Q2 2020 West Fraser Timber Co Ltd Earnings Call

Good morning, ladies and gentlemen, and welcome to the West Fraser Q2, 2020 results conference call at this time, Oh I'm sorry.

Remote.

Following the presentation, we will conduct a question then that's a session and many times during the call you'll be quite immediate assistance. Please press star zero for the operator.

During this conference West for you.

During this conference call, what Fraser's representatives, well be making certain statements about potential future development. These forward looking statements are intended to provide reasonable guidance to investors what the accuracy of these statements depends on the number of assumptions and is subject to various risks and uncertainties.

Actual outcomes will depend on a number of factors that could affect the ability of the company to execute its business plans, including those matters described under risk and uncertainties in the Companys annual Mdna, which can be accessed on the west Fraser's website, what to see dark and our supplemented by the comp.

These quarterly Mdna.

Accordingly, listeners should exercise caution and relying upon forward looking statements.

This call is being recorded on July 28, 2020, and I would like to took off the call over to Mr. ferrous. Please go ahead Sir.

Thank you silly hi, good morning, everyone and thank you for joining our call. This morning with me is our Chief Financial Officer, Chris Rustic and Chris Mckeever VP is sales and marketing and several other members of our West Fraser Executive Chair.

And I'm going to turn the call over to Chris roster.

Thanks, Ryan Good morning, everyone and thanks for joining the call. This morning, I'll briefly review the Companys financial performance for the quarter, and then Ray will provide a business update and some comments on outlook.

We reported adjusted EBITDA for the quarter of $184 million as compared to $127 million in the first quarter of 2020.

The most significant impact within our lumber segment, where adjusted EBITDA increased by $50 million to $156 million.

Panel results were $20 million of adjusted EBITDA or 12 million higher than the prior quarter.

Oh that increase of 12 million 7 million relates to the insurance claim proceeds on the business interruption claim indicated in our results <unk>.

Pulp results were largely in line with the prior quarter.

Turning to the income statement operating earnings were $83 million, an increase of 70 million from the 13 million recorded in the first quarter.

Finance expenses declined 3 million as we repaid $325 million of debt in the second quarter and variable interest rates were lower.

Net earnings were $48 million compared to 12 million in the prior quarter.

Throughout the quarter, we were able to maintain a solid pace of lumber shipments during some backlog for Q1 relating to rail blockades and taking advantage of sales opportunities in Asia.

The quarter progressed stronger than expected demand industry, curtailments, and a low supply chain inventory position led to increased prices.

That's why p. experienced the price increases well in advance of SPF, which was more delayed.

The downtime that we took in the quarter has been reported in our Mdna.

Stepping through our results the impact of price relative to Q1 was a benefit of $33 million to adjusted EBITDA loss.

Lumber contributed $23 million of this change.

That's why P. was a significant benefit but was partially offset by lower realizations on SPF.

Panels pricing was slightly positive as plywood pricing increase toward the end of the quarter and rising pulp prices from earlier in the year flow through.

Volume was a modest benefit as SPF volume gains over Q1 were partially offset by a pullback in panel shipments.

[noise] costs were also better by 13 million costs in Canadian lumber were slightly better versus Q1 and were significantly better at U.S. lover, leading to an overall impact of $20 million in costs in the lumber segment.

The first part of the prior year, we experienced multiple disruptions that affected our operating rhythm.

Stronger demand less disruption from capital in progress. If you are weather related impacts to operations all contributed to improved manufacturing performance in the U.S.

Right well touch later on an update on a project that Mcdavid, Florida.

These improvements were partially offset by cost headwinds in pulp stemming in large part from unscheduled downtime.

As previously indicated we recorded a $7 million benefit for business interruption relating to the 2016 west Pine incident as part of a final resolution of the insurance claim.

Reviewing our key metrics for the quarter lumber production was 77 million board feet or about 5% lower than Q1.

Shipments, however were 165 million feet higher as Q1 backlogs for clarity and we capitalized on markets that improved over the course of the quarter.

As previously mentioned price improvements in syp panels, and pulp improved cost in lumber and a slight increase volume all helped lift consolidated results and consolidated adjusted EBITDA increased to $184 million.

Cash flow from operations in the quarter was $439 million benefiting from improved operating results the seasonal draw down in log inventory and cash tax refunds received on account of 2019 results.

Major capital projects, most notably Dudley remain on track and capital spending was in line with targets.

Net debt to capital declined to 28% EUR 939 million as we repaid 325 million up debt and accumulate an additional $27 million of cash.

You really have duties on deposit at quarter end stand at 436 million U.S. dollars.

Subsequent to quarter end, the DRC announced yet another totaling up they are one which would mean the adjustment in rates will not likely occur until at least sometime in November.

Turning to liquidity, we ended the quarter with $800 million available liquidity at attractive maturity profile with no near term maturities and ample room on our debt covenants with that I'd like to turn it over to Ray for an update on business conditions and a recap.

Thanks, Chris I'm looking at the demand grass for our products I think we can say that there is nothing there that adequately describes the first half of 2020.

And more so how Q2 is unfolded and although as Chris mentioned.

We are currently experiencing strong demand and associated pricing for our web products. It's important to reflect how Q2 started.

First in Canadian SPF lumber, we started into Q2 and experienced a rapid and deep reduction demand.

Beginning in early to mid March for.

[noise] frankly, four to six weeks there was minimal tell more snow lumber sales and pricing drops quickly to overcome by over $150, a thousand which led to significant and very quick unprecedented lumber curtailments.

Our Vichy lumber manufacturing was effectively curtailed for the month of April.

As the supply chain FC domain and as downstream demand did not fall off as much as anticipated pricing rebounded surprising click the strong levels.

And while Offshores down somewhat year over year export to Asia remains an important unreliable customer.

[noise] Aspinwall Sps lumber sales plummeted in late Q1 in early Q2, we did not see the same pace of slow down and our U.S. southern yellow pine business. Although we did reduce production for a period of time and you asked me quickly ramped production backup to meet surprisingly strong demand driven primarily by robust repair and remodel and a resilient Uh huh.

I was construction.

I thought I would comment on our plywood business as well.

And then I will remind everyone on the call as I've done before our plywood as an integrated extension of our lumber business in Canada.

Where we're able to extract the highest value from the trees of which we harvest, but the most part our plywood is essentially a Canadian business with more than 95% staying in Canada.

Over the past few decades. This business has been very steady and operating with little to no market downtime.

And outbreak collapse in demand due to construction shutdowns in eastern Canada led to a similar MKS supply chain and resolves had an unprecedented downtime throughout our operations.

Imagine pricing have rebounded strongly after the restriction that construction was lifted primarily in Ontario come back and the turnaround imply like has been swift.

With regards to Paul as a result of the impact of sawmill curtailments in British Columbia.

Ah, which led to caribou pulp taking approximately four weeks of fiber related downtime.

And that shot was extended by roughly one week to bring forward maintenance for these activities from this fall the.

The mail restart after being down for more than five weeks went very well.

In contrast to Paul a as we went into coal that's the wood products business wasn't relatively good shape with what appear to be rising housing starts solid U.S. consume restraint.

And reasonably lanes seasonal inventory strive to supply chain and of course low mortgage rates.

Pulp business. However, after 2020 with world inventories high kind of slowing China.

And then with a pandemic outbreak a collapse in printing and writing demand.

As all taking an ongoing rebalancing a shake out in the industry that appears to be currently underway.

Although we see the next few quarters will likely remain a difficult pricing environment involved we remain constructive on our longer term outlook for both for growth in world pulp consumption.

And as Chris mentioned, we enter Q3 with all of our operations running at near capacity for and ramp up after capital.

Operationally has been a very challenging and disruptive started the year as our operations adapted to an ever changing landscape as a result, or the impact of the covert pandemic [noise].

No one can accurately predict what the next few cars will look like as demand the ebbs and flows, particularly with the impacts the pending that makes dolan known at this point.

However, I think it's important to note that the underlying fundamentals that we see our for wood products business.

Housing starts only recently returning to above the level that was previously seen a cyclical lows.

And 1980, there were 75 million more people in U.S. then there are today.

All adding to a formation deficit that will need to be felt.

Let's start continue stage.

[noise] the largest cohort of potential homebuilders in buyers are just entering the market. The 20 to 32 year olds as reported by most of the major homebuilders and our should finally, showing signs of moving into their own homes, taking advantage of exceptionally low interest rates of course.

And on the supply side, we believe the industry as a much needed ability to respond to the supply or does it demand in the past couple of years BCS further reduce production by more than 2 billion feet a permanent reduction.

Well production cuts coming on more slowly than expected in the U.S. set of [noise].

[noise], so with that I just wanted to touch briefly on our some of our capital has done. This in the last couple of calls, but just a just a bit of a glimpse on some of the progress are making the U.S. I was on our growth and margin improvement projects and as Chris mentioned, recognizing that 29 came as a very disruptive at a significant renovation here.

For West Fraser in the South.

And on although not what I was some difficulties were pleased to see the gains beginning to flow through the mic David Kantor line replacement is a good example.

After a month of downtime and to be clear.

Not all of our project started out this well. This project came up very quickly and up to speed is now exceeding our initial pay back assumptions more lions better grade significantly higher yield recovery and of course lower cost.

Although we had made some good gains our operating platform in the U.S. says as in Mcdavid, we continue to see ample runway for further improvement.

With respect to overall operations and why we still have much more work to do we're encouraged by the recent trajectory in both manner, if manufacturing costs and productivity of both our and B.S.K., Paul and our U.S. says the lumber businesses.

Which complements our strong Canadian what products NBC TV N P operations.

With respect to markets it would be great to say the worst is behind us and that market volatility will improve.

Well, we expect that continued bumpy ride and are focused on being able to adapt as necessary.

Before I turn it back to the operator.

Notwithstanding stronger than expected markets and improved financial position overall, our priorities at West Fraser remain unclear and unchanged, one health and safety of our employees and the communities that we operate in.

Secondly, executing that is operationalizing, achieving the gains from our prior capital and operational excellence initiatives and thirdly, maintaining a strengthening a prudent balance sheet.

And while there is short term uncertainty, we see long term fundamentals remain strong and our geographic and product diversity leave us well positions.

Finally safely and efficiently our employees continue to adapt to an ever changing market.

Continuing to improve productivity and lowering cost in almost every segment and I. Thank them for their hard work and commitment to our success with that I will turn it back to the operator for questions.

Thank you Sir.

Ladies and gentlemen, if you do have a question. Please press star followed by one on your Touchtone phone you will hear Athree, Tom problem acknowledging you request and should you wish to withdraw your question simply press star followed by too and if using a speaker phone. We do ask that you. Please lift the handset before pressing any keys. Please go ahead and press star one.

Now if you do have a question.

And your first question will be from Sean Stewart at TD Securities. Please go ahead.

Thank you good morning.

A couple of questions a rate I guess I want to start with.

You saw mall portfolio first and I'm trying to gauge your ability to add extra supply and if your system.

In response to the strength, you're seeing in markets right now and.

Not sure if you can put some numbers around additional volume to come from Mic David and.

Potentially some of your other U.S. sense assets, but.

Any detail you can provide with respect to your ability to add supply and more broadly.

It's on the industry's ability do tad supply and so the strong market.

Yeah, Good morning, Sean.

I'll do my best here, maybe crisscross to Ken Ken as chirping here as well, but so you know just you know broadly.

You know a across you know the landscape.

You know a.

So first you know I can you know I think in Western Canada, we have pretty good understanding of British Columbia in Alberta, and I would say, there's little to no upside in anyway anyone.

You know improving demand, particularly you know us I don't see us.

Being able to supply additional volumes.

From our areas and we were working hard to maintain the volumes that we house.

You know I'd say that you know our perspective I would be that there's little ability and the balance of Canada. I mean, there maybe a few spots where there's some minor in ability to increase supply, but I think thats pretty.

Not material.

And then really when we look across the U.S., we I mean, the only area and of course, that's where we're you know a heavy part of our focus is the U.S. So ER.

And so on a I'm I'm hesitant to put a number on it but certainly when you when you look at our projects or I'd say our projects are primarily based on improving margins which are.

Higher you know better recovery ISO lowering our wood costs, improving great you know better productivity and I'd say growth is there, but it's not a fundamental driver of how we approach our cat, but let's say, it's a piece of it so.

I would say that in the U.S. I was I think it's going to you know we're going to I think our expectation would be to continue to grow our volumes.

At a at.

You know at a certain rate I think if you look back at the last few years, probably pretty good indication of kind of where where we're going in the future and and I guess, we'll see where that goes but but I think it's I think production growth comes on slower than what you might expect in the U.S. out and I think you know I think we're going to take our time as we grow at our portfolio.

What we're focused on is making what we have a really good.

And and growth number two.

Chris sitting on our summer heading I think the last couple of years into U.S. South when you look at the production growth overall the industry. It does does come on slower and comes in small increments.

Okay. Thanks for that context, and my second question is regarding capital allocation priorities.

Looks like you're keeping your capex guidance studying in 2020 and.

At present.

The near term focus is further balance sheet deleveraging.

But as you look at the 2021.

Can you provide some context on how you're thinking about prioritizing.

Discretionary Capex M&A returns of capital to shareholders are you thinking about those options going forward.

Thanks, Sean.

Yes, So I think I think you know we got a we got to keep in mind here I think on the line on the last call. In Q1, We said you know where were nine nine weeks into this or something like that when we were when we were last talking at the end of at the end of April or something and it feels like now we're about nine weeks into a what's been a pretty.

Good market so.

It's been a very rapid recovery, but it's been short in duration. So far so I think whats important is we don't get ahead of ourselves in terms of.

You know assessing a are predicting how durable this is the more durable it is the better.

But there's just a.

A challenge in the visibility to how how sustainable is this going to be for how long I think we'll be guided over the longer term by that approach to allocation that we've always talked about is we need to make sure where modernizing our mills to be efficient and making prudent investments.

They are necessary or we need to make sure we've got financial flexibility on the balance sheet to.

To pursue growth when it's there and to provide returns to shareholders. So we're going to try to strike a balance for that over the long term.

You know try not to to make that a quarter to quarter decision and I think we just have to keep in mind that it's still early days of Ah of how this is unfolding and I think it's a little premature for us too.

Be thinking too far out yet in terms of you know what does what does next year. What does next year look like in terms of capital I think we'll be having those discussions here over the next several months.

Okay. Thanks for that Chris I, that's all I have thanks guys.

Thank you.

Next question will be from Mark why don't I BMO. Please go ahead.

Thanks, Good morning, Ray Martin Chris running.

Chris I'd like to just come back on that capital allocation question more from the from a balance sheet perspective can you give us some sense of.

How you're thinking about debt reduction what level, you might like to take that.

In two.

Thanks, Mark So I you know I think one of the things we keep in mind is is whether there's a few things I guess I would I would comment on is this is a this is a seasonal business right with the log inventory build in the first quarter and so we have to keep in mind building building up that liquidity through the.

The middle part of the year to get ready to get back into logging season, which is about to about to resume here.

And you know we consider.

The investment grade rating as you know one important part of of how we manage the capital structure and so.

That's partially going to guide our.

Decision, making as well as is making sure that we're growing earnings that were de leveraging Jeff reserve to preserve that rating and preserve the confidence of the agencies that are that we can remain investment grade.

So in terms of putting a putting a dollar figure or ratio on it.

I don't know that that we're going to do that today and I think in this market. It's a little a little tough to do that but I would say those would be two of the main things that are going to guide our decision making.

Okay, and then I wonder just kind of toggling over to M&A or if either you or re want to give us some sense of what you're seeing kind of available in the market what valuations look like it seem like you know if we go back to 2018 valuations.

Has started to get pretty frothy for.

Sawmilling properties in the U.S. south.

Well good morning, Mark.

I'll try and do that Ted.

Well, you're right it things they get very frothy and dad <unk>.

I think with that.

There's always something going on I'm, Mark and I would just say that Oh, you know I've just kinda back.

That capital allocation balance sheet I, you know I think we want to be conservative and not get her head ourselves I think Chris when he said, we don't want to get ourselves I think thats really yet and so that we and so so you can take advantage of those opportunities in M&A when they come up.

I would say, it's relatively quite out there today.

And I would say.

That people are remember the valuations of a couple of years ago.

They look at the fundamentals I don't think it said.

I don't want to be speculative, but we've had record pricing in a into it all and in the last twice in the last two years and.

No I think that speaks to kind of.

Attention in the supply and demand. So I think when we think about the long road that we've taken to get here on you know.

From the last recession.

Yeah, I expect you know people unless there and significant financial trouble, probably have still pretty healthy expectations of what their businesses, where thats kind of how I'd leave it but I'd say, it's pretty clear it's relatively flat there at the moment.

Okay, just one more on the M&A side Ray there are a couple of idled saw mills in the U.S. south with with European technology that a lot of people struggle with in the North America market any view on that technology.

No.

I think I'll stay away from that one mark Thank you.

[laughter] last question I have for here Ray is that maybe you could talk a little bit about the labor situation, particularly in the U.S. south.

It is labor ban at all a bottleneck during the pandemic.

Good question Mark.

Labor continues to be a challenge in a in the south.

I wouldn't say, it's a it's a different than it was I think it's maybe a slightly different challenge of with but but I would say for the most part.

It hasn't been an impact to us and U.S. centers I think there are certainly you know we're back into and have been back into hiring mode.

In certain regions of the south and.

Mike I think that wouldn't be the challenges that with so many people off work, it's been a bit of a challenge to find people that want to come to work, but but to this point, we've been able to man up and ER and operate our mills and normal. It's just it's always seem to be challenging this out.

Okay, but this is issue that we've had where you know you've hit pretty generous.

Kind of.

Pandemic payments of people you'd have you haven't seen that as a disincentive to workers that has made it hard for you to get enough labor run the mills is that fair.

[music].

It's yeah I would say we're aware of it it is a challenge.

We're able to we're able to find enough people to operator mills, but yeah, I would say, it's not an easy process.

Okay, all right that's fair enough thanks right.

Thank you.

Next question will be from EMEA Patel CBC capital markets. Please go ahead.

Hi, Good morning, Ray we saw the a the two by six and to buy 10 grades up substantially in the south in Q2, I am I know in recent years.

Been focused on increasing the to buy for mix could you remind us where your mix stands today and how flexible are you to be able to take advantage of some of those spreads when they arise.

Yeah, good morning here.

So.

I'm not sure I can provide much fun I can't provide any color on what our current Max as I mean, what I would say is that what we are you know.

A lot of our.

Capital that Weve deploying our mill.

What we you know we try and do it in a way that provides us the flexibility to meet.

The ever changing market demand, but it but.

There's only so much room to move that but but we certainly have some ability and.

So.

You know I had to what my takeaway in the two by six to attend is set at that's.

Great signal because it typically means that housing and other construction activities are strong beyond.

So.

So I would say not not a great answer your question here, but.

Sorry about that.

Fair enough right and then I just wanted that turned to the duty.

Delay.

This keeps getting pushed out does that mean that the next Judy revision would also get delayed so such that you still get the sort of 12 month window of the lower duties or is there risk that if they keep pushing us out that that period of.

Lower duties, which was supposed to last 12 months might only be six months.

We're actually investigating that issue right now it's not it's not clear.

What what happens there whether a our two would get extended such that.

You know rates from a our to take effect on a delayed basis or not we're grappling with that question with the trade lawyers right now actually.

Okay, great. Thanks, Chris that's that's helpful and just as another one for you.

I know you guys had a modest inventory write down in the quarter one of your peers reported.

Pretty substantial inventory recovery.

I know there's different accounting treatments, so should we expect.

Current lumber prices, a similar large inventory recovery out of west Fraser in Q3.

Ah we weren't carrying very much in the way of inventory reserves at the end of the at the end of the second quarter. So there was there was very little write down.

In the aggregate applied to any of the inventory, given where where pricing was so theres not.

The short answer is there's not much there that's to reverse.

And I.

Yeah I.

I guess I would leave it at that that these prices inventory write down should be less of an issue going forward.

Okay, Great. That's a that's all I had I'll I'll turn it over thanks.

Thank you, ladies and gentlemen, as a reminder, if you do have any questions. Please press star followed by one on your Touchtone phone.

Your next question will be from Paul Quinn RBC capital markets. Please go ahead.

Thanks, very much good morning rain, Chris I'm, sorry question just question on lumber order files, where they sit right now and and where are you pegging current inventories in the distribution channel.

Well, we're fortunate I can give a great answer, but we're fortunate to have chrisman keever here, joining us false we're going to let him tack allowance pardon Paul.

Yeah, I would say that.

With regards to order files and the lumber side, we are about as strong as we have seen in the last two or three years, both in the U.S. and in Canada on that side. So.

We've made a choice of extending our files there.

With regards to inventory again, you know it Oh, we can only really tell by what our customers are telling us in hand, because in a lot of visibility but.

You know our sales folks are spending three four or five hours a day dealing with.

Customers that don't have any inventory and.

Whether it's in plywood or whether it's in lumber everybody is still very very short, including the box stores and.

So from what we can tell I'm still very lean what they're telling us they don't expect that to change in any you know in any particular.

Too quickly and then the other pieces, we really feel that housing is is beginning to kick in and we didnt see that in the early part of the pandemic and we're really beginning to see that now so our expectation is that we might see our in our slow down a little bit but continued increase in housing.

Okay, and then maybe a question just on the capital allocation.

It sounds like you're going to be.

Prudent on Capex plans.

And M&A, so that's out there as potential opportunities.

I guess, a focus will be a dead payback.

Debt pay down, but where do you where you sit on buybacks.

At that price I mean, if I look at West Fraser share.

A lifetime lumber with at this price it you know it significantly higher and.

Second pretty good opportunity right now.

Yes, so I'll start and then Ray can jump in if you want I think you know as we kind of alluded to earlier kind of nine weeks into this recovery.

Our or thereabouts and so.

The onset of this was very quick and the recovery of it was very quick and.

I think that gives us pause with with respect to getting too far in front of anything.

We this has been a series of several tough quarters, I think starting towards the back half of 18, and certainly last year was a very challenging year.

We're encouraged by the by the second quarter.

I think theres a ways to go yet in terms of deleveraging and rebuilding financial flexibility in and.

What kind of let that govern our our actions.

For in the near term so ray anything you want to add to that I think thats great.

All right that's all that that's like a thanks Paul Thanks.

Thank you next question will be Mark well at BMO. Please go ahead.

And just few follow ons.

First any sense of what we should expect in terms of a b C fiber costs in the second half of the year.

So mark.

You know, we do expect stumpage to come down a little bit a couple of box I think it is in October onest.

And.

I guess, it's probably a little bit early to see what's going on in the purchase would market, but tab.

You know I can tell you that from our perspective.

Notwithstanding a reduction in stumpage.

I think we're going to be.

I can only tell you what we're going it is we're going to be very thoughtful and be very reluctant to.

You know, we're going to want to make sure. We would prefer mills were going to try and do that in the most.

Cautious prudent.

As we can do that.

Okay, Colombia, British Columbia still as you know a very difficult to area to operate in general so.

Yes.

Secondly, just at a 23 million dollar project it make David can can you give us some sense.

As it stands right now what you think the return on that project looks like.

So I'm going to just I'll.

Good question.

You know I can answer two ways, Mark just to be vague, which would be I would say are higher you know a strategic capital you know certainly tends to be a longer longer payer paybacks.

And then I think we've talked about that in the past typically in this range anything it all kind of in that.

Less than.

This would be a bit of an exception I'd say anything kind of less than five or 10 million were typically in the two year range and you know the mcdavid one.

No.

As a certainly a shorter payback than that our longer term strategic stuff. So I would put it in and that kind of somewhere between one and three year south.

Yeah, that's fair and how much of this kind of stuff is left that I remember when you guys bought Gilman you talked about prospectively, some pretty big improvements that you thought you could make it gilman overtime.

So I think someone asked me that a couple of quarters ago, but what inning wherein.

And so you know I would just say that that that we have we see lots of opportunity.

You know in the U.S. has continued to improve our operating platform. So you know and relatively both in longer term strategic stuff and in shorter term.

Higher payback stuff, so you know Merck.

We still think we have lots to do.

Okay and that last one for me as maybe for Chris Mckeever and that is to just give us some sense of kind of the conditions in the Asian export markets, what volume into those markets looks like and then maybe some sense of what you're selling into that mix I think one point youre, probably so on a lot of beetle kill I'm assuming.

Yeah, there's lots of that the cell now so just a sense of.

How much and what the mix would look like going into those markets.

Sure Mark good morning.

Well, what I would say is coming out of Q1 in into Q2, we were pretty aggressive in Asia and China in particular.

And a lot of that was low grade.

We were probably among the first to go back in with the pandemic.

Since that time, we backed off in a lot of that's due to Europe was kind of out of that market for a little while that they had container issues Ed vessel issues.

They are back there with the European spruce, which I'm sure everybody on the phone is aware of.

They're very aggressive both in lumber and logs.

We've chosen to back out of there is somewhat but still keeping a meaningful presence so I.

I would say demand in China is good I would say pricing today is poor.

We're staying there mainly in low grades not in higher grades because.

Yeah, there's really not that great a return on that side.

I would say within Japan.

It's been hit quite hard both recovered and we think the postponement of the Olympics.

Hey, it's made them cautious.

Again, we're we're staying there were trying to increase our market share but into a smaller markets. So.

I think that we will continue to see.

A strong demand out of China, Thanks can be competitive with Europeans for a number of years, but theres spots, where I think we can fit and then Japan I think we'll see it recover over the next.

Six day months, but.

But we remain in both markets and the rest of the world is.

A bit spot here in there so.

That's helpful. Chris Yeah. Good luck in the second half of the your guys. Thanks. Thanks Bert.

Thank you.

And at this time Mr. ferrous we have no other questions. Please proceed.

Well. Thank you very much operator, and thank you for everyone on the call for joining us and we will look forward to talking to you in Q3. Thank you.

Thank you Sir.

Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do assets you. Please disconnect your lines.

[music].