Q3 2021 Ryerson Holding Corp Earnings Call
Good day and welcome to the right person holding corporations third quarter 2021, and the conference call Today's conference is being recorded.
At this time I would like to turn the conference over to Justine Carlson.
Please go ahead.
Good morning, Thank you for joining wires and holding corporations third quarter of 2021 earnings call I hear this morning, with Eddie later, Briars, as President and Chief Executive Officer.
Burbach, our chief operating officer gym classes are executive Vice President and Chief Financial Officer, and Molly, Canada are controller, and Chief Accounting Officer.
<unk>, our executive Vice President of operations will be joining us for Q&A.
Before we get started let me remind you that certain comments, we make on this call contain forward looking statements within the meaning of the federal Securities laws. These.
These forward looking statements involve a number of risks and uncertainties and clearly impacts of COVID-19, and related economic conditions that could cause actual results to differ materially from those implied by the forward looking statements such.
Such risks and uncertainties include but are not limited to those set forth on your risk factors in our annual report on Form 10-K for the year ended December 31st 2020.
You are cautioned not to place undue reliance on these forward looking statements, which the only as of the date, they're made and are not guarantees the future performance.
In addition, our remarks today or for the several non-GAAP financial measures that are intended to supplement but not substitute for the <unk> most directly comparable GAAP measures.
A reconciliation of the non-GAAP financial measures discussed on today's call to the most directly comparable GAAP measures is provided in our third quarter 2021 earnings release filed on form 8-K yesterday, which is available on the Investor Relations section of our website.
I will now turn the call over to Eddie.
Thank you Justin and thank you all for joining us this morning.
To discuss our third quarter 2021 result.
I would like to begin this morning by thinking.
With deep gratitude and admiration.
All of my writers and teammates for executing the another extraordinary record breaking quarter as we posted our highest adjusted EBITDA <unk>.
Excluding LIFO.
Second consecutive quarter, while also setting a new gross margin excluding Leipoa records.
I also want to thank both our customers and.
Our suppliers as we continue to navigate.
Through a myriad of industrywide supply chain just ructions.
Displacement.
And just locations.
Pick any number of descriptors and supply cannot meet demand during the quarter.
We return it demand delayed but not ultimately denied.
His unfulfilled needs are compiling and compound it at.
At a macro level, we continue to see elevated pricing.
Across our product categories, and while peak spot carbon sheet fuel pricing is waning. It is leaving a well supported price baseline level.
Level higher than past decade averages given secular drivers such as the carbonization and consolidation among others.
Viruses diversified medals mix with 50% of revenues generated from bright metals augmented gross margins in the quarter and we expect this to continue for the balance of the year.
We are observing a number of positive demand factors.
Or a re gathering of demand momentum and our end markets.
That support sustainable manufacturing strength these.
These factors include the carbonization.
Consumer spending power company earnings fiscal policy monetary policy infrastructure investment.
Onshoring, an ongoing restocking from low levels.
Of consumer inventories and longer life acid inventories and build rates.
Record results being a function of the right things done well, we can point to accomplishments through the quarter that materially improved reierson financial position, while enabling further investments in the future.
Coupled with tangible shareholder returns.
All roads lead with strong balance sheet supporting investment and great customer experiences across our network.
Of intelligently network industrial metal service centers.
Our actions in the quarter demonstrated that clarity through a nearly 200% year to date increase in network value as we pay down higher cost longterm that derisked legacy liabilities invested in value added and a value added acquisition.
Along with investing in Greenfield service centers.
While pain of quarterly dividend and repurchasing shares.
Given the noted advancements in Reierson financial and operating position.
Viruses board of directors approved an update to our capital allocation plan.
Five cents per share quarterly dividend increase.
Our fourth quarter dividend.
Which will be paid on December 16th to shareholders of record as of November 15th.
Will therefore be eight and a half cents per share.
This dividend increase underscores or confidence.
And our future trajectory.
And increased earnings potential, while reflecting our commitment to consistently delivering value for our shareholders through the cycle.
I will now turn the call over to Mike to discuss the third quarter pricing and environment.
Thank you Eddie and good morning, everyone in.
In the third quarter Muddles markets remain tight.
Lemme aluminum ended the third quarter up 16% compared to the end of the second quarter and appears to continue to appreciate into the fourth quarter.
Driven by making Aecium supply shortages.
Likewise element nickel prices increased by 8% by the end of the third cooler compared to the end of the second and current supply dynamics for stainless products remained tight.
Pricing across carbon steel products continue to increase throughout the third quarter, but.
But posted incremental declines across specific carbon she'd categories in the beginning weeks of the fourth quarter.
As prices show signs of modest spot market and futures curve retracement.
Overall pricing remains strong across most all products and grades with availability.
More of a concern than price.
Although carbon prices may be peaking as predicted by carbon futures pricing. We also foresee demand conditions remaining positive supported by longer term secular trends.
Expanding on the demand environment macroeconomic indicators remain positive in the third quarter.
The ISI manufacturing TMI index read well above 50 for each month in the third quarter, reflecting in an expanding manufacturing environment.
While the U S. Industrial production also reported year over year growth rates in each month.
<unk> is proposing a positive economic data north American industry shipments as measured by the Middle Service Center Institute or MSCI contracted nearly 5% quarter over quarter.
Which represents a stronger seasonal decline historically experienced.
We attribute this weakness to ongoing supply chain bottlenecks that intensified during the summer months.
Early queue for indicators indicate improved reopening trends after the fourth paying debit wave that pervaded the third quarter.
<unk> third quarter, North American per day shipments reflected the broader industry trend is most of our end markets with the exception of oil and gas so softer customer activity compared to the previous quarter.
However, we believe we are seeing demand deferral.
Rather than erosion is our customers are reporting strong demand.
An increasing backlogs for their products.
Supply chain constraints are currently delay in the production and completion of finished goods.
Constrained resources include everything from Labor transportation and chips too important parts.
As consumers, we see the effects of these constraints is lamar's furniture and appliances are harder to come by an auto dealer inventories re mainly.
With that I will turn the call over to Jim for our fourth quarter outlook.
Thank you, Mike and good morning, everyone.
Building on the market dynamics that might discuss what we recognize constraints persisting at our customers supply chains. We are optimistic about the fourth quarter business conditions and anticipate reporting a strong finish to 2021.
At this point in the quarter pricing growth across carbon products appears to be <unk> told me.
Or wherever we have seen continued strength in stainless and aluminum prices.
We expect fourthquarter volumes to soften compared to the third quarter due to normal seasonality patterns and some continued supply chain and market constraints.
Therefore, ryerson anticipates fourthquarter 2021 revenues of $1.5 billion to $1.6 billion, assuming sequential average selling prices up five to seven per cent and shipments down 7% to 9%.
Lifeful expense in the fourth quarter is expected to be in the range of $71 million to $75 million as replacement costs continue to increase relative to average inventory costs.
Given these expectations adjusted EBITDA, excluding LIFO is expected to be in the range of 228 $232 million in earnings per diluted share are expected to be in the range of $2.38 to $2.48.
Turning to riders since asset management in the third quarter.
Inventory restocking to normalize service levels increased our cash conversion cycle to 68 days.
Up from 55 days in the second quarter.
This intentional inventory investment resulted in days of supply of 78 days up from 63 days in the previous quarter.
As a result of this third quarter restocking investment the company used $21 million of operating cash.
In the third quarter Ryerson realized expense leverage is warehousing delivery selling general and administrative expenses decreased as a percentage of sales from 12.6% to 11.4%.
Despite inflationary pressures labor Q1 operating supplies.
Warehousing delivery selling general wanted administrative expenses, only increased $2 million nominally quarter over quarter or 1.1%.
Ask you distributing right your son's first quarterly cash dividend on September 16th.
<unk> Board of directors has improved an increase to the dividend of half a cent for sure.
Our fourth quarter dividend of eight and a half cents per share of common stock.
Will be payable on December 16th 2021 to stockholders of record as of November 15th 2021.
Additionally, during the third quarter.
<unk> repurchased approximately 39000 shares at an average price per share of $22.31.
Resulting in additional return to shareholders of approximately $1 million.
These repurchases were made a part of our share repurchase program, which authorizes purchasing up to $50 million of the company's common stock over the two year period ending in August 2023.
Between the dividend and the repurchase program initiated in the third quarter. We were pleased to have returned approximately $4 million of value to our stockholders.
Now I will turn the call over to Molly to provide further detail on our third quarter financial results.
Thank you Jan in the morning.
And the third quarter of 2021, <unk> generated revenues of 1.58 billion, which is within the range communicated and our third quarter guidance with average selling prices up 19.6% and volume down 7.2% from Q2 2021.
Gross margin expanded to a record 23.1% compared to 18.1% for the second quarter of 2021 as selling price growth outpaced inventory cock.
Reflective of the rapid increases in industrial metal prices in the third quarter <unk>.
Included in third quarter of 2021 gross margin is LIFO expense of 102 million, which is in line with the second quarter's LIFO expense of 105 million.
Excluding the impact of LIFO third quarter gross margin expand it by 410 basis points from the second quarter of 2021% to 29.6%.
Net income attributable to virus and holding corporation for the third quarter was 50 million or one dollar and 27 cents per diluted share compared to net income of 113 million or $2.91 per diluted share for the second quarter.
Included in third quarter net income as a 98 million non-cash settlement charge related to the partial annuity nation of our pension liabilities.
<unk> six $9 of expenses related to the partial redemption I've Reierson, it's 20th 28 now.
Adjusted net income attributable survivors and holding corporation, excluding their pension settlement charge loss on retirement at that and the associate income taxes.
It was 127 million for the third quarter of 2021 or $3.25 per diluted chair.
This compares to the second quarter 2021, adjusted net income of 48 million or one dollar and 24 cents per diluted chair, which excludes gain on sale of assets and the associated and kind of taxes.
Briars and generate adjusted EBITDA, excluding LIFO, a 301 million in the third quarter of 2021 and increase of 104 million compared to the previous quarter.
To put our results into perspective.
Our third quarter adjusted EBITDA, excluding LIFO nearly equaled the $308 million a pain in the full year 2018, which was our best years. That's why our son was acquired by platinum in 2007.
Here to date Reierson has generated 622 million of adjusted EBITDA, Excluding my phone.
We completed a partial pension that new it today and in the third quarter is part of our continued efforts I've, reducing <unk> pension plan liability exposure there's.
206 million a new association is expected to result in economic savings of approximately 5 million on a net present value basis.
Additionally, the partial annuity <unk> resulted in remeasurement of the Reierson U S pension liability bleeding to an accounting liability decrease of 44 million since prior year and.
Primarily driven by increasing discount rates and strong pension asset returned in 2021.
We also furthered our financial transformation by utilizing the proceeds from our second quarter sale leaseback transaction.
To repurchase 100 million of our outstanding 8.5% Senior secured notes do 2028 at a price of 104% in July.
We also executed our second 50 million notes redemption at a price of 103%.
These transactions were possible due to the optional redemption features we secured and our 20th 20th refinance and they effectively decreased the outstanding balance on our senior secured notes to 300 million as of the end of the third quarter, a decrease of 40% compared to the original.
500 million principle.
There's 200 million reduction has reduced our annual interest expense I 17 million.
Briars and ended the third quarter was 633 million in that that an increase compared to 563 million for the previous quarter. However, as a result of our increasingly trailing 12 month adjusted EBITDA excluding lifestyle.
The company achieved a leverage ratio of 1.0 times for the quarter down from 1.5 times and the second quarter of 2021, and that's the low end of our long term strategic target range of one to two times.
Briars, and a third quarter global liquidity of 698 million <unk> represents a decrease.
Compared to 890 million as of the end of the second quarter as the company applied sale leaseback transaction proceeds to redeem a portion of the 20th 28 now and.
And made working capital investment.
And uhm, the third quarter financial records reflect both a successful efforts of our long term financial transformation as well as the dedication of our commercial operational and corporate team.
With this I'll try to call back over to Eddie.
Thank you Molly with the completion of Ryerson is 179 year insight.
We can say with hard enough conviction that we will begin our 180, if you're in business with proof and promise the proof of delivering on our plans and the promise of better times ahead.
We are now seeing the communist too positive effects of.
Of lower fixed caste commitments.
A lower cost of capital lower leverage ratios lower legacy liabilities higher book value of equity.
And intelligent capital allocation, all powered by higher intrinsic EBITA and cash flow generation.
Creating great customer experiences with passion and purpose is the once and future perpetual opportunity machine, enabling our growth as an organization and the realisation of our vast human potential.
As we look beyond the past two years.
It felt every bit like 20 inexperience years.
We continue our work for more just an inclusive society.
Wow heartlessly advocating for the investments required in the many types of infrastructure that engender and sustain a broader based prosperity and a better quality of life for all.
That is why metal matters.
As you will see when visiting us at <unk> Dot com and why the build now movement MSCI Dot org are so vital an imperative.
Give them both a long look.
Let's make infrastructure investment happen without further delay we need it.
We need a lot of it and we will see profound betterment across the board because of it with that let's take your questions operator.
Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
If you were using a speaker phone. Please make sure your meat function is turned off to allow your signal to reach our equipment again press star one to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions.
And we will take our first question from Michael a shock with Keybanc capital markets. Please go ahead.
Hey, Good morning, first I just wanted to ask on how much third quarter margins benefited from import or arbitrage opportunities just given that foreign steel prices, notably herc are dramatically lower than domestic levels and how should we think about that opportunity going forward as prices begin.
[noise] to normalize.
[noise] Michael Good morning. This is Eddie we really have not imported significant quantities of anything we we'd sit in the past I mean, some of our imports.
Coming to Canada, and they really tend to be on the margins in terms of really wide product or heavy product or things that are just really really difficult to procure but are important virgins or I mean are important percentages are negligible.
And really didn't have didn't really to make any contribution to.
To margins are too holding games in inventory during the quarter I think going forward, you'll see some of that arbitrage. Even if you look at the futures curves now based on the announcements that were made earlier this week.
In Europe, you already starting to see the arm close between European HRC N U a and the United States HRC future. So I think if you tie those two threads together, you'll start to see that arb come in I think it will support margins for those that choose the imp.
<unk> to some extent, but the pricing environment is still is still healthy and strong and I really think it is underpinned by.
Demand that.
Is going to have a.
He's going to have a really nice trajectory going forward because as we noted we really believe it was demand deferred and not denied and we see that demand continuing to accumulate as we go forward into 2022.
Got it and going off of that as we look at your end markets you alluded to abroad demand deferral, rather than erosion are there any markets, where you're seeing that more prominently or is there any market that might have more pent up demand as a result of the deferrals as we move into 2022.
I'm gonna keep it over to Mike I would just say that that demand.
[noise] accumulation, it's it's really broad base and and widespread I don't think we're even back to restocking levels through through the channels that that go out to our customers in into our end customers to their end customers. So I think it's got I think it's got a good duration to it and it's got a good 10 or two.
But I'll I'll, let Mike expound on that some more.
Yeah. Thanks, Thanks, Eddie and good morning like Yeah.
Yeah, I think getting hit it right.
We don't really see any one area that's impacted more than others. Obviously, you hear a lot about chips and transportation and in in the automotive sector. So that's kind of easy to identify and in other areas that uses chips, but I would say the theme that we here pretty much.
I'm all sectors is.
The constraints that so many people are dealing with these days and that can be chips.
Chips related it could be supply chain bottlenecks for imported products it could be any sort of labor issues or parts whatever it really seems to be impacting most and markets and the theme is demand as good and for the reasons mentioned.
The backlogs are increasing and the future's looking pretty pretty positive if they're able to capacity constraints.
Great and then how should we think about networking capital going forward, specifically as it relates to the inventory restock that we saw in the third quarter is that something we should expect to continue into your.
Jim why don't you take that one.
Yeah, Good morning, Michael.
Really it was it was unintentional restock in Q3 on the inventory side and we see that waning as we head into the queue for our service levels of have normalized and we're really in a good position to service our customer base.
Would expect as you look at the other pieces.
Tends to attract revenue fairly closely for us.
Got it. Thank you so we would.
Yeah. So we would expect we would expect to be cash flow positive in queue for.
And we'll take our next question from Alan mother with her body advisors. Please go ahead.
Oh, good morning can you talk about.
You know if a wind pricing declines kind of changes you've made to kind of just how you can you know places that environment.
Sure Hi, Alan Good morning, I think I think if you look at our history.
And you really sort of deep dive into the last 10 years and passing prologue, we've really done a lot of good work and all credit to the team around verbalizing, our cost structure. So if you look at how we've been able to get cost per ton and and variable cost per ton uhm down.
And rebuild a drink carefully as we go from counter cyclical a cyclical I I do think that the proof is certainly in the putting their butt.
We we have a base case and we also have a top or a plan and we have a bond into our plan that we keep at the ready all the time and we're always revising that plan to make sure that we can we can get in and out of the cycle, well and I think given.
The results that we put up this year it gives us a really an even better framework for how we manage that process as we go from cyclical to counter cyclical so really great work done by the team and I think you see and I think you see it in the in the working capital metrics I think you see it in the expense metrics with generated expense leg.
<unk> again, this quarter and I think we certainly have demonstrated the ability to manage that the other way when when counter cycles inevitably come.
And then when you look out several years right the balance sheets in much better shape to cash flow at least you know should be better.
How did you think about acquisitions and just you know the.
The company when he was about to say five years right because you're gonna use you said you're kind of at the low end of your leverage ratio today, and you know that really should improve.
Yeah, Alan we we certainly agree that the trajectory. We're on is a really good one and it's it's a trajectory that we look forward to getting used to for a long time I I would I would tell you that we've we've done a good job of their acquisitions. When you when you look at.
Some of the feedback we got initially when we did the C. As in W acquisition.
We knew we were gonna take it in the teeth for a little while but as you can see that decision is more than validated itself again based on the great work done by everybody involved in the organization. So we have a robust M&A pipeline, we really have a very good outlook in line of sight.
The type of Capex investments that we would make to drive organic growth and organic improvements in the business and there's no shortage of those ideas that they're really a wonderful thing about the strategy that we'd laid out is when you deconstruct the customer experience and you break it down into its elemental parts and pieces you you work to get to that.
Future stayed in every part of the customer experience. There's a lot of good investment you can do there there's investment that has a high return to it given our market share. We've got a lot of market share that we can grow organically, while always been at the ready.
Look at acquisitions that.
Are you I would say are are incremental but also those that may be transformed it but it's a high bar I think we're but.
But we're always looking we're always looking at the same time, we still have some more work to do on the balance sheet and we want to make sure we finished that job.
It it just my last question in terms of acquisitions, how do you think about when you look at companies right because even have they may be smaller than you, but they're gonna have obviously you know much improved EBIT. This year like how do you feel good about how do you look at it in terms of thinking about a valuation when you're kind.
You know if if their results me rejoice to some extent.
How do you think about that.
The way, we think about it as we stay disciplined and we keep that discipline I mean, that's that's how we think about it meaning we understand the entire cycle of this industry and I think that means you have to maintain that discipline and and I I would say again past is prologue I think you'd look at the acquisitions. We done you would expect us to behave the same way.
Going forward.
Okay, great. Thank you very much.
Thanks Alan.
[noise] and we'll take our next question from Matthew fields with Bank of America.
Please go ahead.
Everyone.
Great progress whittling down the maturity on on your bonds. This quarter just to sort of Ah Ah housekeeping question When's. The next time you can do another 50 million at one O. Three is it next July.
[noise] I'm Gonna say, yes, and I'm Gonna go ahead and ask.
Jim and where Molly to confirm that but I believe that's the case, yes, ma'am I think yeah July.
That is that is the case Matthew It's next July we have a potential 50 million dollar redemption.
Okay, and that's the last $50 million you can do until the bond becomes callable right.
So they're sort of art.
Yeah go ahead go ahead.
K U you first.
[laughter] I I I was just gonna say that $50 million redemption, and then there is a special redemption feature.
Feature.
If there was.
And equity claw of 40% of the face value.
And then the call date of 2023.
Right.
Okay, Yeah, and then a mask yeah, Matthew I would just say, our our <unk> our whole holders seem to like these bonds. So [laughter].
They seem to like them.
Fair enough and then you know given the you know kind of age old.
Poland and pushed between EBITDA growth and cash flow use.
Can you care to comment about how you plan to.
You know work down the the revolver balance over the next year or so and balancing with your kind of new shareholder return policy and and kind of.
The next forward 12 month environment that you see.
[noise], yeah, putting some color around that [noise].
I would I would say looking at cycles encountered cycles in our industry and and looking at the amount of at least historically speaking if you look at just the counter cyclical cash that.
You could projected is being stored on balance sheet now.
You can you can understand very clearly what that means in terms of the trajectory towards paying down debt overall and the work that we can do on the bonds and the work we can do on the a b L. So the leverage ratios that we're showing now have one times and 1.8 times with a trailing basis.
As LIFO is lifeful effects settle out I think you can see that.
We should have a very healthy free cashflow profile that allows us to balance.
Shareholder returns against debt reduction and investments towards growth, Matthew and I would say that we find ourselves in a really really good position and and would expect that to continue for the foreseeable future.
Do you do you expect to be able to to start to sort of turned working capital around as you see maybe prices start to soften and you know this quarter or the next how how do you think about you know the cash flow.
Working capital release sort of aspects of it over the next few months.
Yeah, well I think you you get one or the other if prices stay elevated and and and the underpinnings of demand start to actualize more than they have then you are gonna get it in EBITDA and you can expect like working capital to start to level off and so that that castle would be driven by EBITDA and would certainly exceed the.
Working capital needs the business and then as we go counter cyclical.
That cast that comes in to the extent that we can work down the high yield bonds, we will because that's that's the best first option for us, but after that we would start to pay down the a b L. A.
Two irresponsible level and.
And then we go from there.
Okay, great. Thanks, very much Eddie and good luck on the rest of the year.
Thanks, Matt.
And as a reminder, please press star one to ask a question we'll take our next question from Saint These cats Nathan with two Shebang. Please go ahead.
Yeah, Uh Huh hi, good morning, Thanks for taking my questions. My first question is on the on your audition to build a new <unk> new facilities can I talk about it I sounded behind that and maybe your latest thoughts on how you see the body was has been strategy.
To teach I'm, sorry could you just clarify the last part of that question.
Yeah, maybe I mean, the latest thoughts on how you'll see by you as a bed. So so you're you're ordering lifting in new <unk> buying consider consolidating the industry with just under the much fragmented.
Yeah absolutely.
Well part of.
I would say part of the success that we've had is figuring out what notes to play and then playing those notes really well and when you. When you look at the Monetizations in the Seattle area and the Monetizations in the Chicago area and the Beneficiate <unk> of some of our own real estate.
We received uhm, a very well what we thought was was it really was good value for those assets and then we turned around because we had an opportunity to modernise and build new facilities supporting.
The Chicago land market, specifically for the C. S N W brand and franchise and then also a repositioning ourselves in the Pacific northwest marketplace with honor and facility with much higher degrees of [noise].
Patiency and automation and really customer experience potential. So this is part of that growth part of that modernization that we're conducting throughout our network to really reengineer and gets that features state customer experience. So I think it's I think it's a very logical I think it's a very smart progression as we think through that network.
Work of how to build our market share over time profitably and the investments required to do that while also having taken advantage of.
Opportunities in the marketplace for the reevaluation of assets, that's going on in our industry and I and I think that's that's something that is just starting to be recognized as of the assets. In this industry are really more valuable than how they've been valued over the last decade.
Yeah.
Okay, Oh, okay. Thank you and.
And sorry Yep go ahead please.
No I was gonna say in in terms of viruses build in this case.
In Centralia in the Pacific Northwest and in the Chicago Land area, specifically, specifically for C. As in W.
Developing those Greenfield service centers made the most sense and and [noise] I would say concurrent with that we're always looking at our at our M&A pipeline and the opportunities out there to buy assets that we think are really accretive to our strategy.
Okay <unk>, the new New office. It is more focused towards evaluate if those are saying.
John or if you want to talk about that a little bit.
Sure. Thank you Eddie <unk>, we are definitely focusing on where and how to intelligently allocate our capital and we see the value add processes is is an area of great opportunity and also service to our customers.
At both of these greenfield facilities, we are looking and analyze and what our best opportunities are around equipment automation, both from a safety and throughput perspective, but also from a state of the art on what what can be done around quite processing and servicing.
Our customers.
Okay and also can you hear the Mendez, what your current value added processing mixes today, and how much more incremental capex or I could've been spending is required for you to achieve your 14% target.
Sure. So so historically going back to 2010, the way we've measured it.
It was 10% if we looked at in a 2010, we brought that up to about 16 to 70 per cent, 16% to 17% <unk> and we look to move that above 20% now in order to achieve that we do.
Don't need to invest more than when our rate of depreciation is from a growth capex standpoint, but we see a lot of very attractive IRR opportunities within the value added equipment value added processing value added systems, and the I T and systems tools that go with it to make incremental into.
Estimates as conditions allow to accelerate that value add percentage as we move towards 20 per cent and and look to take it higher than that as we as we move through the next say you know one to two to five years.
Okay, Yeah <unk> congrats on a great corridor and then good luck for the next one thank you.
Thanks to <unk> I appreciate it thank you.
[noise] and appears there are no further questions at this time I'd like to turn the conference back to Adelina for any additional or closing remarks.
Thank you and thank you for your continued support of an interest in Reierson. Please have a safe healthy and happy holiday season, and we look forward to begin with all of you again for our virtual Investor Day on January 27th 2022, and again in February when we review our fourth quarter until your results take care stay well.
This concludes today's call. Thank you for your participation you may now disconnect.
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