dealers or auto body shops, or what are you assuming you're bad debt.
Yeah. We we went through you know the mix of customers we.
You know globally, we did certainly look at it from a business inside the customer in their liquidity. So it's it's really a mix of all of our businesses in our expectations.
<unk> against against their their metrics.
[noise] I'll point not drawn in in 2000 82009, we we didn't see a significant up left in bad debt in that crisis. We we didn't take this reserve because this crisis effects. It's just brought her and affects a lot of smaller.
Customers differently than L. eight or nine.
[noise]. Thank you.
Oh.
Next question comes from Michael System Atlas Park I'll go ahead.
Hey, guys glad to Sunny glad you guys are all safe and sound <unk> attempt to your stores.
Talk about how many how many are stores or shut down and what maybe what your sanity and.
Maybe just run through what what they've changed in terms of their ability to do business. During this yeah. So so disgusting shut down type of 'em environment.
[noise] Yeah. So my you have to go by various regions around the world. So if you look in Italy, all our stores or close and they're doing delivery.
In France, we have you know we had gone through a period of time. The last two weeks a March and I'd say the first two and a half weeks of April where they were all closed Ah, but now we've gotten permission to open up a few of them and we have latent demand as soon as we opened a store you can immediately see a pop in sales.
So right now we have about I would say about 40 stores open in in France.
And when you move over into the U.K. They were mostly running all the way through near the end of March and now we got probably about a 40% of the stores or back open again and again you see as significant demands cool as soon as you can get a store open.
So that helps us we did not have to close any stores in Denmark, they had to record it.
Record quarter, we had no store closures in the <unk>. So that was also a very solid performance.
In the U.S. right now we have about 250 stores close but that is really more trying to not only comply with local regulations, but also because we moved to a delivery model. It doesn't really matter, whether the stores open or closed for we've moved to delivery. So the painter just want to know you got the product kids.
Place to the right time.
So we'll continue to manage in that kind of environment.
Right and a quick follow up that I know I know you won't feel the raw material impact, they're low raw materials to the second half the year, but can you maybe talk about their actually given where oil is that what you see in the basket as he had into the second half of the air is it could it be down double digits. It maybe maybe talk about each of the.
The the paint pockets intends to the direction.
Well I I think right now you know I think directly it's all we're going to say right now it's down it will depend upon you know July one type pricing 'cause solvent are immediately pass through will start to see some of the rather than as a benefit but at this point I think I would.
Given that it can be so little and we'll have another chance to talk again at the end of the second quarter I think I'd, rather differ when we have more visibility into that number.
Got it thank you.
[noise] next question, it's been stop quick Oh goodness. Please go ahead.
You're very much. So if you guys look back in architectural <unk> No financial crisis, I guess it was at least for a period of a shift towards D.I.Y., maybe gaining some share.
Sounds like maybe you think that's gonna happen again, and I I guess curious what kinda duration or impact you think that might have.
Well, we're seeing it right now Bob the D.I.Y. numbers across our business are up significantly and people you know they have free time on their hands. They wanted to get projects done they're out there getting them done we expect that to continue probably the whole summer. So I would say there's no.
No.
Likelihood that's kind of stopped anytime soon.
This is being consistent with a you know when people nobody wants to be unemployed, but when they're unemployed that gives them free time and that has been a bet. A positive force you know our D.I.Y. and Australia's up our D.I.Y. in Europe is up our D. Hawaiian Mexico is not much of a market, but it's positive and certainly in.
The U.S., it's a positive.
[noise] Caskey on refinish, if we look back in the last financial crisis assume you mentioned density is is proving but still not high enough on roads for completion rates, but is there some level of thrifting by consumers such that when the collision rights climb they still don't actually get their car.
Fixed.
Because they're trying to save that money. Your pocket then insurance money is they're going to be any delay and pick up there did you not see that in the last economic crisis. We we did see that in the last economic crisis bomb.
Probably too early to tell yet right now with that's kind of look like.
You know nobody's getting in accidents right now, but we'll we'll be paying close attention to that it's easy to tell because when you're driving round down the road, you'll be able to see one into panel.
Accidents that aren't getting repaired, but we'll be paying a lot of attention to it.
Yeah, I think that deserves version of the last prices bottles or contributor to that.
Unemployed for a longer period as long periods of time, we're certainly hopefully we don't know, but we're certainly helpful.
<unk> this crisis is a shorter.
Yeah makes sense thanks, guys.
[noise] next question is something that's.
<unk> search please go ahead.
Good morning, gentlemen, and kudos on your charity efforts I appreciate the commentary on the raw materials any outlook.
No I just don't want it to see the other side of that calculation on a on the your ability to raise pricing you've done a really good job over the last couple of years with a with price increases in each quarter et cetera.
Must be very difficult environment right now how should we think about that side of the equation.
Oh, Frank This is Michael first of all hope you like to Jets draft. So loved it. Thank you loved it.
Okay. So I would tell you that.
We're we're.
Sorry.
Oh, yeah pricing, yeah, when I, when I think about pricing, it's going to hold in there.
The reason why is you know when I think about the production rates for most of our employee our customers they're going to be down.
And so they're not going to have a a lot of leg to stand on in regards to a their production rates.
Second thing is raw materials.
From you know started going up in fourth quarter 2016, all the way through the first four to 2019 and therefore, you know we haven't quite captured back all that pricing and so I think from that standpoint, we're going to be in good. Good shape. So I don't I do not anticipate that pricing falling off we still have some other pricing.
<unk>, we're going to be doing later this year, so clearly with that currencies being weak that you know we'll have opportunities in Latin America will also have it in our refinished business later in the year. So I think from that standpoint pricing will continue to be a a positive force.
Interesting very interesting and if I could it's kind of question about the the only ones for doubtful accounts. Obviously, that's something that you don't typically do this sort of magnitude are their specific industries that you're most concerned about in in that regard how do we think about that and and I I well I guess, it's too early.
Say if their scope for.
Additional charges in the second quarter by just based on what you've done in the first quarter <unk> what are the industries that your that your most concerned about their.
Yeah, Yeah frames, we alluded to earlier you know, we're we're most concern about small business.
Oh, who has less slivers of liquidity.
And that that goes across many of our regions.
So we we took a more more or detailed approach with respect to trying to understand a small businesses and their capability to withstand a big crisis like this.
I. So we can <unk>, we can exclude a auto oh, yeah, I'm, an aerospace et cetera, and focus on some of the smaller customers.
We took some reserve and every one of our businesses and every one of our reasons, but if you ask where we were hiding in terms of our concern of small businesses.
Thank you.
Mm.
Next question, it's kind of P.J. excuse the car city. Please go ahead.
Yeah.
Oh.
Oh.
What's this.
Oh, it makes nickname for next year.
Or or.
<unk>.
How do you think about posting fucking.
Given that you know sort of down your position for your plan.
What is.
And the channel.
Thank you.
Yeah, just show you a little hard here you. There I think you asked about the perl or cancellation of projects into the spring or fall.
And again <unk>, we're getting information from our customers.
On on a real time basis, we do think.
Mandates stayed on mandates are lifted we'll see a surge of activity.
Projects and if they haven't started or completed there's certainly some pent up demand as Michael alluded to we're seeing in Europe and stores open their but but if you look it though the reality if some of these hardest hit markets.
Actually in the commercial side, we expect to have a prolonged recovery and in terms of their.
The size of their business.
And also in terms of their balance sheet repair.
So those are the ones the maintenance work.
In any certainly any new commercial projects are ones, where we expect to be either delayed or or postponed or canceled.
Yeah.
Thank you and then what about inventory levels have you use and abuse someone pained into the channel for the spring and.
Did you have to slow down you're applying to the result, then can you just update us on.
Windows in the channel.
Yeah, I would say.
M.P.J. I would say the only one that had significant inventory build would've been a refinish you know you know they had.
They anticipate a spring rebuild of the accidents that they had in the backlog. So now they're just working off the backlog I would say that's the biggest one.
<unk> as we mentioned in our prepared remarks are are finished goods them into Marie.
Was elevated which is normally is at that point in the season. So we're working that down as we go through two two and indicate three as well.
Okay I just wanted to clarify something you said about raw materials. You said you will get more comments on second quarter, Michael but does that I mean, given that you're volumes are now does it takes longer for romano's to flow through is that what you meant because you want to get bonus one second quarter thing Yeah, No we won't get a lot of <unk>.
Fitting q. too.
When we talk to you again in July on it after the second quarter earnings that release, we can get more clarity on how it will flow through in Q. tree. I mean, typically you know raw materials flow through in that 50 to 60 day on time period, but since we're going to be buying a lot less we don't anticipate much benefit.
Thank you too.
Great. Thank you.
The next question is kind of just the caucus and J.P. Morgan. Please go ahead.
Oh, thanks very much.
Neat to <unk>, you were really able to move your S.G.N.A. expenses down pretty rapidly, but you're a leaner company. Then you are now.
<unk> then you were then so order of magnitude is your goal to try to knock your S.G.N.A. costs down maybe 15 per side euro per year for the next three quarters or do you have a different color.
[noise] Yeah, Jeff we're we're certainly looking today at all our discretionary cost items.
The one.
Thing that we don't know is the duration of of this crisis.
Yeah. They mentioned I think it with the first question. Yeah. We are seeing staggered start ups. So in 2008 2009 everything was down for an extended period of time.
We worked our cost accordingly here, it's a little more dynamic.
And we're certainly certain trying to manage our costs aggressively as you mentioned that we mentioned I'll break even points are lower.
It's gonna be a little more difficult till we understand the duration of the Oh the crisis.
Okay, I guess for my call up <unk> can you tell me what with a volume like in your Canasta door network and.
Yeah there.
If you look at that segment right now, they're probably down.
15 per cent through the first 27 days I would tell you that it's a different nick's than what we typically see so.
You know a lot of that also has to do with you know like Reds repaint people are not able to get into homes to do that type of work you're seeing a lot less maintenance type work because of obviously the hotels aren't going to be spend any money. So.
It's a little early to take to tell you whether or not all these trends are getting continue but I certainly think that the likelihood of of of lower maintenance, especially in anything in in the hospitality segment is going to continue to be significantly lean negatively impacted.
[noise] Okay, great. Thank you very much please stay safe.
Two different things Ya.
The next question his family tension Andrews Morgan Stanley <unk>.
Oh, Thank you and nice to hear everyone's up voice. This morning, I can just ask you on two specific raw materials T.O. two in propylene. It's you actually looks like a cell flat for the second quarter and most regions. Despite you know, obviously very challenging <unk> warplanes holding up quite well despite.
The decline in oil prices some suggest a that's a function of.
Slower refinery runs and therefore less refinery great proclaimed so just you know any thoughts on whether you think those dynamics will break down over time is to sort of does the lower volume demand works or when D.F.B. balance or if these are going to be a little sticky or this time around.
Well, let's start with T.I.O. Two you know we're convinced that this is a supply demand driven market I'm sure.
We're hearing a lot about costs on their side about a war frankly, that's kind of a red herring.
So we are seeing lower T.O. two prices for q. to not as much as it should be but we're still working though the system. There demand obviously in the second quarter is gonna be down considerably on the paint side, which is their largest in use market.
So we'll be shifting suppliers around to able to make sure we get the lowest on T.I.O. two price.
You know from the propylene standpoint, it's not just propylene sit down shooting derivatives of the resins and so you know on that side that will be long as well. So we're anticipating that will continue to see some price relief in that area, although that won't be a significant.
Purchase in that second quarter like it normally is.
And there's this is a <unk> working capital you know impressive that you took 120 basis points sales out. So quickly you know given given the unprecedented nature, but what took place late in the quarter.
So can you just level set us on sort of how we should expect that progress through the balance of the year you know you're already fully implemented your plan or is there more to come in the second quarter or just how should we be modeling that.
Yeah, getting the visibility are much lower than our operations team deserve a lot of credit.
They reacted.
And our reacting exceptionally quickly to the environment Michael mention we're we're measuring the start of of our facilities around customer demand. It's just too early to to to predict on what the drawdown will be a lot of our finished goods and we have to see the demand patterns more fully to in order to to to understand that working capital impacts.
It's certainly a high focus for the company has it is that every company.
Thanks, guys.
[noise] well next question his friends, Kevin talk 937.
Yeah.
Hey, good morning, everybody glad to hear a buddy to say.
Slide nine curious on on how you expect a mix of the product line performance impact your margins here 'cause on slide nine you show that aerospace and we're finished you're likely to be this lois to recover which I believe or two of your higher margin businesses. So curious of your comment on the the mixed impact.
To to your margins.
[noise] Yeah, Kevin if you if you look at the segments. Obviously, there are several businesses on the slide and we say you know the higher volume impact that are in our performance segment.
Fuhrman's coding segment, which does have higher margins. So so that is a negative mix impact and as you as you lose too easy businesses, we expect to recover quicker.
Yeah I've been in the industrial segment that segment got hit hard and Q1.
We do expect again some progression.
And as we get too late Q2 in early two three in terms of the margins and that segment, but I think I think your analysis is accurate.
Okay, and then a curious on the corporate expense it looks like you're you're guiding at 40, what was the 45 to 50 million in the second quarter. When she looks like the first house tracking up quite a bit versus the first half. The last year I think last year was 90. This your contract for 105 to one time why is that that much is that what's bad data.
Just showing up or is it because I would think with the telecom prefer souls and I think there's some stock based company there that would drive that down to just curious why that is running.
[laughter] Kevin's.
John So I would remind everybody in slower than when we got into a in January.
In first cooler at last year was was a lower historical first quarter. So this this first quarter came in in more in line to where we are typically in up to one yeah.
And I would say accuses Q2 is forecast it'd be a little bit lower than a normal q. too. So when we do have some addition, since we're still funding digitalization, which Bible talked about and his opening remarks is is a new program that were funding.
Corporate so we have some examples like that that also impacted.
Mm.
Okay, great. Thank you very much.
[noise] X. question, it's from <unk> RBC capital markets, He's probably <unk>.
Morning, and thanks to take my question happy to hear everyone has a safe and sound for now.
I guess I just wanted to ask about the 30% to 35% volume decline in cute too is there way you could potentially size your business maybe into three buckets automotive architects on industrial and what's a typical lead time that you you have in the in those areas and maybe automotive you'd have to switch.
And to to Refinishing, Oh, yeah, but once a typical lead time and I'm just trying to gauge see your top unenslaveable in in in that 30% to 35% would you consider that kind of a a conservative estimate or could it ended up being a better or worse than that and then again, maybe you can just just to help.
<unk> Bye bye bye vertical thanks.
Yeah, so that that number is our current best estimate.
If you think about automotive, we're adjusting time delivery business now we do have some inventory on hand that we were going to be delivering in late March when they rapidly shut down <unk>, you know asking our auto guys and take that inventory for so automotive paint has aging requirement.
To it so we try to make sure that we give them the freshest stuff.
But otherwise we're you know their place in orders I always tell people in the automotive they give us a 60 day outlook, which is probably 80% accurate a 30 day I outlook, which is you know 90% and then you know a week or two before you know it's 100% accurate. So right now we're still sitting you know upwards of 21 day.
Days before they are starting up so what they have given us a start up number we factored that into the estimate that we gave you.
We've looked at demand and so we are anticipating that they will ramp up rates throughout the back half of the second quarter. So that's how we factored that for automotive.
<unk>, we think the orders will be like given the fact that there's there's no density no congestion no miles driven and so we're anticipating that we won't see significant inventory in the refinish side until the back half of the quarter. We you know obviously commercial transport light industrial <unk>, we're gonna.
Continue to see those and then aren't in the architectural side those orders or place you know the day before so you know that they don't give you a lot of notice a you do know when the big projects are coming to your your geared up for the big projects, but the day to day kind of stuff. They show up and tell you what they need a place orders by noon pick up a seven A.M. So.
We expect you know that to continue that ordered pattern, we don't expect to get a lot of visibility differently. Then we're getting now.
Okay. That's helpful. And then just on the margin <unk> when you look at the.
Q1 margins they held up you know relatively well all things considered when you consider to the cost actions that you're accelerating.
You know what <unk>, how can we think about the detrimental margins are cute too.
There is there is there are opportunities because those to be a slightly better than what you experienced when the coded losses in in Q1. Thanks.
Yeah.
Earlier, that's that's only our target there's some things working against that.
$90 million segment earnings decline on the 225 million dollar sales decline.
We experienced in Q1.
[noise] anyway to potentially quantify that are are houses or figure out how to do that.
Oh yeah.
Only I tell Ya <unk> as I said at the outside of the question and answer session.
Things working for us and things working against as we have more time to be planful.
And I've implemented you know district discretionary cost controls that we didn't have at it at our.
Benefit in March, but we we we get or being respectful of those folks being furloughed and then as I mentioned, there's a stage start up going on.
And we do have some costs that are global in nature that we need now in China, and hopefully meet them in Europe in the next coming coming weeks.
Okay, great. Thanks, a lot like when a quarter.
Next question is from Duffy said sure that claims. Please go ahead.
Come on if I was question just around a couple of you were end markets in your customers Air you talked about you know maybe the potential on the debt side for those small contractors. What if you look at auto Refinish. If you look at contractor architectural Howdy judge.
Just to help those customers are yours were they able to get some of the money from the government are you sitting up funding plans for them and if you use 2009 is an example did you see significant consolidation in kind of customer's going away in a reset about model.
So from the architectural side you know we are not funding or painters, we're certainly a more than happy to work with them right now they're still is a fair amount of commercial you know there is backlog out there that they're going to work out to the question is when did that backlog go away. They also have variable cost structure.
So they hire painters during the busy season and then.
Let them go as he a season winds down so they have the opportunity to manage your cost structure Ah from that regard.
So we'll be watching it we do think that this could lead to more M.S. So tight activities from the body shops I was clearly that's a benefit for us if that happens and when that happens so we'll be watching out for that but the the small body shops you know.
Oh I would say you know there. They also have a somewhat of a variable cost structure as well.
Would anticipate that they wouldn't be applying for the P.P.P. money to support them in this regard.
Okay.
And then if we could just focus on the Coolmax business in Mexico.
The following the pay so you know and they seemed to be a little bit slower on the cold good.
<unk>, how would you judge the health has been Mexicans business and then what are the costs down there that are somewhat dollar based versus the the cost structure, that's peso base down there.
So for my raw materials standpoint, Duffy about Mel call at 60% of the raw materials are dollar based so and it's.
That's why we'll be able to a pass through a price increase down there to offset that.
Here in the near term when you think about the the rest of the business you know our concessionaire network is not owned by US it's owned by our partners and so we don't have that big fixed cost structure, that's hanging over our heads down there.
Can tell you right now is that the a sell out in April is actually pretty good. We have about 10 1200 stores that are operating what we call curtain down say that you can't physically walk in the store, but only 250 of those 1200 or actually.
Delivering so the vast majority of them are still delivering product so.
That is continuing to progress.
And I would tell Ya our overall Mexican team is somewhat cautious, though because the current government.
Is not as pro business as you know the prior government and so we things at the back half of the year will be a little bit more challenging construction projects that are under way, we'll probably be completed Ah, but there's not a whole lot of new big stuff being started and so that does give us a little pause for concern.
So we're going to be watching that very carefully.
Great. Thank you against.
The next question is from line like Sandra Dot freeze. Please go ahead.
Hi, there are too quick questions can you talk about incremental margins on the recovery. If you expect any significant difference between Europe and the U.S.
And secondly, with the.
Or or the mornings that you've had from the shift to the delivery model. How should we think about this longer term does those bonding switch back to the stores on the restart or to go to <unk> or is it cost to the consumer similar or lower.
Then purchasing through the stores.
Lawrence I would say that the incremental margins on the way up in Europe in the U.S. will be somewhat similar they should be on the higher end of the spectrum, so that will be a positive.
From the delivery aspect as you know we've been a proponent of the delivery model.
You know for some time now we're working with our Premier authorized dealer network, we had a good.
You know a quarter from that standpoint in the first quarter. So we think the delivery model will continue and Ah right now are once our customers get used to it I think that trend line will continue obviously, we've tried to convince the owners of the businesses that when they're painters come in our stores or not painting, they're not getting paid.
And so the more that we can keep them out on the job site. The better it is for the owners and I think they were going to start to see that become more evident in their business. So I think this is a long term trend that's going to continue.
Thank you.
The next question from my Cats, M.F.C. quite cloudless guarantees Lisa Hi.
Hi, good morning.
The increase in restructuring number.
To me that implies a structural.
That isn't including areas like reduce travel and entertainment furloughs other discretionary cutbacks.
You're you're kinda temporarily reducing so can you just verify that those temper reductions are not included in that restructuring number and and how much could we be talking about in terms of S. you name savings from <unk> another temporary cutbacks.
[noise], Yeah, Michael restructuring savings that we we sided does not include he's other discretionary costs, we have an itemized or size.
Level again, it's it's gonna be part of the.
Huh Huh Huh tempering, we're going to try to do on the detrimental <unk>, but I alluded to several times Hey, Mike. This is John just use the second time, we've gotten yes generic question. So I just want to remind folks that in the financial assumption Sly we did provide a range of 28% to 29% for S.G.N.A. for Q. too. So we didn't want to give you saw.
I'm help in modeling so that might be a number you can take a look at.
Alright thing for him object and then.
A two part question on that aerospace number one you your mention I I believe the after market that's about half of your business. An aerospace you mentioned that plane bar flying M.D., but a lot of them are still flying for how much lower it'd be after market. This nets versus normal and then the second pizza request.
<unk> this downturn [noise] fundamentally alter the long term secular positive views that we have had a a new commercial aircrafts.
So right now just to be clear like 60% of global Fleet is park.
So that is this you know unprecedented number from that standpoint.
Your estimation of the after market is relatively a good number. So you can continue with that kind of number <unk>.
Right now we are not thinking that this is a fundamental shift in the aerospace business or the global.
Trends are going to continue I think I think the fact that you're seeing all these people want to get up and get out of their houses reinforces that we are seeing travel <unk>, China continuing to grow every week. So we do not see a fundamental shift now I do think the order book for the Big.
Oh yams will be a materially lower because there are gonna, obviously going to try to figure out what their exact needs are and right now they have no cash so they will be looking to cancel some of that so you have seen a significant cancellation. If you look at the net new orders for both.
I mean, they were minus 307, if I remember right Airbus did have some net new words. So you know the backlog I think we'll come down but you know I think overall this is still a good industry for us.
Alright, thanks very much.
Right.
'cause came clean it that question and answer session I would like during the conference back I've read a management for any collecting on Mac.
Thank you I'd like to thank everyone for their time and interesting P.G. and please remain safe and healthy if you have any further questions. Please contact or Investor Relations Department. This concludes our first quarter earnings called.
[noise] [noise] Francis now completed thank you for attending today's presentation you may not disconnect.