Q2 2020 Ag Growth International Inc Earnings Call
Hi, My name is Pam and I'll be your conference operator today.
I'd like to welcome everyone to the EG second quarter results release and conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, albeit a question answer session.
We'd like to ask a question. During this time simply press Star then the number one on your telephone keypad, if he'd like to withdraw your question simply press Star then the number two thank you Mr. Jim could you may begin your conference.
Good morning, Thank you for joining Stephen I discuss Q2, and our outlook going forward [noise].
Our businesses performed well through an unprecedented quarter. Despite all the issues associated with cold crisis, and most directly manufacturing closures and Todd.
Sales were down just a 11% from Q2 2019 coming in at 261 million.
Adjusted EBITDA at 41 44.1 million was down 14%.
Oh, good related items impacted costs in the quarter.
Our gross margin also increased in the quarter year over year to 32.2% due to favorable favorable product mix. The strong North American farm environments stable commercial margin profile augmented by strong performance in India.
In substantial improvement in Brazil.
Our resilient results in Q2 and going forward had been directly driven by the outstanding performance across our teams, which allowed us to continue operating where and when possible.
As I've outlined in prior communications, we moved very early in this crisis to develop and implement robust safety protocols across our entire operation from standard P. P E robust tracking tracing in every location.
The face of a wall of uncertainty conflicting and changing advice from the professionals.
Rapidly adjusting markets. Our team responded with com deliberate actions to maximize safety minimized uncertainty across our entire business.
Now we have been pushing hard over the last number of years to diversify our business from a geographic and market basis to move away from regional exposure drive demand drivers closer to global food supply infrastructure build and maintenance.
Become an integral partner and that global ecosystem.
Our historical and in particular, our performance in 2020 has highlighted the resilience for business and our positioning or end markets.
That track record extra resilient business.
<unk> regional weather events through economic cycles that we cannot global pandemic to that last.
Now turning to our regional review of our operations.
Our farm business in North America, Romey remains robust our investments in quoting tools dealer training dealer Onboarding infield inventory product development customer service has positively impacted our results and our growth in the farm segment.
We continue to focus on expanding our relationships with our dealers as well as growing our dealer base in key regions to ensure that we have the products service and support needed by our customers in all regions.
Demand and then take it to farm level in North America has remained strong throughout the past six months as dealer development and expectations for crop volumes as a result resulted in robust demand for storage.
And portable equipment.
Overall farm backlogs are up substantially year over year heading into the back a year.
[noise] North American commercial has been more impacted by cold related delays in projects.
Although these delays and postponements had been packet projects as our customers focused on operations and working through cobot related uncertainty said their markets. Our diversification across five platforms has resulted in a backlog higher than at the same time in 2019.
We expect the covered will continue to impact activity, but we've seen initial signs of projects resuming with quoting a design activity picking up.
[noise], India continues to had elevated code activity, which was which has impacted rice millers throughout the country over the last four months.
Our facility was closed for roughly three weeks.
And many of our customers operations have been close for much longer.
All of which has resulted in a temporary reduction in order intake volume.
Despite the challenges in the quarter sales were flat to the prior year margins remain strong as we made significant progress on lead projects should positively impacted margins going forward.
Is the country opened up later in Q2 order intake increased and backlogs are again robust in India is no activity comes back comes back online in the rice crop remains in good shape.
In Italy, we completed the investment of our new production line earlier, this year and I've seen the benefit of increased capacity productivity, having a positive impact on operations and margins.
Although activity in AMEA region has been impacted by travel restrictions similar theme uncertainty, causing delays in projects backlogs are also up substantially year over year in this region as we capture sales an expanded footprint sell sell more complete projects with integrated storage and handling.
Our operations in Brazil, we're also impacting the quarter, including a two week shutdown unrestricted cash need additional periods.
Despite these headwinds we're seeing excellent momentum in Brazil was sales climbing to record levels.
Positive EBITDA in the quarter, representing a nice delta from a subdued <unk> Q2 in 2019 and backlogs are now up over 60 up 60% year over year.
[noise] farm sales in Brazil to strong aided by strong crop on increasing propensity to store I crop at the bottom level.
We've also completed lean projects in Brazil to increase productivity provide better detailing our individual product costing rolled out an automated quoting tool to decrease according to better serve our customers.
Our technical technology business continues to come together, we moved the entire operation into a new facility in Kansas City over the last few weeks. This new facility provides spaces substantially increase our I O T hardware assembly manufacturing as well is that a dynamic space to bring our developers and multi device engineering teams together as we continue to map out the.
Expansion of the products and platform.
We continue or do you several programs to facilitate expanding our sales and onboarding farmers to the out to you.
Platform, including sales through our dealers direct sales hardware as a service data subscription options and financing options normalizing for the changes in the sales methods, our retail equivalent sales increased 80% year to date as at June 30.
We are entering or a critical time now as farmers turn their attention harvest and acquired capacity into it was properly condition stores and market that crop.
[noise] during the quarter the scope the require refurbishment in.
In the <unk> troubled the commercial project previously discussed increase significantly, adding 6 million to age you guys cost to complete the project.
Our assessment of the original and subsequently amended scope was based on extensive assessment at the time whoever the issues leading to the increase cost would you be issues that cascaded more.
That was expected by our team and consultants as well as substantially higher cost for all associated materials Labor and third party expenses.
This site has moved to commissioning phase and as such we are satisfied. This this increased amount is a comprehensive estimate of the entire project.
As previously reported because of this disappointing project was identified early in our investigation, we changed our team processes and structure to quarantine the the cause eliminate similar events and restrict us to a onetime event.
At the end of the day. This issue is accelerated a restructuring which has raised our expertise improved our design engineering sales of project execution skills.
That comment I will turn the call on for Steve for more detailed review the core.
Okay. Thanks, Jim.
Sales and adjusted EBITDA in the second quarter up 2200, 61 million and 44 million respectively.
Her to 293 million and 51 million in the prior year.
Robot phone demand in North America, and solid results in Brazil, EMEA and India contributed to a strong performance in Q2 2020, despite the headwinds presented by the merchant Corbett 19.
Our results reflect result linked up our business in the face a cold the challenges as well of the benefits of diversification across geography than product line.
Our foreign business remained very strong if you look responded to robot and user Paul and expectations of a high yield high volume harvest primary demand driver for age yacht.
Offshore.
The helping you order intake remained steady despite the significant impact at Cobiz in our primary hub countries, Italy, India, and Brazil, and backlog I think difficult prior year.
Our results in Q2, 2020 reflect a very strong operational performance across our businesses and geographies.
Gross margin increased 32.2% in 2020.
From 31.6% in 2019.
It is significant that the gross margin percentage was achieved despite cobot related production interruptions at all of our international facilities and several facilities in the U.S.
As a percentage of failed or adjusted EBITDA margin increase that significant 570 basis points from Q1 2020.
And normalized for the investment in our emerging technology platform with higher than Q2 2019.
Merchant growth what resulted lucky tenured strong.
Aren't performing.
Well a sustainable increases in offshore margins that resulted largely from strategic capital project in EMEA.
Problem momentum in Brazil.
With respect to outlook, we expect adjusted EBITDA in the second half 2020 will exceed 29 at the end result.
At June Thirtyth 2020, our farm backlog were 25% higher than the prior year.
The strong momentum has continued into Q3, yes favorable crop yields and volumes are expected in both Canada and the United States.
Likewise international backlogs remain strong at levels consistent with the prior year, despite macro corbett related uncertainties.
Overall, our total sales order backlog of 7% higher than a year ago, and we remain positive <unk> in the second half a 2020 <unk> and beyond.
With respect to balance sheet.
Previously, we amended our credit facility that people 2020 in light of the substantial uncertainty caused by the emergence of Corbett 19.
Although our talk about tests are currently suspended our net senior debt to adjusted EBITDA ratio of three times remain well below the pre suspension required that 3.75 times.
And we expect to racial decreased further in the second half of 2020.
In April 2020, we also expanded our credit facility to add flexibility, an additional liquidity and out of that June Thirtyth 2020 had 184 million Undrawn revolver capacity left at 100 million dollar untapped accordion.
With that I will turn it back to Pam for questions.
Thank you ladies and gentlemen, we will now begin the question answer session should you have a question.
Please press star followed by one and you touched on mountains, you'll hear three Tom Tom acknowledging a request and your questions will be pulled in the order. They received should you wish to climb from the billing process. Please press star followed by Q.
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Your first question.
Your first question comes from CICC about let's see IVC. Please go ahead.
Hi, good morning.
And your <unk>.
So.
Maybe want to just start off with theory work suit so the total.
Rework estimate now is 20 million.
That's what that's right yep okay.
Okay.
And maybe just talk a bit about.
What led to this increase in.
You know could we see the same issue pop up but I'd other projects.
Yeah, I think <unk>.
The answer is no we didn't mean.
We don't expect it to pop up elsewhere and per my comments you know we've changed made many changes and to let me just a one.
20 year history is a onetime events and it was a <unk> an error or in a design elements that Oh, we cascade. It ended up cascading up throughout the entire project so while with initial stages assessments.
We are [laughter] had been limiting that a that impacted on a project cascading through the entire project. So.
Obviously, a <unk> a disappointing results here and but I'm very satisfied that the change we made on that this too to this one time event.
So this was something on the design side for the specific project is up that's right.
And one is this.
Project expected to be completed you said you you're moving into commissioning phase now one is yeah, there's certain <unk>, yeah. So literally a in commissioning of the project over the coming days here. So.
The from our perspective sod been installed is substantially complete.
Okay, I guess, what I'm what I'm.
Thinking about like so when is it and when when does decline expected sign off in us and really how confident you're going to be no further rework costs in third quarter.
Yeah, that's that's happening right now and very confident that this is the end of this Ah. This project, we can put it behind us.
And reap the benefits from a a changes we've made an acceleration on I'm not on a lot of changes we've made and look for.
You know salvage the deposits from an event like us.
Okay.
And also wanted to ask about.
Brazil, you know sounds like things are ever the improved there.
You talk a bit about you know capacity utilization of the plant currently.
What products are you a manufacturing there and and what else.
Else is going to come out of this plant.
Oh, we've we've got lots of capacity on the team.
The last quarter, so in terms of while increasing the output of that not not coming close to capacity, but increasingly open to still.
Allergan and doing doing that while we were we were shut down for a number of a number of weeks and and restricted a in terms of or.
What we can do in the plan, even when we brought people back on.
Yeah, a lot of some of our protocols you know obviously involve a certain amount of distancing so getting <unk> temporarily impact the capacity to plant, but no. We've got lots of room left to.
Capacity perspective sales in the backlog is is high.
But but all equally so is the pipeline.
And expectations for continuing the momentum of those cells. So you're seeing very nice improvement in <unk> fundamentals and gain market share in you know in brand awareness and in execution of projects just.
Incremental improvement on on every <unk>.
Yeah, so running it.
30% capacity utilization and.
What do you think the EBITDA contribution would be like in 2021.
Yeah, well well I'm no we haven't mapped out exact number for 2021, Steve Yeah, but you know it's it's positive now and we expect just incremental growth and not getting to our margin you know a similar margin that we have and.
You know blended basis across the rest of the Jack.
Okay.
Bob I'll leave it there thank you.
Thank you.
Your next question comes from Steve Hansen with Raymond James. Please go ahead.
Yeah. Good morning, guys I'm just wanted to touch on the margins here, if I could briefly a very strong performance.
Just curious how we should expect the blended margin to look going forward I understand the farm side is quite strong as yet mix benefits and international said was also strong but I'm also where this can be lumpy. So just trying to a sense for how we should expect that margin profile to trend through the back that's still the card here.
Yeah, Hi, Steve it's a steep [laughter] the margins in Q2 were very strong.
I noted in my comments.
Opening its called sustainable margin improvements you know that michalik favorable with respect to the farm business being very strong in Q2, which is not unusual for acute two for our are far business to be or for our business that's to be more heavily weighted to the farm.
You know I think what what's most important if the margin against with me. It off shore, you know, particularly in Brazil, where that as Tim noted a incremental improvement.
Stronger sales higher market share a better execution all of those things are leading to sustained margin improvements and also noted in the Mdna was the capital project in Italy, refurbish there or replace their their storage been production line and and are reaping the gains a bit.
So there will be.
Obviously, some fluctuations quarter to quarter, but there was nothing in Q2 of 2020 that.
You know stood out at the unusual or not sustainable.
Okay. That's helpful and it just aren't sure drag or the technology platform, we've seen a number investments over the past two years or so and it sounds like the sales trajectory as well, but you are you are you going to continue invest in this for the next year and a half for two years before we start to see that drags speed.
How should we think about that drag relative to the growth profile.
And maybe just some context around you know how much further we how much more rapidly should see that script propel accelerate I think you mentioned, 80% of your remarks again.
[noise] Yeah, there's no good good questions who they are.
The increased volume and sales levels and changes in business it will.
The decrease that drag in the near term.
So we do we do expect established as a positive contribution to the business and in the near term and then you know it's it skewed is growing nicely right now and we've got a additional plans for maintaining that growth and that will bring a nice positive contribution to the business directly and indirectly.
Augmenting and our equipment sales building, our relationships with customers and dealers and.
You know the digitization or the and had been somewhat automation of our equipment is just a.
Just necessary, it's it's expected it necessary and part of all the baseline offering to look for products pretty much across industries, but <unk>, especially in into a equipment like ours. So it's something that we can we will continue to spend a good deal time on it we've.
No. We've made substantial investments we have a great platform right now we're focused on executing on that that platform capabilities and expansion of the product offering with what we have.
Very helpful <unk>.
Your next question comes from Michael Robertson with National Bank Financial. Please go ahead.
Hey, good morning, all our thanks for taking my call and congrats on the strong quarter.
We were a little surprised by the results in Canada.
Given that there were no production suspension I know you highlighted.
Income or commercial sales relative to a really strong you doing 20, nineteens, but you also to change increase season buying programs that resulted in some sales being moved in Q3 2020 can you talk a little more though those changes.
Several changes and maybe ballpark how much sales you expect to see moved from Q2 to Q3.
Yeah, Hey, good morning.
They're really two things up and our pockets within counter that are important one was the very late feeding we had in 2020.
The farmers got the.
Crop in the did well and then looking like a very strong harvest, but the timing of it in Q2 get impact Q2 sales.
The change in preseason buying programs was significant it was Ah.
A very different than prior years, where we would normally received our pre season orders in Q1 and begin to fill up in Q2.
Able to change in the buying pattern, but customer at their Boston.
Over the course of fiscal 2020 will not impact <unk>, but you know the reason one of the reason why our backlog at the end of June is its high because of late.
Ordering pattern orders received in June so.
Isn't that bullish you have the timing, it's a timing change from prior year.
You know you'll see the benefit of that in Q3.
Got it.
So.
You can't really expect an overall change in the air just just a movement from Q2 to Q3.
<unk>.
Okay.
Good point its expected record sales in Brazil in Q3.
Even the striking your international markets, including Brazil. So far this year are you still expecting those record sales or did you maybe realize some of that anticipated revenue a little earlier than expected.
Oh no no. It's Q3 is still still looking very strong.
With good momentum heading into the fourth quarter actually so.
No. It did no that was brought forward if anything some was pushed pushed out of but other Q2.
Hi, all that's great I'll turn it back in <unk>.
Thanks Ethics Michael.
Your next question comes from David Neumann with Chardan. Please go ahead.
I tend to see.
Turning to.
I just told me on the margins again not to beat a dead horse, but im just trying to understand well. These periods often give us an opportunity kinda like their cost structures and look at the Marin and and made it takes some permanent cost reductions overall was any cost actions that you took a dream to Q I and actually kind of dug down deeper that you identify.
Other cost savings that might be more permanent such that when we get in the back half here the margins could actually doing that.
HM My while I think you heard me talk to margin improvements and Steve talked to sustainable margin improvements.
It's through.
Quite a few of our regions. So you. We bought those were the result of of lean a new got new capital automation and lean projects that did did remove substantial amount of cost to make those those margins sustainable I think it you know you. We also know our our volumes or you know have.
I haven't changed substantially.
And in fact, you know backlogs are up so we need a the teams that we had been place up from from a design engineering, we actually expanding and and augmenting that team from a regional systems.
Engineering perspective, and sales getting the right salespeople night places so.
In order to two.
Take advantage and keep up with what we see is.
An improving conditions through 2020% 2021, so a good it's an excellent point, it's one that we're focused on in general making getting the margin improvements that we've talked about the last number quarters, but some some some earlier nordson. Good good recent results in in achieving those margin improvements.
Any any fuel cost benefits that the cascaded through this quarter or do you expect to I'm kind of hit up three Q4 Kinda thing.
I sort of David Yeah.
<unk> steel cost benefit steel a quarter or that will be in the second half.
Yeah, Steve was still has been you know we buy significantly in Florida markets does such a little bit different everywhere, but we'd we'd been.
Looking at and Opportunistically buying steel as much as possible as usual and so steel steel did have a did did contribute to some of the improvement in in the year, but I wouldn't say is any different than than any other quarter right now, okay, and then on international and two questions. One is on it.
That's one on one time more domestic but and international any change in sentiment I didn't see any pull in or push out I look they get a little bit a purpose deferrals, but any change in confidence or sentiment and <unk> and have you had it had any telltale signs that they'd be any cancellations amid the environment or is it improves.
No. There's no cancellations I'm you know you know our buy on something in our backlog is everything stayed in or backlog no. No change. There are there there was a pause there is definitely it was largely because of the travel restrictions are people couldn't get to sites and on a lot of the projects you need to be either due to do assessment to do.
Some of the design and.
Work, but so that that have impacted intake and pipeline for a number of weeks dot has started to to normalize I wouldn't be certainly hasnt bought back to normal yet, but you know that said we expanded the footprint, we're selling into expanded our teams and that just that expansion.
This is partially why we Scott.
Today, our backlogs are up substantially internationally.
Okay and last one for me just on the on the domestic Frank maybe I'm reading too much into this but Ah you called out new dealer relationships in the U.S. and and looks like you're winning new mandates down there is it because of the comprehensive land that you're offering or is any change in an environment that a you're you're winning these mandates or any any.
Is there.
No absolutely related to the oral expansion of our product lines and across the board. So I'm not long ago, our product lines were more restricted in the U.S. too to portable and then we've expanded over that time into permanent systems on the farm and then he can through all types of commercial.
Operations, so that that complete product offering and service offering and technology offerings absolutely.
Why we're expanding those may able to expand those those dealer relationships and adding dealers or do you think you're winning share there.
I do yep, Okay very good thanks, guys. Good result.
That's good.
Your next question comes from Michael Dammit with Scotiabank. Please go ahead.
Hi, Good morning, guys I wanted to circle back to that gross margin conversation warm or hot I mean.
Understanding you called out favorable mix and realize structural improvements you know you'd also did realize oh are there were a significant headwinds related to co. Good shot Dallas I'm in the quarter so presumably.
We shouldn't see the negative impact from shutdowns at least off the same extent going forward and it sounds a favorable mix will be sustained east through the second half. So I'm just wondering it again based on that type of thinking if we should.
You know as we sort of lot cold shutdown cost for the quarter. If we should think margin expansions should actually Peru for the balance of there.
Yeah, well here, Mike, let Steve <unk> I mean, a good question the.
Impact in Q2 Oh.
Oh that cannot be understated you know we had you know relatively lengthy shutdowns at all of our international plant.
And sporadic.
Protocol mandated.
Production interruptions in the U.S.
Shutting down production restarting no easy task.
And Oh, absolutely had an impact on margin the negative impact on margin in Q2.
Absent the interruptions, our margin would've been higher than it was to your parents of track to that.
Q3, and going forward, all other things being equal our margin will be higher than you saw in Q2.
Okay. That's crazy I mean anybody can quantify the impact of the shutdowns in the quarter just to give us it does.
Well really we provided guidance on the length of the shutdowns.
Two to four weeks internationally the shutdowns in in the U.S. were generally three to 10 days, but what <unk> there were several of them and what's important to note is.
If the shutting down and restarting.
You know what are your down for a week or three weeks you know to come back from a cold start a there's an efficiency.
I I can't quantify the.
Percentage impact on our margin, but I can't tell you that it matters it wasn't olin's significant event.
Okay, well, that's good color I appreciate it.
Maybe just a high lover higher level question for you guys need if I roll back the clock you know and I think we've had this discussion before you go back to call. It early days 29 gene barcode bid for the tree tensions.
Before the poor weather conditions in the U.S. content, suppose calling out for 2019 EBITDA of 170 million.
I didn't feel unreasonable back that in terms of expectation that I wouldn't I would think that in a normal world whenever that time comps that number would wouldn't necessarily feel unreasonable than to say I guess. The question is you know if you look at the business today.
Were in which areas do you guys see that most potential for growth or for a catch up you know having sort of been it impacted some date for the macro conditions.
Last couple of years.
Yeah well.
Yes, a couple of parts to the to the question there, but yeah. Our international business is I don't know if you can you call. It kept catch up for continued growth.
India's growing nicely you know brazils is essentially start up its growing nicely and EMEA continues to grow as well with with new new products new product a manufacturing.
And entering new countries new markets in those regions. So continued growth I mean, so far markets had been robots continued so sort of the catch up or you know there there's some delays the only.
The only real aspect is Ah.
Projects around you know globally, North America, and internationally, where that might have been postpone during cold and then you called out some catch up as people reassess, where where they're going to allocate your capital going forward otherwise I think it's a continuation of the path. We've been on is growth in each of the marketing platforms that were in.
Okay, great and and Tim just on that I mean last year storage the business and the U.S. is quite challenged given some of the conditions just give us a sense for the year to year improvement in that business.
Yes substantially different profile the last year from a weather perspectives in the U.S. and Ah I wouldn't say the political noise is has gone away, but maybe it's been normalized somewhat and so you know there.
Projects are moving ahead. There is there some some regions made is still impacted by by some of those are more in the political side trade trade tensions, but nothing the most part farmers.
And commercial continue invest in the facilities.
Hey, this this this year, we'll see large crops will see a and we have seen a good good steady demand in each of those categories each of those segments.
Okay, great. Thanks for the answers hasn't turned up.
Your next question comes from Andrew Long with RBC capital. Please go ahead.
Hey, guys. That's are having on the call I stress. This one I slept cash flow.
Do we expect a reversal and the working capital second how will the air and I'm just in general working cap has been kind of a cost draw down a few years and I'm guessing acquisitions also having impact on this but how should we be thinking about this like for like Hopper gosh conversion.
EBITDA for example.
Right so.
Typically for AG <unk>, our cash flow in the second half of that you're a stronger than the first up.
Due largely to the timing of a foreign sales and pharmacy.
You know we were out several question block ordered regarding pull bid and its impact on our.
Cash flow in working capital and you know we've been watching it very closely and I I.
I can tell you that our cash flow than in Q2 of 2020 were not significantly impacted by hope. It there was no discernible pattern of a change in cash receipts.
Going forward.
The use of cash in our working capital depends largely on.
A couple of things I guess, it's our approach so buying steel you'll see some lumpiness quarter to quarter. You know, we're very proactive on acquiring steel at an opportune time to walk in margins and walking our cost base.
Generally, though I'd be grow you would expect a usage a in working capital However, <unk> you're correct.
Last couple of years prior to 2020 with higher than than typical largely due to investments in.
Brazil for example, where we were.
Really creating a startup business.
Plenty of investing in inventory a financing tool that sort of thing so.
But the long winded answer I, suppose, but Q2 2020, we expect a favorable cash flows hope it hasn't been a significant factor in 2020 and going forward.
It will remain opportunistic on steel buys.
However, and working capital out would be grow there'll be a minor investment, but not what you've seen in prior years.
Okay. That's that's great. Thank you and then just still on cash flow.
What are the capex expectations for the rest of this year into next year like are there any new kind of investment projects that we should be thinking about as we kind of model that out into next year.
Yeah I know.
Got back saw your maintenance Capex remains unchanged as a percent of cells.
And then we've completed a quite a few capex projects over the last a number of.
Of quarters in years, and those there's nothing like sales in Brazil, or even the expansion and in Italy that we just went through there's nothing on me.
In the in the near term Oh on our plate.
Okay. That's great that comes out unless X next couple of quarters.
Okay, that's great.
And then just lastly, we've seen some pretty big fluctuations around the U.S. dollar.
Just you know in the past couple of weeks, how does that impact. The conversations you have like you mentioned you have a very strong backlog like could the fluctuation in U.S. dollar push push those decisions back and then just generally like how would you think about the U.S.D. in terms of costs and and how you recognize sales. Thank you.
Right. So I mean, we sell in the U.S. and U.S. dollar if I'm understanding your question correctly, so from our customers perspective fluctuations in the in the U.S. either the CAD is not just not a relevant metrics it impacts our our earnings here in Canada, and our reported earnings on a on a translation basis, but.
As we sell into the U.S. it our customers aren't aren't affected by the change in exchange rate.
But what about like internationally for commercial projects in international markets.
Yeah, well, we sell predominantly there and when we're selling in Brazil, and realize we're selling Europe or via the combination of UBS euro and and and the U.S.T., but and in India, we're selling in local can in local currency or or yesterday, but mostly local currency. So.
It would be just in some portions of that EMEA, but.
You know I'd, we haven't seen any any impact to our due to the the exchange rate and those in those markets. It is if so it'd be pretty isolated.
Okay. Thanks.
I guess I guess, the one know where the strong.
Dollar has had a positive impact is on farmers in Brazil, and a you know they maybe while they're paying us and re eyes.
Selling and U.S.T. in some cases, so that translates whether they are directly or indirectly selling.
The stronger dollar does.
Give them.
A better price.
Okay. Thank you.
Ladies and gentlemen, as a reminder, should you have any questions. Please press star one.
Your next question comes from Steve Hansen with Raymond James Please.
Yeah, Hey, guys to carry one quick follow up it Tim. This is just a broader strategy question around your and your strategy either obviously, an enormous market opportunity, but also pretty difficult to tackle I think given the breadth and complexities of all those different markets he'd be tackling. So I'm, just really trying to understand what you need to do.
To enhance your competitive position in the EMEA space, there's lower cost competitors out there I understand you made some definitely in Italy, I think that's where you based at an integral part of if I'm not mistaken, but how do you really a you know fundamentally attack some of these larger new market opportunities in Africa, and these places that wed really what do you need to do to answer your competitor.
Position, there I think what those markets.
It's good good question too because we've been investing I think we may be heard us talk or regional teams regional engineering.
Teams in and MS systems design teams, it's bringing more than just a the the product.
The.
Augmenting it with with the expertise the design elements and and then being best in class and in.
Project execution, so and that's what we've been investing in in June in EMEA and each of the other regions that.
We're in and so <unk> move beyond just just be the steel products and and augmented with whether it'd be service execution or technologies that they need to that or that become critical to operating those those are the systems going forward.
So n.. We then have continued expansion of the product lines. So part of the EMEA project recently, we've added additional product lines at different capacity levels to ensure we had the right a product a match to our customers operations and what they what they levels of throughput.
So that they operate out for instance, and that helps with costing across the their projects and systems and expands the market. So we can we can enter into so you know the type of project that you're selling into northern Africa. As you rightly point I'm very different than what you might see in Ukraine for instance, and having the right product line tailored to those regions.
It's key to be to a remaining competitive but to expanding our our relationships and in each of the regions.
And so that's what we've done over time, we've we've taken a lot of the expertise there would have been in North America, we've regionalized, it and got that expanded it and in growing our expertise.
As is relevant to those regions and then place to close to our customers and we'll continue doing that that's the best way to build those relationships and and and build the most most sustainable growing business.
Okay, and just the public had to do a service component to that in emerging markets as well.
Domestically, obviously, you've got a good established team and footprint here with long standing relationships, but did you sell into these new markets do you need boots on the ground Mr standpoint.
Yeah, we we have less of a service businesses internationally, we have oh outside of India.
But and you know we don't want a plan to substantially increase that that's service component in the near term service that we're talking about more more upfront in terms of helping a.
Designed the right system and choose the right a sizeable sizing of Ah Ah site and equipment for the intend to do is intended use of the of the project and while there's plenty of that expertise in North America gets a little bit more limited as you as you go in or internationally. So and then you know we are working.
On Oh strategies to increase our parts of business and that would be that would be globally, and then service would be expansion of our service business would be more regionally Taylor.
Sure Okay very helpful.
There are no further questions at this time. Please proceed.
Okay, well. Thank you very much for your time. This morning, and will again look look forward to catching up maybe down in person, but over video with more more of your going forward and and in the quarter. Appreciate your time. Thank you.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and I said. She please disconnect your lines have a great day.