Q1 2020 Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the first quarter 2020, Mettler Toledo International Earnings Conference call. My name is George and I'll be operator for today at this time, all participants are going to listen only mode.
After the speakers presentation, there will be Michigan answer session.
That's the question during this time, so he fresh star one on your telephone keypad.
Of your question press the pound.
I would not like a hand the conference over Dear posters for today, Miss Mary Finnegan Keys go ahead.
Oh, Thank you and good evening everyone.
And again responsible for.
So.
Oh and happy that you're joining us this evening.
I am on the call today with a live T.A.
You know and Shawn <unk>, our Chief Financial Officer, I want to cover just a couple administrative matters call is being web cast and it's available on our website.
A copy of the press release and the presentation that we refer to it's also on the website.
Let me summarize the safe Harbor language, which is outlined on page two of the presentation.
Statements in this presentation, which are not historical fact.
Forward looking statements within the meeting up the U.S. security 1933, and the U.S. Securities Exchange Act up 1934.
These statements involve risks uncertainties and other factors that may cause our actual results levels of activity performance or cheap meant to be materially different from those expressed or implied by any forward looking statements.
Discussion of these risks uncertainties. Please see our recent form.
And other reports filed with the S.C.C.
All of the forward looking statements are qualified.
By reference to the.
The under the caption factors affecting our future operating results.
In the business and management discussion and analysis of financial condition and results of operation sections of our filing.
Just one other item on today's call. We may use non gap financial measures more detailed information with respect to the use of and differences between the non gap financial measures and the most directly comparable get measure is provided in the form eight k. I will now turn the call over too.
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We have already indicated type recall, comparing the initiative, which will result in a meaningful reduction in our operating expenses <unk>.
I will overall goal is to be well positioned to capitalize on gold once do we call her evil curse.
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We look to the future post Kobe.
We expect to me you talked to remain challenging we continue to believe we kind of games, there regardless of market conditions.
Let me turn control for the financials.
Thanks, Olivier I also want to say that I hope. This finds all of you well and adjusting to this new environment.
Sales were $649.2 million in the quarter, a decline of 3% and local currency.
The U.S. dollar basis sales decrease 4% as currencies redo sales growth by approximately one per cent in the quarter.
That's why number four we show sales growth by region local currency sales grew three per cent in the Americas in decline five per cent in Europe and declined eight per cent in Asia rest of the world.
Train a local currency sales decline, 13% in the corner.
Well sales in the quarter were negatively impacted by Cove. It I want to also highlight that we had strong local currency growth in the prior year in particular Europe had nine per cent sales growth and shine I had 13% growth in Q1 of 2000 in 19.
A slide number five we outlined local currency growth byproduct area.
For the quarter laboratories sales grew 1%.
Industrial decline, 5% with the core industrial down, 3% and product inspection decreased 8%.
Food retail declined 16% on the quarter.
Retail reduced our sales growth I one per cent in the quarter.
Let me now move to the rest of the P.N.L., which is summarized on the next slide.
Gross margin in the quarter was 57.7% 850 basis point increase over the prior level of 57.2%.
Pricing and Sterndrive contributing to the margin grow.
R. and D. amounted to $34.4 million, which represents a 5% decline and local currency.
This decline was impacted by the timing of activity and then nine per cent local currency growth in r. and d. and the per year.
S G.N.A. amounted to $198.7 million, a 2% decrease in local currency over the per year.
Continue to make investments in our field for us, but this was more than offset by some immediate cost containment measures and lower variable compensation.
Adjusted operating crop it amounted to $141.3 million in the quarter, which represents a 4% decline over the prior year amount of $147.8 million.
We estimate currency reduced operating profit by approximately three and a half million dollars.
Despite these headwinds and challenges to the top line operating margins were 21.8% in the quarter consistent with the prior year.
A couple of final comments on the P.N.L.
Amortization amounted to $14 million in the quarter interest expense was $10.2 million into quarter.
Other income amounted to $3.3 million.
Are effective tax rate in the quarter was 21.5% before discrete items in as a reminder, this adjust for the timing of stock option exercises.
The rate is higher than we expected. The last time, we spoke and is being driven by the impact of covert 19 on our results in particular, we now expect changes in deductions and geographic income mix as compared with the beginning of the year.
We anticipate at 21.5% effective tax rate for 28, 20, but believe we will return to the 20 to the 20 per cent level in 2021.
Move into fully loaded shares which amounted to $24.4 million in the quarter and as a 3.8% decline from them prior year, reflecting the impact of our share repurchase program.
Adjusted he P.S. for the quarter was $4.
A 2% decrease over that prior amount of $4.10.
Absent currency are adjusted D.P.S. gross was flat with the prior year, despite the declining sales growth.
On a recorded basis and the quarter E.P.S. was $4.03 as compared to $4.42 in the prior year.
Recorded E.P.S. in 2020 includes 12 cents of purchased and tangible amortization sixth sense of restructuring and the 21 cent difference between our quarterly and annual tax rate due to the timing of stock option exercises.
That is it for the P.N.L., let me now cover the cash flow.
And the quarter adjusted free cash flow amounted to $48.3 million as compared to 80 million point $2 million into prior year.
Cash flow and a quarter was impacted by the timing of tax payments in inventory was higher as we built up some safety stocks to facilitate our global supply chain.
So was at 47 days well I.T.O. came in at 4.4 times.
Let me now turn to guidance.
As I know you were aware forecasting is very difficult given the significant uncertainty surrounding covert 19, and ultimate repercussions for the global economy.
We were a short backlog business and then outlook for sales growth, particularly for the second half of the year is extremely challenging.
The timing and pace of a global recovery is difficult to ascertain at this time.
Given these circumstances, we will not provide formal sales and adjusted E.P.S. earnings guidance for the full year 2020.
We would expect to return to providing annual guidance. Once there is less uncertainty in the global macro environment.
We believe we have enough information and insight into our business to provide cute to sales and earnings guidance.
I want to stress however that we are cautious on our two two Q2 guidance as a market dynamics are very fluid and changes in customer demand can happen quickly.
But the second quarter, we would expect local currency sales to decline, 8% to 12% and adjusted E.P.S. to being in a range of $4.05 to $4 and 45. So.
We acknowledge this is a wider adjusted E.P.S. range that we typically provide for water, which underscores the uncertainty we face in today's environment.
Let me provide some additional insights to help you as you continue to analyze our financial results.
We expect to continue to benefit from our spinnaker sales and marketing initiatives, which we believe are particularly important competitive advantage and the current environment.
We will continue to benefit from our margin and Sterndrive cost initiatives, although this will be offset by mix and volume declines.
At the gross margin level.
We have enacted temporary cost containment measures and discretionary cost reduction actions.
We estimate this will reduce operating costs and the second quarter by approximately 9% as compared to the prior year.
Olivier will have some additional comments on these actions shortly.
Interest expense is estimated at $10 million in Q., too and $39 million for the full year.
Amortization is estimated at $14 million for Q., too and $57 million for the full year.
Other income, which primarily represents pension income is estimated at two and a half million dollars and q. too and $11 million for the full year.
Adverse currency will reduce adjusted operating profit by approximately four and a half million dollars in q., too and 14 and a half a million dollars for the full year.
As already mentioned, we estimate our full year effective tax rate before discrete items will be 21, and a half per cent in 2020 in is estimated at 20% for 2021.
We expect currency to reduce sales growth by approximately two per cent in q. too and reduce it by approximately one and a half per cent for the full year.
Effective with the second quarter.
Stopped our Sherry purchases given the significant uncertainty due to the global spread of the pandemic, we would expect to resume repurchases during the second half of 2020 as our target is the end the year with net debt to eat at T.A. of one and a half times.
We currently believe all acquitted d. is more than adequate to meet all our financial needs.
That is it from my side and I know now like to turn it back to Olivier.
Thanks useful.
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Challenges in terms of government restrictions safety protocol.
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Core things could change I mean time, but that's not always feels good about the ability to maintain that I would <unk> supply chain.
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Throughout the world have gone a great job in allowing us to maintain production <unk>.
The final topic it costs actions, we have implemented.
As you heard from <unk>, we expect to reduce our pricing expenses by approximately 90% in the second order.
Pass through the probably over here.
Compared to our original Bucks once you point it needs a reduction approximately 12% which of course is significant.
I'm very pleased with our mother teams throughout the world ability of decisive action.
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We can be fully prepare for the recording.
We will continue to more lethal and Furthermore, I will call structure as necessary, depending on how market conditions evolved into <unk>.
That's cool my remarks on how we have adjusted I woke wasting model to the current environment.
That'd be no provide some brief moments of how we see our values businesses and geography, playing out in the new tone.
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However, these products also so if mark it outside of lifestyle that will result in negative grow into too.
We would expect let's see my <unk> weak in the second Bordeaux as <unk> move you to work from home restrictions.
One sale back <unk>, we would expect some delays before it's too much purchased as we call him too bold buying passive we would expect to see lap sales decline low <unk> in the second fall.
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The ability to target areas of growth is important to limit the decline in this business given the overall declines expected manufacturing G.P.
Overall, we would expect that we're pouring dust will fail will decline meat too high in single digits into too.
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On the pauses inside packaged food companies <unk> significant increase in custom wouldn't be model, which bodes well for our product inspection business.
However on the negative side food manufacturers are very cautious on limping outside personnel into that facility, which is impacting installation so far away instruments.
We'll see how these facts display out into coming courses, but would it affect sales <unk> high single digits logo, whom they fit in products inspection.
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Finally, we expect market conditions to put two needs to be very challenging for food retail while grocery stores are benefiting from all eating at home given the heights and the amount of challenging uprising quotations feeling not focus on upgrading your replacing that waiting instruments for perishable goods and Jimmy.
You can throw this business with benefits, but Paul <unk>, we wouldn't expect a significant decline include retailing likely in mid teens away.
In terms of geography, we would expect meaningful declined to the magnificent Europe as well as certain parts of Asia Pacific outside of China, and the second poor.
We would expect me single they should grow in China in Q. too.
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I'm confident we can continue to gain share you only need to tell him because.
Then we will be well position wants to incorporate gets under way.
I want to off the operation, though cool delightful questions.
Thank you at this time if people would like to ask a question simply press power one on your telephone keypad again that is star one on your telephone keypad.
Plus for just a moment to compounds.
Oh.
Oh.
First question comes from the line up Tyco Peterson from J.P. Morgan essential question.
Hey, thanks.
Yeah.
Her comments are called out to map reactors is potentially having a vaccine <unk> I'm just curious as we start to think about.
Tailwinds are there other areas you think you could disproportionately Bennett and and you couldn't mcgary views on you know labs opening up academic minds opening up in the fall.
Okay. Yeah. So <unk> also can business I've highlighted case, we'll better space. We will continue also do better with the pipe in business.
I do expect that more investment will <unk>, who by your production <unk> will benefit again I will also kind of business will also <unk> business particular, <unk> ingles products.
Then industrial will also get some benefits.
In general.
Do expect that there will be industries end user industries that will suffer for quite a while in this environment.
Industries that will be more attracted on one hand short term and we're working on this already when I talked about shifting priorities for our sales force, but then they also <unk> segments that I've I I do view as more.
Active going forward I certainly expect.
That there is.
Desire for <unk>.
To bring back certain <unk> production that for example would also benefits and when we think about be they said Ollie says when we think about driving out sales force to these opportunities we we.
Look at industry say, when we look at specific called we certainly also look.
<unk> in terms of investments.
And then working initiatives. Your cat is is could get more of your you know clients on and your wife service contracts in the context of your comments your rear I'm sure. There's can you maybe just reminders, where you are in that record what percentage your services and you're like and how much Christian you know that might give your in the near term.
So about half of our service revenue is called truck based.
And that business. This stage, we see no reason why shouldn't we call. Her we we didn't we have good when you will away we didn't have conflation in that sense for that pizza, yet expect a v. shaped we called <unk>.
When is close to voice fakes, although pre emphasis may set of work. We certainly see that this is this a heavily impacted but typically these would you rather be laid them costly.
In general I wouldn't view our services business.
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But I do recognize particular, indeed, it does still world.
Capacity utilization I'm aware of our products has also made impact on so.
Will be severely impacted you in cute cool.
But I do expect that we have a good we call right in the only made off with you.
And then just one last one on China, you set up mixing with the getting a second quarter can be just comment on the <unk> you know what consumer confidence in the people that you present cool. Thanks.
Yeah, Hey, Tyco. This is Shaun Hey, maybe maybe I'll take that one you know so for China, Yes, we're thinking mid single digit for for Q. to you know if you kind of think about it in terms of the different businesses would probably think in the lab business will be more like low to mid single digit we're expect.
Thing more on the industrial side, maybe more like mid to high single digit part of that maybe gives you a little bit of a flavor for how things are playing out like on the industrial side, we had a a much more significant decline in the first in the first quarter. It was down in the mid teens, but it also shows you that.
The recovery isn't necessarily a v. shaped recovery well on the lab side in the first quarter, we were down low single digit.
And then that kinda just shows you that it's maybe a more moderate moderate situation. There and then in terms of April up nothing in particular, I'd really want to comment on there but of course, we we understood. The month of April as we're kind of providing guidance for the second quarter.
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Thank you here next question comes from the line Derrick Brian and license.
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Hi, Danny.
Yes.
This is my <unk>.
Clicking the question one one up on that last one there on China common and also that into your general thoughts on their cover you made a couple of comments in a in the prepared remarks, you expect a little bit more of a u. shaped recovery and so we cues should be not that different than the two q. range is that just some of the differences in terms of how.
Quickly you expect the lab as an industry to bounce back.
Because in the U.S. you know if there's some conservatism bedlam built in there or is this and they all 16 in terms of ordering patterns and how these countries have these other geography beyond a pack region have gone through the walk down so far just thinking about you know, but labs reopening it sort of the the pace of ordering as we go through the summer call.
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Incorporate we've talked about.
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It would be shape, we call it really before.
I do expect that certain industries segments for example, r. and D. laughs and so on they have a sharp drop Europe in the lock down, but then we should certainly see we cooperate.
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Instruments that customers by within them.
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Early in.
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Then we have is wasting into locked I'm now were very few new project, sorry initiated I've customers for for multiple reasons.
But why don't they certainly also the people Oh grazing out of home offices or do we things are the companies are slowing down there <unk> then sometimes it can be also that the size or not easily accessible people don't want to.
Bring additional disruptions by bringing new instruments <unk>, we now if I I bring you all these businesses to get at all if I think about that they put geography.
I I it starts to sum up more to a huge shape recovery.
This is I'd kill all sorts of context, why we are working with an old pricing model that <unk>. They will not be better to have a few too I would want me to fall will start to see improvement because we do expect by Dan.
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God that's helpful and then right along those lines of it can go down the piano on on the back side I. Appreciate all the color on the two two cost cutting steps should we anticipate sort of a similar cadence today three q. and then again flexing that back up a waiter in a year and then 2021 is a demand to recover.
And could you also search on talk about the margins gross margin one thanks.
Yeah sure Yeah. Thanks, My Cat. So of course, we're working on in planning cost reductions at the moment, but I I wouldn't want to quantify the magnitude of what we're going to do for for Q3 at this point I think it's important that we get closer to the quarter and then and then we can differentiate our ultimate execute.
<unk> as we enter the third quarter in terms of detrimental margins I mean, I think there's.
There's a lot of variability at the moment with with our with our guidance you know I think probably the what I would focus on a little bit as maybe just on the gross margin line. Maybe this is what you were referring to but you know if we look at the first quarter gross margin very pleased with.
The results, we're continuing to benefit from from pricing pricing a realization was just under two per cent in the quarter. So towards the higher end of our of our guidance there we'd expect something similar here in the second quarter as well we also had some.
Could benefit from our sterndrive initiatives around material costs savings.
But of course upsetting that is is volume impact and so has that plays out in the second quarter, we're going to see a bigger impact from volume will mitigate some of that with some of our cost savings initiatives, but most of our costs savings initiatives are below the gross margin.
Line. So when we look at gross margin for cute too.
If I kinda like look at the mid point of our guidance, we'd probably be looking at minus any basis points for the second quarter, but but I cautioned that there could be a larger range of expectations here than normal just given the impact of volume. So so for example.
If we where at.
The better side of the sales guidance in terms of minus eight gross margins might be down 50 basis points, but if we were at the the worst side on terms of minus 12% you know gross margins could be down like more like 120 basis points that gives you a little bit flavor for how the.
Outcomes can be quite different with volume.
That's really helpful Sean over there.
Yeah.
Mm.
Your next questions comes from the line of the J. Kumar your line or something.
<unk>. Thanks to take my question guys. One I guess just on the on the on the Mac recite here Olivia you know coming out of five you know I would have flocked down in fact, when you think of a recession recessionary impacts in the back maybe just skillet.
The Big picture sense on how was the portfolios struck her to you know whether recession and now what kind of you know growth. It should we look at is 2008 nine <unk> yeah, Yeah to look at the company now you know a decade later or is that a good analogy on how we should be thinking about.
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Yes, he interesting that.
That you make this oh Gee it it has certainly over being one thing that we started very early on when the crisis Star food.
We started to do revenue scenarios we.
We use this for days a point what is I think walnut particular, one that that we can't most is too low cost the different industries segments, how they will be impacted on how we expect them to be impacted and then we looked also tend to D.V.D.'s around what we'd have experienced 10 years ago.
Unfortunately, I I am not already in the in my effects and cries, because it's <unk> I'm. So I I feel that we'd medical well that crises now from a couple of things to consider when you compare it <unk>.
We are two days much better position then we were in 2009 in terms of the exposure. If you think lobbies about <unk>, 50% of our sales significantly I you fair, though is at the time services consumable A.'s now. So you percent also my try you.
Industrially smaller percentage of sales white emerging market is a log <unk>. So all in all we we are not moving to the economy, but we do believe we are less reliance on it then then the pulse downthrown.
The second point is we have today in much stronger spit back with tools based on L.D.C. Some change my life with cases <unk> that we did not have the 2009.
Very important practices really I have seen the power of these tools that approach is in the last few weeks I was referring into prepared remarks about fundamental change it I would vote for marketing approach. It you know we have college, we were cut.
Basis went down by 90% into lost a few days weeks and we have to compensate. These these custom access.
To auto meet with all the <unk> <unk> and the oldest oldest technology that we have the old way be implemented in in the week, Paul but also new.
Digital technologies that we have piloted now can scale up our big bad so.
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But in terms of we section. They pack there are certainly learning outlook 2009, we we use these learning also when when you build a rope relational Oh Oh. It all you have you know being.
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I I think that has also been that learning from last time.
We we know how to do did things I will organization knows how to respond to these things.
Yeah. So I think that's kind of way I would look at these 2000, a nice comparison.
<unk>, that's helpful and Shawn one on on.
The cost actions in Martha's side, I think I heard you.
Say opic's will be down nine per cent.
Friendliness or down 10% to make one are we looking at topics being down in line with revenues and then the implication would be C.T. revenue sort of down then you know we're looking at them.
Down but market. So it's still end up being down in the context of five you know if that's the right there to be thinking like margin skiing down for 22 2021 be a hyper Norma.
Margin you ever for you guys are given the cost action taken you know and Walliams come back you know the marching benefits should be above your typical you know 75 <unk> expansion. Thank you.
You know hey, thanks for the question V.J.
Hey, I think of course, it's a little early to to try to to look out to 2021, but I think it's good that you ask the question because.
It highlights on these costs actions I think it's important to understand that these are temporary largely temporary action. So so these <unk> a lot of these topics.
We'll come back next year. So we will see the next necessarily we won't see the the same level and pick up that maybe you might be implying otherwise.
Thanks, guys.
[noise] operator, the to move to the next question.
[noise] operator.
[laughter].
Yeah.
Oh standby just one minute.
Your next question comes from the line up.
<unk>.
A line is helping.
Hi, Thanks. This is Jesse crank on Kirkpatrick. Thanks for taking the question could you just remind us what percent of your sales generally come within the last two weeks in the quarter and you know just kind of your visibility into the second quarter is you're preparing guidance there.
Yeah sure. So I'll I'll take this yesterday and Shawn So we're we're not a hockey sticks kind of business I mean, the the third month of a quarter typically is higher.
A seasonal perspective than them first month of a border. So it's not so backended in terms of a hockey stick in the last two weeks, but as we kind of like provided guidance for cute too.
There's a lot of ingredients that kind of go into that I mean of course, we have to benefit let's see the trends develop throughout the border. We we see how the month.
April came together, but his Olivier kinda mentioned centers.
In our prepared remarks, there's a lot of other p. eyes that we've been monitoring literally on a daily basis in our virtual we're room. So we've been doing that for quite awhile now is to keep kind of a close posts on the different businesses.
So you know in a high level those are all a lot of the different factors that we had as we kind of provided guidance for the second quarter.
Okay.
Oh really famous interesting way that we what shortly before the war, we we we really from.
Home the first week on installed.
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Okay. Yeah, that's really helpful. And then just one more on the capital they're playing in the front you guys. I think brought back 200 million shares in the corner and you know talked about suspending that but what are you kind of looking for to maybe get back and and you know take advantage of lower share prices or you know look for.
For other areas the department, whether it be paying down debt or just kind of higher forget about that throughout the quarter.
Yeah sure. So hey, I mean, we we strongly believe in the Sherry purchase program very strongly believe in in our philosophy has not changed at all for US. It's not it's never been about trying to time to market. So share price will not be a factor in terms of when we try to re enter you know we'd expect that.
<unk>.
<unk> you know hopefully in the second half of the year here.
You know in terms of capital deployment I I think this is still going to be our strategy going forward I mean of course, we still like hold on M.N.A. as well.
Some opportunities that are available you know, but we you know in the end. It just came down to caution you know just giving a significant uncertainty.
In in terms of forecasting is we talk about.
And we recognize that it's a cautious view you know we have a very very strong balance sheet with very strong liquidity and I think you'll see us get back into sharing purchases in due course and kinda continue to work towards this leverage ratio of one and a half times that we've talked about in the past.
Okay, that's really helpful. Thanks.
[laughter].
Your next question comes from the lines.
<unk>.
Hi, Good evening, just one followed question first on a on that last question regarding buyback showing <unk>. When you do look to potentially re enter and restarts to buy back in the back half year would you expect to.
We started a similar rate is what you had been doing.
Yeah. That's a good question I mean, I think we need to kind of see what the situation is Steve in terms of like what you know what the future looks like at that point in time, probably yeah, Yeah I think.
I could go different different directions are really will depend on how the world looks when we restart and but I I wouldn't expect us to get at this you know kind of keep at this one and a half times net debt D.V.D.A. ratio and I I wouldn't expect that we'd want to wait too long to kind of march towards that ratio.
Okay.
And then secondly, I'm just wondering maybe if olivier or Sean could provide a little bit more color as it relates to your pipette business. You is highlighted is yeah. I believe you said you know stronger very strong in the first corner. Just was wondering if you could help either quantify that at all maybe talk about what you're expecting a business could look like.
During the second quarter over the back half the year, you know if you're taking up manufacturing capacity at all for that business is any more color on the pets.
Yeah, I you know no. It's it's not that we.
<unk> the specifically on the shortcut.
Q, while we have a very strongly mine, but partially was also because customers.
Wanted to secure supply of them they'd also stock up a bit that's certainly required also so <unk> five some short term cross for the full year, we got to have good girl.
I don't think that it's going to impact the group with Oh in them actually overweight.
So don't want to always pays the growth coming out.
Okay, and then Olivia if I could just adding one more real quick.
Last quarter, you talked about the potential for some governments stimulus in China, which was wondering if you had any updated thoughts on that but central at all.
Yeah. So that's an interesting one because of coffee.
They are.
Chinese government column cool were postponed to not to this is happening right. Now we just go up also updates on the topic in the last few days.
We do expect the most money the symbol of money will however be buried did from what we have 10 years ago.
It's it's going to go to the frozen and markets last time. It was very much will for infrastructure related this time, what what the room was our it's no less being <unk> <unk>, partially be sexist and we'll know benefit both.
But they'll all those that we like we do we think that C.D.C. hospitals will benefit from it we do things that fall production will benefit from from it and so we got to see some benefits to.
So if I mean, all through the same magnitude as we have seen it 10 years ago.
Mm.
That's that's helpful. Thank you.
Mm.
Next question comes from the line of Brandon Cool Yeah.
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Operator could you check the line please.
[noise] Hello, Brendan your line of style, Okay mass your question.
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Okay.
Already great. So this one more time.
Curious to get your thoughts as to why or why not China would be a relevant proxy to thing go in terms of the pathway that the U.S. in Europe might take a is restricted or or lifted.
Yeah.
Can you repeat the question I'm not sure <unk> so.
Yeah.
Mmm.
Or just curious what your thoughts or in terms of books get China is the government's proxy for a European in U.S. recovery as restrictions or less good. Okay. Yeah. Good. Good. So you actually good question.
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You haven't had a question from Dan Brenner <unk>.
Hi, this is john salary or on it for Dan Thanks for taking my question.
Instead of a question around a customer behaviour.
Any thoughts around it's really a replacement cycles over the next year and how long that these can be differed on replacements.
Yeah, I mean pressing questions. So when I asked me to.
Between lab and in Ducks cool <unk> industrial environment.
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Drive Phoebe.
In that sense capacity utilization is one of the key drivers or the industrial business.
Accordingly.
The two businesses behave differently across the economic cycle.
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In terms of investments in new production plan.
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Yeah, Hey, you know good question. So we're we're definitely.
Fitting a lot from the more favorable mixing our industrial business you know would be kind of go back to the question on how do we live in terms of 2000 at night and now to me that's that's part of the.
That's part of it too it's like even though our industrial business as a smaller part of the business. It's also in a lot more attractive businesses like you know as segments I kind of mention I think that.
When I kinda look at two two and I look at how the businesses and I held up and Q1, certainly I think that is going to be a differentiator for us I think also as we.
Oh look at the different segments, you know when you think about something like chemical I just to be clarifying chemical or a lot. You know we don't have a significant.
Exposure on on the oil side of chemical you know, we'll see more so on like the specialty chemicals side of that so there's pockets of chemical that are actually doing better than others.
And so we're having a little bit of <unk> experience there at the moment. The other thing is that.
You're looking a lot of our industrial customers in general we are serving a lot of essential businesses.
And I think that's been a real you know that's been very favorable for us and and again I had to Wanna Overplayed us that we're not immune to the economy I just want to play that we're better position that we were in the past and I think if it even look at some of the things that we've done from an innovation perspective in the last couple of years.
Like for example, and our transportation and logistics business, there's there's definitely some good stories there as well.
Thanks to take my question.
There are no further questions <unk>.
We continue.
Oh. Thank you. Thank you and thinks everyone for joining us this evening take care and of course, it's always if you have any questions. Please don't hesitate to reach out take care and good night.
That's inclusive this conference call. Thank you all for participating coming out this guy.