Q1 2022 North West Company Inc Earnings Call
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All participants thank you for standing by the conference is ready to begin the please be advised that this conference call is being recorded welcome.
Welcome to the Northwest Company, Inc. First quarter results conference call.
Ill turn the meeting over to Mr. Dan Mcconnell, President and Chief Executive Officer. Mr. Mcconnell. Please go ahead.
Thank you very much and good afternoon, and welcome to the Northwest Company first quarter Conference call.
I'm joined today by John King, Our Chief Financial Officer, and Amanda Sutton.
As president of legal and corporate Secretary.
I started meeting off by asking amounted to read our disclosure statement before.
Before we begin I remind you that certain information presented today may constitute forward looking statements.
Such statements reflect northwest current expectations estimates projections and assumptions. These forward looking statements are not guarantees of future performance and are subject to certain risks, which could cause actual performance and financial results in the future to vary materially from those contemplated in the forward looking statements for additional information on these risks please see northwest annually.
Information for them.
And its MD&A under the heading risk factors.
Thanks, Matt.
We just had our annual general meeting of shareholders. This morning, So before I begin let me. Thank those of you who were able to join us.
So all of those things I mentioned already been briefly discuss your AGM. So again, thanks for your patience if you noticed some duplication.
With that lets begin our first quarter results now.
We are pleased with our top line results.
Three years of exceptional pandemic related growth in sales.
Especially noteworthy.
Considering with the travel restrictions have eased and consumer income support payments are substantially lower than they were a year ago.
That said our bottom line is experiencing headwinds driven by higher inflationary cost pressures, coupled with insurance gain last year do we need to work through this year.
Diluted earnings are Directionally in line with what we.
As we indicated in our outlook. However, adjusted net earnings are up more than double compared to pre pandemic levels.
Let me start by providing some color around our consolidated results and then I'll provide you a brief commentary on our results by division, including the Airlines before I open it up for your questions.
Okay in terms of sales first quarter consolidated sales increased 2% to $552 million.
Results were led by international operations, particularly with tourism markets mitigating softer sales performance in Canada.
Same store sales were marginally down increasing 7% compared to a three 8% increase last year.
With respect from these numbers same store sales are up 21, 3% compared to the pre pandemic sales in Q1 of 2019.
In general we have been observing a shifting.
Our behavior, mainly as a result of two factors lower income and higher inflation.
This quarter, we saw our customers allocating more of their purchases.
Some products, we should change our mix of food and general merchandise sales.
Same store basis food sales were up two 5% this quarter compared to a <unk> fiber channel San increase last year. However, general merchandise sales were down 16, 1% compared to an exceptionally strong 23, 9% increase last year.
In spite of holding our sales flat to last year net earnings this quarter decreased to $28 2 million compared to a $40 3 million last year. This was largely due to the impact of a $7 1 million.
Tax insurance gain last year. So we don't have this year at a lower gross profit rate.
Gross profit dollars decreased three 6% to last year and our gross profit rate was down 125 basis points, mainly due to the following factors Wyman.
Wyman the change in product mix between food and general merchandise sales also includes a higher blend across U S sales, which have a lower gross profit rate consistent with the discount warehouse format.
And to the impact of merchandise and freight cost inflation that was not fully pass through in the retail prices.
Our focus has remained on keeping our momentum on sale by closely monitoring competitive pricing levels with a balanced approach. We are also taking steps to mitigate inflationary increases as much as possible to meet our value offered to our customers.
That's why I like many other retailers our teams are prioritizing kind of prioritizing cost controls and conversations with our vendors as well as maintaining disciplines around purchasing and pricing to help mitigate pressures on our margins.
Our inventory approach. This has the same balancing a component.
We are focused on maintaining our in stock position as we navigate supply chain challenges.
They experienced some vendor delays and shortages, we're working closely with them to minimize this impact.
Over the past couple of quarters, we have talked about the fact that we took a higher in stock position and see lift and winter road stores in Canada. The rationale behind US is threefold first it's navigate and get ahead of the current supply chain restraints and extended lead times second he was to take advantage of specific low risk buying opportunities and hedge.
Rising costs due to industry wide inflation and lastly, it was to capitalize on lower freight costs by using utilizing less expensive modes of transportation like the winter Road and she left.
We will continue to grow.
We continue to believe that this approach is necessary given the supply chain and inflation realities.
We're closely monitoring these inventory levels and taking measures to adjust our position to align with changes in consumer demand.
This resulted in higher markdowns and seasonal merchandise in the quarter.
Having said that we believe our inventory position by and large is in the right merchandise with built up inventory in categories.
Such as motorized home furnishings in Canada, which we expect to see continued demand.
Alright, So let me take a moment to talk briefly about the performance of our Canadian and international operations.
Canadian operations sales decreased one 6% to $315 million for inflation related gains were more than offset by the elimination of corporate income support payments and these are for all the for all the individual.
Same store sales decreased four 2% compared to a six 7% increase last year over up 22, 9% compared to the first quarter of 2019.
We're holding around on same store sales.
<unk> down 1% in spite of comparing to a much larger income support base last year.
Shifting consumer spending patterns I mentioned previously for <unk>.
And in general merchandise same store sales, which were down 16, 5% compared to an impressive 21, 7% increase last year.
The other point I'll make here on the changes of sales mix is the fact that we have had a higher participation of motorized sales and the overall sales, but which has contributed to downward pressure on gross profit rates as well.
On the other hand international operations increased two 1% to $187 million led by strong food sales and the impact of a new a lot of the new Alaska stores, which mitigated lower all lower overall income support on U S territory.
Okay.
There's a caveat here given the fact that there was an increase in our.
Benefits from the supplemental in our supplemental nutritional assistance programs for snap as we know it but in the U S territories and this occurred in the third quarter of last year.
We also had improved performance in tourism markets in the Caribbean.
We are seeing some tourism come back slowly to the islands and somebody has the Alaska. However, these results are not uniform across the territories and some markets like in the U S. V. I tourism has been back for some time now but in others like the BVI tourism, it's just making its way back according to local estimations of overnight tours in the BVI.
And it's still down around 50% compared to pre pandemic levels.
Changes in sales mix in international operations, the Celerity, Canada food sales increased three 8% and were up seven 2% on a same store basis compared to a three 1% decrease last year.
Here, it's worth mentioning that in Alaska. This quarter, we did not have the sales of the USDA farmers to families. FOUP box program that we had last year general merchandise sales decreased 14, 4% and were down 15, 2% on a same store basis compared to an exceptional 38% increase last year.
Alright, now I'm, just going to briefly touch base on the performance of the airlines for the quarter.
[noise] North Star Air's, EBITDA increased one 5% compared to last year higher passenger volumes, resulting from reduced travel restrictions have more than offset a decrease in cargo compared to last year.
Offsetting the impact of a $400000.
Canada emergency wage subsidy payments that we received last year.
We've also had cost pressures in the airline.
Jet fuel cost so almost doubled year over year and between February and April alone, we have increased around 30%, but you've been able to pass through most of these costs through fuel surcharges.
Through fuel surcharges, the same way all other carriers have been doing so far.
Wherever remains of significant cost pressure, we need to manage to avoid further margin erosion on the retail side.
And before wrapping up let me just say that in the short term there are so global supply chain pressures high inflation and more broad macroeconomic uncertainties, we still need to navigate.
I have previously alluded to some of the focus areas to mitigate these risks which include supply chain management as well as controls on cost inventory and pricing right across the organization.
That said, we are very excited about the future of our company and the strength of our business going forward as I mentioned on the AGM. We are actively pursuing growth through new stores products or services in our Canadian and in our international operations.
The duration of the current environment as previously noted the medium and longer term outlook for the company is favorable and this is based on the expected impact of government transfer payments and higher infrastructure spending in the indigenous communities and improved here that tourism into definitive in the tourism dependent economies.
With that let me open it up for any questions that you might have.
Thank you, we'll now take questions from the telephone lines. If you have a question and using a speaker phone. Please lift your handset before making your selection.
Just have a question. Please press star one on your device.
Can you cancel your question at any time by pressing star two.
First question from Michael Van <unk> from TD Securities. Please go ahead.
Hi, good afternoon, and thank you.
First question just on the.
Your commentary around the absorption of.
Cost of inflation.
Is it more predominant in the international markets.
And is this something that northwest.
Initiating to gain share or is it a ria is it a reaction to our competition.
Hi, Michael It's a good question I'd say, there's probably both in there I would say really theres a number of things I mean, the one that some of the things are there's the markdowns is one factor the sales mix is definitely a factor keeping a balanced approach because of <unk>.
Lot of our competitors are not are not necessarily keeping up with inflation at the same extent, there's a learning.
In the coming for them Unfortunately, but we are following.
We're setting where we can and we're not going over the mark So I would say on the most part though a lot of the inflation that we haven't passed on is is kind of comprised in those areas. But then there's also a lot of fuel increases the the increase in the AR and the cost of product that has been so sudden if you've seen it in some of the markets you'll see that it's up seven 8% in a month.
And we're it's almost like you can increase prices quick enough.
And I mean this is this is something that we've seen the other retailers are obviously experiencing the same thing. So it's just now it's a real focus as it always has been a focus but now just understanding that it's almost unprecedented of costs increasing at such a rapid rate that we have to make sure we stay on it and and keep on with our passing those costs.
The inflation and the price inflations onto our customers.
That's a it's really a mix so I would say sales mix Ah Theres Theres markdown.
Markdowns that are that have come out.
And this is the markdowns are simply a result of the season Hasnt changed as quickly as it has in previous years, we got a lot of seasonal merchandise that the weather hasn't cooperated not that we'd like to talk about the weather, but people are thinking of buying their outdoor patio furniture until the snow goes away. So this is something that we are we expect to.
To start happening very soon we've also amped up on.
Some of our selling activities, which were planned as you have you seen and you've heard some of the commentary I made in the past we have we did make some purchases in order to avoid some of the cost inflation and some of the supply chain disruption. So we've made some purchases beforehand and those are all in a lot of in accordance with some of the selling activities that we have.
Coming up in the next couple of quarters, whether it be through arena sales in the north.
Truckload sales black.
Today all of those types of events are all are all accounted for so we'll be able to accommodate a lot of that inventory that we have because I imagine there is an inventory question coming with some of the inventory. That's a that we're sitting on as well and that has been that has been marked down.
So as it is in relation to the time that we've held it so there's a lot of factors, but I would say.
That everybody's everybody's aware, obviously that cost inflation is a top front page item. So our customers are the competitors are definitely starting to increase on some of the store on some of the markets that maybe haven't been as as quick to do so so I see that as less of an issue moving forward. It's more along the lines of just try.
To forecast and keep on top of some of the cost increases.
And in all the different categories that are.
That are that are experiencing that that action.
That answer your question.
Well, yeah. It sounds like there is some climbing to this and that.
Passing on.
One if you were to see some of these costs.
Inflation slow down to be able to catch up but.
But at the same time.
I remember one year when you reported your last quarter results.
Gross margin was at the same 32% level.
And you indicated that that was a good indication of where you thought you'd want a good balance for you going forward. So.
It's 30 to the right level or is that 32.
Are we going to see it rise above that level, but you can catch up to some of these cost pass through initiatives.
I would say 32 is it is a good level in order to sustain that 32, especially with all the.
The cost increases I went to bed last night gas was at $1 90, I woke up this morning is it to 10 so.
I think.
To sustain the 30 to a margin rate would be something that we'd be looking to sustain right now.
Okay, Great and then on the inventories since you brought it up but you did mention that you thought the inventory was in.
Categories that were going to have some good demand but.
But at the same time Youre, writing down some inventories that you're it looks like your inventory is up I think 11% year over year, but your sales or not.
Not higher so.
How comfortable are you that you write downs are that you've taken so far are adequate.
And that you won't have to do it again.
Right, well definitely well some of our for example, where we've doubled down.
In some of our categories like motorized home furnishings, and we have strategies that are in works in order to execute on sell through of those items.
I can tell you that if you haven't tried to buy a a quarter and a T V or boat lately that I can tell you that it's pretty liquid it's hard to get but given our position in the market and the fact that we are the largest.
Distributor of snowmobiles and definitely up there with the Atvs that we do have a preferred place and we did take full advantage of that to buy a lot of inventory.
For the year, so we expect that throughout the year.
With the different avenues and the different promotions that we have in place that we're going to sell through that product. However, in saying that we are still sitting on.
We are still sitting on more inventory than we are than we have in the past.
So when you move on to some of our other banners.
We did go and we are purchased I'm, probably a little heavier on several immediate media sight and sound and are in our international banner and in doing that.
Under the same premise than for the same reasons, we talked about earlier, we've slowed that down in anticipation of the somewhat slowing of the economy, but we do have an outlet for that as our black Friday and our Q3 selling seasons are.
Our basically geared up to that to move this type of product. So we would slow down the purchases right now in anticipation of the slowdown of some of the the markets and our G M. But at the same time, we will have the selling season and the outlets to be able to move that inventory in Q3 and Q4, So we thought.
We were going to sell it earlier on we hold it off because we know later on in the year, we will sell it as a result, we have taken a reserve on some of that inventory.
Alright, thank you.
Thank you.
The next question is from Mark Petrie from CIBC. Please go ahead.
Yeah. Good afternoon, I just wanted to ask about some of the sort of early insights from your pricing work in your overall views on your ability to retain some of the out shopping business that you've won over the last couple of years.
Okay, well pricing our.
Our pricing initiative is a I mean, the day to answer the question in bold, it's going well, because it's giving us more insight to our consumer trends and the elasticity of our.
<unk> of our products and our services, but at the same time.
Yeah.
It's not.
It's more like business everyday like right now with.
Theres two kind of factors that play into it.
Theres going to be there's a lot more out shopping potential given the fact that the weather has turned and the pandemic is somewhat behind us, but at the same time with the cost inflation.
Particularly in the airlines, which will have some obviously some pretty good insights to that is.
Preventing people from traveling more than we thought they would have people are still going to be leaving the market.
So that's that's a given however, with the cost inflation not only in urban centers through the products and services, but also in the transportation methods or modes that people have to get out of market, it's preventing people from traveling as much as we.
Considered they would be.
It's call. It revenge, that's called <unk> revenge traveled great in the south and isn't great in the north but the other competing factor to that is as I indicated in my in my discussion there. The fuel has our air jet fuel has doubled that is something that the carriers in the north pass through to the customer so that would prevent a you know.
People traveling as much as where we would have thought they would've.
Prior to this major inflation.
So we definitely have created trusted in the market, even just being able to get product I talked earlier about some of the big ticket a T. V's. These are products. There that are very short supply even in the urban centers. So the fact that we have them and we secure them and we protect the inventory levels for our communities gives people obviously less motivation.
From from buying it outside of us outside of the market. So I'd say, we've definitely held on to.
To sum and are to be seen as far as we have all the promotions and the the.
The selling.
Entitlements that we can put in place to try and retain as much as we can pricing is one of them selection is another but its not something that we're not dropping prices in order to persuade the customer to stay with us as we're just trying to get to that happily equilibrium, which seems to have.
It worked so far as you can tell from our our sales momentum.
2019 is still a.
You know quite quite large as far as the gap between 2019 and now so that shows us that are that we are maintaining those customers and I don't think theres as much travel as we would have initially thought.
Okay. Thanks, and then I guess suffice to say that most of the opportunity is in general merchandize, but there is also.
Presumably opportunity in food as well so could you just talk about sort of the different dynamics between between the two businesses.
Sure maybe just clarify for me Marc when you say opportunity.
What are you referring to.
To this there's sort of more more nuanced understanding of elasticity and ability.
Sort of trading sales level gotcha, so trading sales trading dollars. So yeah. So we definitely we were definitely seeing people trade.
They're trading from.
Maybe more fresh stakes to two to two <unk>.
Frozen meat are theyre trading from to more cost effective means we've looked at our our private label is a is seeing some more penetration than previously.
Than previously experienced so there's definitely a trade within the food categories itself, but not as a not as glaring is obviously the trade from general merchandise over to food our general merchandise sales as I indicated have taken.
Significant bump.
<unk> and we anticipated that but it's a it's something that.
Now as more as more.
Yes, it's more glaring and in food. It's it's all it hasn't that happened to the same extent by any stretch, but there definitely is some trading down.
Worth mentioning there is some as I indicated earlier as far as moving some of our general merchandise that has experienced some downward pressures. There is some strong selling events that are coming up as well is worth mentioning that the PFD in Alaska has been and again, it's not final I think the governor has still.
Thursday tomorrow to to reject this but the the P. F. D has been identified to be $3200. This year, which is as high as it's ever been since I can remember I think last year. It was like 1100, so there could be some.
Some good.
The opportunities down the road to be able to move some of our general merchandise as I previously indicated Michael's question.
But I think also ties into this as far as the mix.
As is our suffering now the general merchandise suffering now, but we hope with some of the activity is coming down the road that will be able to.
To catch that up.
Yeah, Okay, yeah, thanks for highlighting.
Highlighting that and I guess, just with regard to the gross margin and sort of passing along higher costs.
Would it be fair to say that you are passing through sort of higher product costs, but not necessarily all of the higher sort of supply chain costs or is it also in.
Inconsistent or maybe not passing through all of the all of the product cost as well.
No I think your prior I think generally ask that you'd be.
But that's probably.
Probably you probably had hit it on the head there.
And it's also it's a gradual increase like because I talked about how.
You know how quickly some of these cost increases have come upon us we see.
Taking a more gradual approach to it but it's.
Probably some intentional and some unintentional to be honest and it's just really because we have.
Seen some of our some of our vendors have some sprung in maybe two there are two there are learning as well, but they've sprung some pretty aggressive cost increases on us.
Which we haven't been able to react as quickly to pass that onto the customer.
Fuel in the freight is probably one of the ones that comes to mind.
As I indicated.
Yeah understood I appreciate all the comments all the bus alright, hey, Thanks a lot.
Thank you as a reminder, you May press Star one if you have a question. The next question is from Neal <unk> from <unk> capital markets. Please go ahead.
Yeah, Good afternoon, guys Hello.
Just trying to figure out on the I.
I guess you know the improvement in the revenue or the revenue level, where it is.
Is there any way you can kind of give us color on how much of that is because of inflation versus volume and I know you have a very diverse mix of products, obviously that you have but even between food and general merchandise.
Cost inflation and price inflation, helping to mask any kind of volume reduction.
Hi, Neal, it's John I think it gets tough to break down.
That difference.
Placement in our business certainly has been running on on certain products in the 7% range.
We also have the impact as Dan said of the we've locked in some of that pricing.
That cost on or if he lived winter road and other other merchandise. So when you get to the heart of it like as you said across the various products, it's hard to separate out.
More definitively that balance between the two.
Yeah.
I think that's a great point I mean, just.
Because of the way we went to market this year understanding never to the extend but understanding that there was going to be significant cost increases we did double double triple down on on our more preferential modes of transport and we've as you saw we purchased are engaged in leases on the other.
<unk> to hold more product so in order to get the true net.
Inflation.
Of the current today's sales.
It is less clear definitely it's something that we're looking at moving forward as you know and.
Just in enabling us to be able to keep up with it.
And have make sure we have that pass through on to the.
The products and services, we deliver but currently again as John mentioned, it's not a it's not a number I'd be comfortable throwing out yeah and for context, and you'll like that number I'm I'm just giving an.
An example of.
On fresh product for example, where you see a lot of commodity cost increase Dan talked about that but also the fuel surcharge increase on there. So you could be running a higher inflation rate there that's not necessarily the inflation rate for the oil business.
Yes.
Hey, that's a difficult question.
Difficult.
Thinking about your you know with the different dynamics the space allocation that you have and probably some of the larger stores have you did you change anything when the pandemic started you had more in community shopping or are there any kind of changes to the I guess the floor space to to emphasize or bring more products and that you think we kind of felt better.
No not really I mean other than.
You know getting as much product into the stores as we can we probably overwrote overloaded the stores again, taking advantage of some of those.
Cost effective means of transporting our products, but I would say that if anything.
We didn't necessarily a change the layout, but we.
We had more product end market and you can't sell unless it's on the floor. So I know that a lot of a lot of the leaders in market, we're definitely getting a lot more of the product, particularly the general merchandise last year and then you know pulsing in this year and I would imagine some of the seasonal items that wasn't relevant to.
The market or what people were seeing outside their door was.
<unk> taken and put it and put in the back until.
Snow was gone or until the weather was appropriate for what we had to sell but really if you think of what our lot of our leaders are sitting on.
The merchandise they don't have it every week so it's more.
It's more just.
You know kind of irrelevant I mean, it's market driven I guess, you could say its marketing demand driven so whatever it is whatever is required to satisfy or essentially is provided for the customers that day is typically what the what the managers, we put on the floor and okay fair enough I'm just wondering if there's a big hole ship.
Oh, sorry.
As John Pardon me I was just going to build on that and keep in mind that in our stores in northern Canada.
We have warehouses.
More than <unk>.
Larger warehouses.
You typically find in our backroom a comparison to an urban store. So that's where we're storing a lot of the product our actual sales far as Dan said.
We didn't.
Materially reconfigure that you have your high volume areas, but it's really that.
Warehouse space in community.
Not that we're leveraging here.
Does that yeah, I was kind of thinking about whether or not now that if you do have the shoppers that are more likely to shop out of the community or take longer road trips.
Being mitigated by the cost of travel.
If that was forcing you to put more of more of the consumables at your stores or more.
Square footage was related to that.
Items, they might spend more time out with community shopping for.
Okay. Okay.
Okay I get it.
Sorry, yes.
Yes, yeah, we definitely like we're definitely on an ongoing basis, developing and evolving our our sales mix to accommodate what are what our customers are looking for so we do have plenty of ground resets on a regular basis and it's really catered around new market demand. So currently depend.
Depending on the markets, we have definitely altered our mix in order to accommodate either the larger market share that we've been able to acquire in some categories and maybe less significant categories.
Have not taken as much of a presence as they might have in the past.
But nothing that I can summarize it as far as consumables, where we've always been reasonably high consumables with our quick stop with the with our perishable programs. It is a competitive advantage that we hold so it is something that we continue to strive to be Oh I would execute.
Our competitors are anybody in market, because it's a core competency and a competitive advantage that we hold over our over anybody else in the market.
Okay.
And then any outlook you have mentioned this before as well, but you mentioned acquisitions that potential business ventures is there a pipeline of acquisitions are we talking about tuck ins or anything.
Significant enough like what you did in the Caribbean that might be on the horizon.
I mean with this ever changing environment I do think it creates opportunities and I can tell you that.
There is definitely tuck ins that we're evaluating regularly and are headed as a is up and looking at acquisitions that we think can.
Play into our competitive advantage and give us more.
Competency and scale for our shareholders. So I'd say that it's an exercise that we do frequently but we're pretty selective on the.
The ones that we are we kind of strike on.
I think thats, probably all I can say about it right now, but we're definitely we definitely think this environment is right for.
Call it people to get fed up with the volatility of the industry at this point and that is that will play into our.
Our appetite to acquire.
Other operators.
But currently I would rely on tuck ins or sorry go ahead.
I was just asking if that was really kind of where the question was going as far as if the environment is now.
With more people getting set up.
You might be able to be more aggressive or get better prices.
Okay.
I'd say that that's I.
I think that that.
Would be an opportunity for us but to answer your question I'm not down the road on anything right now, but I do I suspect that that theres going to be opportunities that ive looked at opportunities that are let me say it. This way I have looked at opportunities that might not have been available a couple of years ago, they're not right for us, but that leads me to believe that there's other opportunities.
Entities out there that should be right for us. So I do think that this has created some.
<unk>.
It is particularly a family businesses or smaller operations that with no kind of stronger succession to think well you know coming out of this lost.
A couple of years and now coming into the environment. We're in now this might be a good time to liquidate and.
That's why I thought.
Hi.
That's my suspicion so that that's all I can really say about that right now.
I hope you're right.
Just last thing I, just wanted to and you have talked to in your commentary about ESG themes and risk mitigation I know in down to the Caribbean you've spent a lot of money.
Putting.
Much more resilient structures in place for the.
Or again of course wins that come through those islands is there anything else that's.
That kind of scale or on a longer term view that you haven't talked about yet as far as dealing with.
Climate change I'm, just thinking about ice roads, and how long they last nowadays and if you're thinking like three 510 years down the road about anything else that you do.
Okay.
I'd say that the evaluations of our structures with the permafrost.
<unk> D for us in our northern communities is something that we've been cognizant up for.
At least a decade, if not more so that's something that we're doing evaluation on the structures on a regular basis to ensure that they are holding up and we've done some work in some of our markets to correct that as far as the Winter Road. A short this is the season kind of funny coming off this season.
A pretty long, one, but I I don't Neal have.
Really any predictions or a lot of.
Insights around around that particular item more just so on the infrastructure and the whole lot of our infrastructure of sustaining the elements and the changing of the climate and the different communities and you mentioned the hurricane.
Scenario and some of the increased engineering around that and otherwise, it's just making sure that we're maintain.
Maintaining our assets.
From a structural perspective to combat the northern climate and really the biggest challenge there is permafrost IBRA.
Okay, great. Thanks.
Thanks Neil.
Thank you no further questions registered at this time I would like to turn the meeting back over to Mr. Mcconnell.
Alright, well then that's great. Thank you everybody much very much for your time and.
I hope you have a very enjoyable summer joy enjoy your summer.
Thank you. The conference has now ended please disconnect your lines at this time and thank you for your participation.
Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.