Q4 2022 Cascades Inc Earnings Call
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Good morning, My name is Sylvie and I will be your conference operator today at this time I would like to welcome everyone to Cascade fourth quarter 2022 financial results Conference call. All lines are currently in listen only mode. After the Speakers' remarks, there will be a question and answer session I will now pass the call to Jennifer Aitken director of.
The relations forget Scott Ms. Aitken you may begin the conference.
Thank you Susie good morning, everyone and thank you for joining our fourth quarter 2022 conference call.
We'll begin with an overview of our operational and financial results followed by some concluding remarks, after which we will begin the question period.
Today's speakers will be Mario Plourde, President and CEO and Allan Hogg CFO .
Also joining us for the question period at the end of the call.
<unk>, Josh <unk>, President and CEO of specialty products, Sheldon Melo, President and CEO of containerboard packaging and jumbo did that dish President and C. O L S tissue papers.
Before I turn the call over to my colleagues I would like to highlight that certain statements made during this call will discuss historical and forward looking matters. The accuracy of these statements are subject to risk factors that can have a material impact on actual results. These risks are listed in our public filings.
These statements the Investor presentation and the press release also include data that are not measures of performance under Ifr S. Please refer to our Q4 2022 investor presentations for detail. This presentation, along with our fourth quarter press release can be found in the investors section of our website.
You have any questions. Please feel free to call us after the session I will now turn the call over to our CEO Matthew.
Yes.
Thank you Jennifer and good morning, everyone.
We are pleased with our Q4 performance on a consolidated basis result met expectation and demonstrate continued improvement at the EBITDA level.
Before discussing our fourth quarter performance I wanted to briefly touch on our full year results.
Our operations faced with more than 475 million of cost headwinds with the last 12 months alone.
These were wide ranging and include inflationary pressure on raw materials supply freight energy and labor costs.
We have made significant progress in mitigating their impact over the course of the year and these strategic actions combined with favorable industry pricing successfully have said 467 million of these headwinds.
Willie.
Moving now to our Q4 financial results on a consolidated basis fourth quarter sales increased 10% year over year, while adjusted EBITDA of $116 billion almost doubled from last year.
In both cases pricing and foreign exchange were beneficial while volume and sales mix and a negative impact.
<unk> levels were also impacted by higher production freight and energy costs.
A lower contribution from our recovery recycling operations due to lower recovered paper prices.
Sequentially sales decreased $39 million driven by lower volumes in all business segments. These more than offset positive impacts from sales mix and foreign exchange.
Adjusted EBITDA increased 5% sequentially, reflecting raw material pricing tailwind benefits from pricing momentum in our tissue business and a slightly more favorable foreign exchange and freight costs.
On the raw materials side highlighted on slides five and six the Q4 average index price for OCC decreased 79% year over year.
Food is 68% from Q3.
The OTC market face unusual condition in the last months of 2022 they.
The combination of usual elevated seasonal generation of OCC low export activity levels and extended containerboard industry mill downtime resulted in material supply levels far outpacing demand in the period.
Giving this prices at been at historic lows in region, where we are present, we expect these conditions to normalize in the coming weeks with usual lower material generation levels, but we do not expect this to lead to any material pricing movement in the <unk>.
Short term, giving the slow export levels and current macro economic environment.
Average index prices for white recycled paper grades begins to stabilize in Q4.
And while they were up 40% year over year, the decrease by 1% from Q3 as.
As we have highlighted in the past these unrelenting costs Edwin at the significant impact in our tissue resolved throughout 'twenty two.
And we are encouraged to see a stabilizing market.
Similar trends were seen in the Virgin Paul the or dual BOP index decreased 1% sequentially, but was 27% higher year over year, while softwood pulp index prices decreased 3% from Q3 and were up a more moderate at 19%.
Year over year.
Conditions at ease for Virgin pulp and will provide some cost relief in our tissue segment material is available in our meals are adequately supplied.
Moving now to results of each of our business segment as highlighted on page seven through 14 of the presentation.
Beginning with the sequential performance sales in containerboard decreased 5% in Q4.
This was driven by lower volumes as had been expected and lower U S dollar selling prices for both parent rolls and converted products. The 7% volume decrease reflects a 13% decrease in shipments.
Parent rolls and slightly lower converted product shipments.
As we have highlighted with our Q3 results. We took an additional 31000 tons of market downtime in the fourth quarter compared to 18000 tons in the previous quarter.
Sequentially converting shipment decreased by 1% and Canada outperforming the two 7% decrease in the Canadian market.
U S converting shipments increased 4% well above the four 5% U S market decrease.
On a per day basis, our total converting shipments increased 4% sequentially.
This outperformed the increase of 3% indicated market and the increase of one 9% in the U S market.
For adjusted EBITDA of $190 million or 21% on a margin basis was 16% above Q3 levels.
This includes a 5 million partial insurance settlement from water effluent treatment issues in mid 2021 at that word knee I got a follow complex and reflects lower raw material and production costs.
These were partially offset by lower U S dollar selling prices and a net negative impact of lower volumes.
Year over year sales increased by 13% driven by pricing and foreign exchange adjusted EBITDA increased by 70% or $49 million largely for the same reason I just mentioned, India addition to lower raw material costs.
Year over year shipments decreased slightly by 1%, reflecting a 2% decrease in external parent rolls and a 1% decrease in total converting shipments.
Mainly driven by lower volume in the Canadian market.
Touching briefly on the annual.
Annual results sales in our containerboard segment increased 13% from 2021 levels.
Adjusted EBITDA for this business increased 8% in dollar terms year over year to $401 million.
Which translate into a margin of 18%.
Moving now to our Bear Island project the startup of the machine is scheduled for the end of March we expect that 2023 production of 235000 short tons and adjusted EBITDA of approximately 20 million U S. Dollar.
Considering the delay in the startup and they continue inflation. The total project cost is now estimated to be between 550, and 525 million U S. Dollar.
Continuing with our packaging business Q4 sales levels in our specialty products segment decreased by 4% sequentially.
This reflected lower you RV volumes at the end of the year in our cargo business, partially offset by benefits from pricing and mix and a more favorable exchange rate.
Adjusted EBITDA also decreased sequentially as lower volumes higher production and transportation and labor costs more than offset the benefit from higher selling prices.
When compared to the prior year Q4 sales increased by $10 million or 7%.
And adjusted EBITDA level were stable as higher realized spread and more favorable exchange rate more than counterbalanced lower volume and higher operating cost.
We are pleased with the performance of our specialty products business in 2022.
Over year sales increased 19% in annual EBITDA margin improved 24% to $92 million.
The annual performance of this segment is a testament to our innovative sustainable product offering.
Moving now to our tissue business.
Sales were stable sequentially in Q4, while adjusted EBITDA levels increased to $8 million.
Top line performance reflected pricing and sales mix initiatives favorable exchange rate offset by lower volume <unk>.
Sequential EBITDA improvement was largely driven by benefits generated by improved selling prices and lower raw material prices.
Volumes were down by 8%, reflecting usual softness at the end of the year as well as the impact of the temporary shutdown of one of our paper machine at our slate they learn arrigo mill for the entire quarter.
Paper machine resumed production on February 10.
Bruce.
Previously disclose the Q4 EBITDA impact was approximately $5 million.
Year over year sales level rose, 13% with pricing and sales mix initiatives and more favorable exchange rate affecting the impact from lower volume adjusted EBITDA increased $14 million year over years.
Have provided a summary of the evolution of our tissue paper annual EBITDA performance year over year on slide 14.
What the graph highlights is the significant cost Edwin that this business faced in 2000 $22 million to $137 million of benefits realized from pricing volume and sales mix initiatives throughout the year, while important did not fully mitigate the hundred and 77 million of cash.
Cost and exchange rate headwinds.
As the momentum of benefits being realized from our profitability plan initiatives continued to grow we.
Expect to bridge this gap in 'twenty 'twenty to resolve.
We will now discuss the main highlights for our financial performance Alan Yes. Thank you Mario and good morning, everyone. So on slide 15, and 16, we illustrate the specific items recorded during the quarter. The main items that impacted EBITDA were $75 million of impairment charges in our tissue.
Segment related to EFS U S plants and $11 million in our containerboard and specialty products segment. In addition.
Includes a $10 million gain on the sale of Atlanta, where furious previously closed specialty product.
Slide 17, and 18 illustrate the year over year and sequential volumes of our Q4 adjusted earnings per share and the reconciliation with the specific items that affected our quarterly results as reported Q4 net loss per share was 27% this compared to <unk>.
Net earnings per share of $8 four since last year and a net loss of <unk> <unk> per share in Q3.
On an adjusted basis net earnings per share were 22 sales in the current quarter. This compared to a net loss per share of nine census, last year's results and net earnings per share of 20th century in Q3.
In most cases the volumes mainly reflects improved adjusted EBITDA.
On slide 19 fourth quarter adjusted cash flow from operations increased by $52 million year over year to $103 million.
And I, just said cash flow levels decreased by $8 million year over year. This reflects higher operating results and significantly higher net capex paid in the current period largely associated with higher balance conversion project.
Slide 20 provides detail on our capital investments paid capital expenditures net of disposal totaled $149 million in Q4 and $482 million for the full year.
Of this amount of 107 million was invested in about in project in the fourth quarter and $335 million during the year.
For 2023, our planned capital investments are $325 million, which includes approximately 175 million far by Ireland.
Moving now to our net debt reconciliation as detailed on slide 21.
Our net debt decreased by $45 million in Q4. This is a reflection of the combined effect of our co investment and by Allen stronger cash flow from operating activities lower working capital requirements and a more favorable exchange rates in the period.
Our leverage ratio of five two times is down from six two times at the end of Q3.
As we have mentioned in the past we expect this leverage trends continue with improved operational performance of our tissue segment and the startup operation at the Barron facility.
When excluding cash investments made today in the construction of biology, and its negative contribution to operating results our leverage ratio would stand at three eight times.
I would reiterate once again that our bank agreements do not include our leverage ratio equivalent.
Financial ratios and information about maturities are detailed on slide 23 sequential and year over year sales and EBITDA performance analysis can be found on slides 26 through 29 of the deck and historical index pricing on slides 30, and 31, Mark you would conclude the call with some.
Brief comments before we begin the question period.
Thank you Alan.
We provide details regarding our near term outlook on slide 24 of the presentation as always we would remind you that this is based on what we are seeing to date and may change in the coming weeks.
Our near term outlook for containerboard as for results to be slightly lower sequentially when netting out the 5 million parcel an insurance settlement received in the fourth quarter. This was driven by benefits from lower raw material costs, and slightly softer volumes and lower average selling prices.
We are expecting an improved sequential performance from the specialty product segments. This reflects the return to normalize the men's level being observed in the market and sell as stable as selling price trends and raw material costs.
Our outlook for tissue is four quarter results to improve sequentially and to be significantly above prior year levels. The stronger outlook reflects more favorable raw material prices higher average selling prices and good demand for the retail tissue, partially offset by softer.
Demand in the away from home products more broadly results throughout we need to we need three are expected to reflect growing momentum and benefits from ongoing initiatives.
Before turning the call over to for the questions I want to underscore that our near term focus is on delivering an effective and successful startup of our bear island facility at the end of March.
This mill will bring our containerboard operational platform to a new level, both from a <unk> perspective, and in terms of our ability to provide our customers with top quality lightweight recycled solutions.
On the tissue side, we are intent on driving profitability production efficiency levels and look forward to providing the market with an update on our 2022 two twin equaled 84 strategic plant initiative for the business and our packaging segment in.
With our Q1 'twenty 'twenty results in May.
With that we can now open the call for question operator.
So if a layperson guests, you'll receive who play compensated white city.
So it looks like Ravi telephonic ULE with Citibank.
<unk>. Thank.
If you would like to ask a question simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star followed by <unk>.
Again, if you have a question. Please press Star then one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
And your first question is from Amit Patel at CIBC. Please go ahead.
Hi, good morning.
Mario It looks like the Bear Island project costs were increased by about 9%.
You speak to what sort of project returns.
You would expect there now just given the higher build cost and the recent decline in containerboard prices.
Well I will take this one so.
The return is.
Slightly higher than initially.
Disclose so.
Given the.
Even though there's a reduction in pricing. So there is a reduction on costs as well so.
Even with the project costs, we feel that.
The return is just slightly under 15% right now as we see it so.
Okay, great. Thanks, Thanks, Elena and are you able to sort of share what type of.
EBITDA contribution you would expect from bear island once it's fully ramped up.
Yes, it was already disclosed.
In the past so we said I don't know remember, maybe two quarters ago around 90 to 100 million use something like that.
Okay. So no change to that even with containerboard prices have been coming off.
OCC went down as well and that spread has improved.
Okay go ahead of its obviously, if you want to add something beyond maybe I'm here also.
When we when we announce and presented the project. We also have some.
Our conservative approach to the project looking at this spread over a number of years.
So we didn't take.
The spread at the moment, where we announce so this is one of the reasons. The second thing also is.
We have built in our project the vertical ramp up so the.
Amount of tons produced.
Is accelerated with the with the team on how we're going to do this so both of these things are also contributing to positively on that on the.
Compared to the year at the original assumptions.
Okay. Thanks, Thanks, Charles that's helpful and Charles just wanted to ask you are there were some trade reports recently that Amazon was putting some of their packaging business out to bid.
Reportedly they were going to put more weight on sustainability. So do you see any opportunity there to.
Sure Anthony.
Michelle.
Yeah, so I'm not going to.
This specific on customers.
But.
No.
There is opportunity for us when we have strategically decided to invest.
In a game changer project like Bear Island.
This is exactly the reason why we're building this.
Eco friendly products lightweight.
And it's very aligned with the new trends and demand.
When we look at.
e-commerce trends in the market.
People like Amazon are customers like Amazon and others.
Are looking to reduce our their impact on the environment. So you do this by weight design.
So Verizon and.
In other events investment that we've made are 100% aligned with that so.
If and when for instance, Amazon is looking for or other customer two to improve we'll be better equipped to respond to that.
Okay fair enough. Thanks, Thats, all I had I'll turn it over.
Thank you.
Next question will be from Matthew Mckellar at RBC capital markets. Please go ahead.
Hi, good morning, Thanks for taking my question.
I'd like to start with tissue, you've previously spoken about the need to drive higher shipment volumes in that business and it sounds like you're seeing some positive momentum on the operational side. So.
Two questions first now that labor constraints have improved can you provide some color on other initiatives to drive better production efficiency and second can you provide an estimate of where your run rate on cases sold would have been in the quarter for one for the downtime at St Helens or where you think your run rate on cases sold would be now that <unk> started.
<unk>.
Yes. Good morning, so for the first part of it we have many initiatives.
So if we're sort of ramping up the productivity is the Q1.
We had a delay on the Oregon facility the special either so that's what we're working on re we have other initiatives in terms of logistic as we are moving jumbo rolls across the system and cases so.
The impact of Oregon was also impacted the rest of the system because we have to shift customers from other facilities as well. So that's why we had the impact. So we can see that in coming quarters, This would improve as well and.
In terms of.
<unk>.
Sure.
The second part of your question was.
The number of cases that could have been higher in Q4, if santana schedules. So yeah. So in terms of <unk>.
<unk> production as well.
Labor was a challenge so we hired a lot of employing lindley last year. So ramping up training. Those employees is also something that we will.
And is that in Q1, we think that the trend is pretty much. The same as January is a bit softer on the away from home side, but as Mario said the retail business is pretty good. So we see the trend in <unk>.
In Q2, probably a little bit iron in Q1.
Q1 be a little bit above Q4.
Okay.
Okay. Thanks for that.
Shifting to the containerboard business.
Your outlook talked about a continuation of slightly softer volume trends I was wondering if you could confirm whether you would expect shipments to increase or decrease sequentially based on what Q1 looked like so far and maybe speak to whether youre seeing any change in the outlook for demand as we progressed through the quarter based on your conversations with customers or otherwise.
Okay I'll start with maybe the Q4, so as you saw we.
We did take some some mass on down market downtime.
But we did though.
A bit more better than we thought on the converting.
So this is this is in line with the investment that we made over the last two years.
With our new facility.
It's got away.
But also in Ontario, where we also.
Revamped our portfolio.
So this is part of the reason why.
We were happy with our performance in Q4.
But we did see that.
Some of our customers.
Shut down or reduce their inventory levels. So.
We saw the impact when we look at Q1.
What we see is that there is a slowdown in certain area. So I can say for instance, industrial.
But overall, what we see at this point.
As we're getting back to more seasonal.
Normal pre COVID-19.
And I'm going to keep my comment on this because we're still trying to evaluate.
With the context, the overall context.
We see that the as we speak right now that the demand seems to be more in line with normal seasonal for December of the year.
Okay. Thanks.
And last one for me.
And not to get ahead of your strategic plan update in May, but as you think about the financial targets for each segment that you provided last February .
Are there any targets at this point that you'd call out in particular that either look less likely to be achievable or targets, where you still have a good degree of confidence at this point.
Well Matthew this is exactly why we will.
Some more color on this in may so.
We'll see how the year starts and all the uncertainty.
Dan.
We will reassess everything and we'll provide you more color, so, but we see positive trend and in tissue.
Specialty is also new.
I'm going to charge us commented on.
On containerboard, so we'll provide you more color and Sheila.
Okay. Thanks fair enough I'll turn it back thank you.
Okay.
Next question will be from Casa Kopek at TD Securities. Please go ahead.
Hi, everyone its cash on the line.
Our assessment of where we are in the current customer destocking cycle for containerboard.
As I mentioned.
We saw in <unk>.
Q4.
A big.
Adjustments.
So right now from what we see.
Again, I'm just using.
More normal for this time of the year in Q1.
Like pre Covid, so we see that the business is.
The Destocking has done in Q4 from what we see so what we see right now is more normal for this time of the year.
Okay.
Your comments on how your current containerboard production mix roughly break down in terms of the different.
This way because you can differentiate between the 42 pound another lightweight great.
Oh, I'm, sorry, I'm not sure I understand exactly the question so what's our mix between different basis weight.
I say that.
If you take a look at.
Where we stand now compared to the year two.
2022.
It's about the same I would say.
Bear Island with Brean.
And average lower weight, when we ramp up because the the mill.
We'll be bringing lighter weight in our portfolio.
So then what would that split be roughly is it like 60, 40 lightweight to kind of more standard weight or something different.
I'll answer that question when we do the update if you don't mind, because I don't want to give the number right now out of like this.
Sure no problem.
So maybe just another take on it.
Are you seeing right now in the market for price gap between 42 pound craft.
And lightweight containerboard grades and then also the price spread versus Virgin and recycled and maybe if you could explain medical the historical price spread that would be great.
Yes, I know, but I'm not going to comment on on pricing.
Comments on.
We're not a big player in Kraft linerboard so.
I don't want to start speculating or talking about market pricing.
Okay no problem.
For me the dam permit charge you.
You had a similar charge a year ago, what's changed over the past year and your outlook for this business that caused you to reassess future cash flow expectation.
Well, it's no it's.
It's accounting base, we remain obviously confident about the business, but some time.
To to make the accounting works, we need to to take impairment based on different kinds of assumptions and what's going on in our operation and you know that under ifr risk if teams.
Reverted back to a more positive trend and we can always reverse these impairments. So that's mainly accounting noncash item it's more.
Would see a more severe in ISR as the new west gaps. So maybe that's one of the reason, but it's all in Q2, the operating performance as we see it right now.
Okay. Thanks, Alan and it was there anything that you think would.
It would be worthy to call out in terms of the impairment assumption that will be kind of the key driver of better assessment or nothing really.
No there's different ways of.
Looking at these impairments sometime is.
Future cash flow or value of the assets on the open market. So there are different we are evaluating so it's based on cash generating unit. So some time it goes in more detail and then the business segment itself soybean. So that's why sometimes we need to take impairment on.
On a more granular assets than the business segment as a whole.
Okay understood. That's all I had thanks, everyone.
Thank you again, if you would like to ask a question. Please press Star then the number one on your telephone keypad and your next question will be from Zachary <unk> of National Bank. Please go ahead.
Good morning, everyone. Thanks for taking my question.
How should we think about the timing of Capex through the year and do you think there is a risk of bear island being delayed further.
Well I'll take the first part of the question. So obviously the 175 million are we expecting by Alan will be more in the first half of the year and obviously a bigger part of this will be in the first quarter as we are finishing up.
The.
The commissioning of the equipment.
I'll, let Charles.
On the second half of your question.
For the year to bear island start up.
We had announced that we would be starting in March and so knowing where we are today.
We still.
Aligned for for that.
As Alan mentioned.
The key components.
We're all being.
Commission right now so we have a full team focused on that.
We also are working on aligning.
The customer and how we're going to be able to service them. So right now all of our team onsite our focus to start up in Q1.
And we're very confident at this point.
That we're going to meet theres not going to be any further delays in the startup and again reason why I can say this is when I look at the.
What has been commissioning right now.
All major components were turning.
Motives under the paper machine and things like that so.
We're pretty confident that.
The debate will be.
As we mentioned today.
That's great color, Thanks, and could you tell us a bit more about the labor situation both in containerboard for the ramp up and in the tissue segment, particularly in the U S tells about the headwinds headwinds you're facing there.
So maybe I'll start with.
For the Bear Island.
We're very very happy with.
The way that the team was able to do.
We bring in.
The people in the mill so right now.
We are fully staffed for Ford to start up.
We are still missing a few position, but they are normal in the ramp up because some of the physician or some of the team members, we would bring towards the end.
More in the logistic and shipping an area like this so all the key players operators were fully staffed and.
Also training so.
We were two things that are key to this is first.
When we decided to convert data bear island.
Location was whiskey.
There was already also some people that were there before paper makers and that work in the mill before.
That joined Us.
But in addition to that.
A good area for four good labor. So this was done.
But also we started.
A year ago to bring people in in phases, and we provided training so.
Where we're really well positioned for the start up everybody is onboard.
And on the tissue side, we're fully staffed in U S.
Schedule will slow where we have that downtime.
So, but it's going well and we have one site in Quebec also on the work from home side as well.
Missing some employees, but overall, it's the problem is not getting employee anymore, and it's more about training them and having them at the right skill level that we need. So there is we're putting a lot of effort in training.
Support from manufacturers and others to ramp up their skills in <unk>.
Thank you very much that's great I'll turn it over.
Okay.
The next question is from Mike Walkley of Trust Securities. Please go ahead.
Hi, Thanks for taking my questions just wanted to quickly follow up on your U S. Shipments you mentioned that shipments were up 6% year over year in <unk> versus the U S market down eight 4%.
You cited Ontario in Piscataway.
Can you talk more about what drove that volume growth in the U S in a declining market.
But if it was price a factor in terms of encouraging the hybrid where they are trying to get a sense of how you're able to grow in the U S. Despite the fact that shipments were down so notably overall.
Yes, it's a good question.
So when you look at when we made the investment in.
In our key.
Region.
Our piscataway.
We ramped up.
The facility.
Customers.
We worked on specifically in markets, where we saw that there was a lot of potential so.
There is a lot of distribution.
In the area, where we invested the piscataway.
So this is this is a big part of the explanation.
And you saw that we made an announcement for a new investment in that region.
Because we still have some.
Some capacity in that facility and we want to be able to tack on.
Again on the growth potential in that region. So that's why we're it's in line with with our strategic plan.
Both on the market that we wanted to go after and also supported by the investments that we've made.
Got it so it sounds like you grew with existing customers in that region would it be fair to say.
Well, both I would say, yes, the existing existing but also with the investments that we've made it also open.
In the distribution, mainly we were able to.
So when I say distribution is.
The e-commerce and other distribution, but gave us the.
The tools to be able to grow in that market.
Sure.
Got it and then just on Bear Island.
You mentioned that you're 100% contracted for 2023, 75% contracted for 2425, how much of the volume of Barrow Island is integrated in those years 'twenty to 'twenty, three 'twenty 2024 and 2025.
The purpose of Bear island.
Existing customers in the U S market that you may be supplying elsewhere, just trying to get a sense of how the volume shave it shakes out with bear Island.
Is it basically existing customers want to grow with new customers, how much of domestic versus international and then how much is integrated.
Yes, so I'm not going to give you too much specific but I would say that.
A combination so when we start.
The paper mill.
<unk>.
Develop some current customers that.
Our growing with with US. So this is one.
In part as we did.
Yes.
Add up some new customers to our customer list that we developed over the last two years that we've been.
Working with with them too.
To benefit from the product lightweight and.
Recycle that.
We're providing that we're looking for this so this is the second part.
But also we are looking.
We're looking at.
Increasing.
Volume in our own converting system. So for example, the investments that we've made.
We announced that we will be starting in Q2 I will contribute to.
To that.
So but at the beginning sorry about at the beginning for sure when a when we're going to start the <unk>.
The mill or.
Integration rates.
We'll go a bit lower just because of the fact that there is going to be more external sales.
But I don't know if that answered your question Luca.
No. It doesn't just one quick follow up before turning it over to Steve the external sales do you expect that to.
Is that mainly domestic or our external are those things that are those sales going to be offshore.
At this point, we're focusing on the domestic and depending on the market condition.
Just as needed, but our model right now is developing with current and.
Our future customers on the domestic market.
Great. Thanks very much.
Thank you.
There are no further questions at this time Mr. Plourde. Please continue.
Thank you everyone for being on the call with us.
We're looking forward to for the next quarter to update you on our situation and thank you very much have a good day everyone.
Thank you.
Yes. Please.
And as Sue said MFA had a coffeehouse was answering that question.
Thank you ladies and gentlemen, this does conclude today's conference call. You may now disconnect your lines.
[music].