Q2 2019 Earnings Call
Greetings and welcome to the American Vanguard second quarter 2019 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If he would like to ask a question today. Please press star one on your telephone keypad.
If anyone should require operator, that's during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Mr. Bill Kuser director of Investor Relations. Thank you you may begin.
Well, thank you very much Donna and welcome everyone to American Vanguard's second quarter, and maybe year earnings review.
Our speakers today will be Mr., Eric Wintemute, the chairman and CEO of American Vanguard.
Mr., David Johnson, the company's Chief Financial Officer.
And also assisting in answering your questions Mr., Bob Trogele, the company's Chief operating officer.
American Vanguard will file our Form 10-Q with the FCC tomorrow.
Providing additional details.
To the results that we will be discussing in this call.
Before beginning lets take a moment for our usual cautionary reminder, in todays call. The company may discuss forward looking information such information and statements are based on estimates and assumptions by the Companys management and are subject to various risks and uncertainties that may cause actual results to differ from management's current expectations.
Such factors can include weather conditions changes in regulatory policy competitive pressures and various other risks that are detailed in the company's FCC reports and filings.
All forward looking statements represent the company's best judgment as of the date of this call and such information will not necessarily be updated by the company.
With that said, we turn the call over to Eric Wintemute.
Thank you Bill good afternoon, everyone. Let me start by thanking you for your continued support of American Vanguard.
Today, I will start with an overview of our top line performance for the second quarter.
Then for a change of pace I will give some attention to a few areas of particular interest to our shareholders, namely inventory factory performance and cash generation.
Typically David covers the subjects, but I believe that circumstances warrant additional color for me.
After her from David on a more comprehensive summary of our financial performance.
I will close by giving future looking comments on technology development and afford your outlook.
Since we last talked there has been a lot of news in our sector you have all read about or in some cases experience the persistent rain cold and flooding that affected parts of the mid western and southern United States.
Like many of our peers, we issued a press announcement on the second quarter forecast in sales below those of our analyst consensus and siding domestic weather as the primary driver.
Before going too far down that road, let's look at some numbers.
In spite of weather, which certainly did affect our domestic markets. Our overall quarterly sales were actually up by 6%.
Well our results fell short of the consensus number I'm encouraged by three things.
First we grew on a global basis second the 2020 planting season is shaping up to be promising.
And third our domestic results were actually mixed.
On the first point it wasn't long ago, maybe five six years.
When we were so dependent on Midwest row crops that are severe.
Bad weather season.
And the and the Midwest would have been much more severe or.
Earnings by contrast today, we are benefiting from the fact that we have become increasingly diversified with respect to both geographical reach and product portfolio.
Our recent acquisitions have given us access into major markets in Brazil, and Central America.
As well as into new crops, such as soybeans canola.
This in turn has helped us to generate relatively smooth financial results over the past several quarters.
Even as certain markets like us crop have had subpar seasons.
Indeed during the second quarter, our international businesses grew by nearly 14% with stable sales in Central America, and the addition of new sales in Brazil and Canada.
On the second point, the domestic crop market, which was down by 6% overall in 2019 may be poised for a rebound in 2020 .
During the 2019 planting season distribution exercise, great conservatism and their procurement.
However is even as they lowered channel inventory levels. They purchase many of our crop protection products and volumes equal to those of last year.
And the fact that there was greater penetration of those products into a weak market.
At the same time it has been reported that several million acres, which would otherwise have been planted with either corn or soybeans.
Went unplanted as farmers, who were unable to get their crops in the ground opted instead to accept prevent plant payments.
This in turn has resulted in lower total acres of corn for the year.
With respect to my third point, even within U.S. domestic sales were actually mix.
Crop sales were off by 9% with products like biomet and counter declining during the period.
By contrast, certain corn products like as tech were up significantly while others like impact were flat versus last years second quarter.
Well dampening demand on the crop sector. However, the wet weather actually helped our non crop sector.
Net sales of our domestic non crop rose by 37% led by Diebold mosquito products as users treat for vector borne diseases.
And prepared for forecast in hurricane activity.
Sales of our pest trips also rose as is typical and wet weather conditions.
Having said all this I conclude my remarks on the top line by adding that we are very confident that the second half of 2019 will be far better than the first.
Our team has gone to great lengths to pressure test our forecast both domestic and international we expect strong performance in the second half of the year led by domestic sales of our soil fumigants on high value crops cotton harvest products Mosquito control solutions and a broad array of offerings in Central America and Brazil.
Now, let's turn to the subject of inventory and factory utilization, which I would think are of particular interest to our investors.
Our inventory for the quarter ended at $193 million, which is up from 163 million at the end of the same period in 2018.
As you know we have set a yearend inventory target of 145 million.
You're probably asking why the inventory grew and whether we'll be able to hit our target.
Inventory is higher year over year for four primary reasons about 13 million arises from new acquisitions, specifically, the assure to herbicide and Brazilian business.
Nearly $9 million from our expedited purchase of equities, which has been in short supply and which we ordered earlier in the year to minimize.
Chinese tariff expenses.
The balance is from increased inventory to support our business in Mexico, specifically growing demand for products that we acquired at the end of 2017.
And finally, our cotton defoliant, Folex, which we which we produced earlier in 2019 than we had in 2018.
Despite increased levels of these products, we fully intend to work down our inventory over the balance of 2019 and to hit our target of 145.
As I mentioned earlier, we are forecasting a strong second half of the year over the course of which we expect to convert about 45 million of inventory into cash.
As David will discuss in more detail. This in turn will serve not only to help us pay down debt, but also to improve our borrowing capacity through sustained generation of EBITDA.
No discussion of inventory be complete without mentioning of factory performance as David will also discuss further the primary factor and reduced profitability for the second quarter arose from our factory under absorption.
As you May recall second quarter of 2018 was the best factory.
Performance utilization in our history.
Factory activity actually exceeded factory costs in that period.
This primarily because we entered the 2017.
Season, with new unusually low levels of calendar and five.
Both of which.
Our manufactured in our facility and Hannibal, Missouri, Accordingly, we built more of those products to meet demands of 2018.
When we entered 2019, however, our inventory of climate and counter were comparatively higher.
Further as I pointed out earlier, the adverse conditions within the us affecting corn sugar based and other crops resulted in reduced demand for those products.
We in turn scaled back manufacturing activity in light of those market conditions. As a result were unable to meet the absorption levels that we enjoyed in Q2 of 2018.
The second quarter 2019 numbers for an absorption we're closer to the historic norm.
I hasten to note that the performance of our other three factories during the period was strong.
We are nevertheless, seeking to optimize our factory activity over the balance of 2019, well building to forecast and reducing inventory.
Now, let me turn the presentation over to David for further discussion of our financial performance David Thank you Eric.
Good afternoon everybody.
As Bill mentioned, we will be filing our Form 10-Q for the three months and six months ended June Thirtyth 2019 Tomorrow.
Everything I'm covering here is included in more detail in that document.
With regard to the financial results as Eric just detailed the company's sales for the second quarter of 2019 increased by 6% to $113 million as compared to sales of $170 million. This time last year.
Within that overall improvement our us sales were flat, while our international sales grew by 14%.
International sales also continued to grow in importance and represented 43% of net sales in the second quarter as compared to 40%. This time last year.
As Eric has mentioned notwithstanding the strong growth.
And international portfolio just discussed the primary reason for falling short of the net sales consensus with the persistent wet weather across all major us markets.
In the face of a soft market, rather than dropping prices, which can be difficult to reinstate at a future time, we elected to take short term lower sales volumes dabble, thereby preserving longer term brand value.
As Eric has also mentioned during the quarter, we adjusted our manufacturing plan to start to address inventory levels, which have been impacted by soft sales in the first half of 2019.
As a result of the change in manufacturing activity and the associated under recovery of overhead costs gross margins declined quarter over quarter and ended at 37% in 2019 as compared to 40% last year.
Also during the quarter, our operating expenses ended at 31% of net sales compared to 32%. This time last year. This improvement was achieved notwithstanding a 2% increase in operating costs and demonstrate improved operating leverage from our expanded business.
The increased operating costs compared to last year, mainly driven by the expenses necessary to manage the several products and businesses. We have acquired in the intervening 12 months.
As expected our interest expense.
Increased driven by our acquisition activity over the last 12 months, our higher working capital levels and increased LIBOR based interest rate.
These various dynamics generated net income in line with the level, we announced to the market on July 23rd earnings pre announcement.
Overall net income for the quarter ended at 11 cents per share as compared to 19 cents per share. This time last year.
For the six month period ended June 32019, net sales were approximately flat at $213 million as compared to $211 million for the same period last year.
Further gross margin ended down slightly to 39% as compared to 40% last year.
The manufacturing plan change I already outlined was mainly a Q2 factor and therefore, the effect was diluted when considering the half year results.
This relatively consistent gross margin performance across the first half of 2019 as compared to last year reflects the balance nature of the company's portfolio.
Our operating expenses when expressed as a percentage of sales were basically flat year over year with a rounding change of about half of 1% when compared to sales revenue.
The reported operating expenses included include lower legal costs adjustments to deferred consideration on the breakup fee on a potential acquisition.
Offsetting these beneficial changes we have picked up additional expenses necessary to manage the products and businesses acquired since this time last year.
Our net income for the first six months of 2019 amounts to $7 million or 24 cents.
As compared to $10.3 million or 34 cents in the same period of 2018.
From my perspective, the financial focus for the company rate remains consistent.
First we continue to follow a disciplined approach to planning our factory activity balancing overhead recovery with demand forecasts and inventory levels.
At the end of June 2019, we had higher inventory levels to a degree caused by the soft sales performance of the U.S. crop business, but also impacted by the expanding expanded global spread about business for example, our Brazilian and Central American distribution businesses build inventory towards the end of the second quarter in all in order to address customer requirements. During the second half of the year, which is the strongest parts of that annual business cycles.
Our integrated manufacturing and inventory plan remains on track to meet our year end target of approximately $145 million.
Excluding the impact of any future acquisitions.
Reductions in inventory from current levels will come in relatively equal parts from inventory that we manufacture and from inventory that we purchase.
Our reduction in Q2 factory output reflects decisions made to start to hold back factory output a little earlier than we usually do and does not indicate a material change in our plan for the second half of the year, which is normally characterized by low output than the first half.
Second our effective tax rate ended at 26.8% year to date as compared to 24.4% for the same period of the prior year.
The current year to date rate reflects a slightly different mix, including recently acquired products and businesses and that mix change is causing us to slightly adjusted tax rate expectations for the full year. We are working to modify our international tax structure to improve the tax rate related to recently acquired assets. We presently expect the full year rate will be in the range of 26% to 27%.
Third with regard to liquidity at the end of the second quarter availability under our credit line stood at $31 million as compared to $137 million. This time last year.
This decrease is due to increased borrowings in the second half of 2018, the first half of 2019 to by a number of products and businesses.
Further because of challenging weather conditions in the us this year and the different business dynamics of managing the needs of our expanded international business. We have seen an increase in working capital, which we are working to address.
Indebtedness as of June 32019 was $165 million as compared to $97 million at December 31st 2018.
Looking forward to the balance of 2019, we are expecting a reduction in inventory by nine by September Thirtyth.
2019, but that reduction will take some time to work through the full cash cycle.
And consequently, we are forecasting that to be relatively flat.
At the end of Q3.
In the fourth quarter, we are expecting to see debt decline and to generate cash as indicated in our earnings release.
In summary, when looking at our year to date financial results. We can say that we have recorded flat sales during difficult weather conditions in the USA truck market, while our international business has continued to grow.
Furthermore, despite taking the decision to dial down some of our manufacturing activities earlier in the year than usual and accepting reduced short term profitability as a consequence.
Our margins have been broadly maintained in line with our projections.
Our operating expenses have increased primarily because of the acquisitions completed in the last 12 months and that remained depressed approximately flat when expressed as a percentage of sales.
As expected we have higher interest expense is driven first by our acquisition activity and second by the working capital dynamics I've outlined.
With that I will hand back to Eric.
Thank you David.
Now I'd like to give an update on our technology development efforts and then close with a full year outlook.
On the technology, we will start with and Vas essential oil products and then work into some fast.
Turning first to invest as many of you may have seen on July eight the Wall Street Journal published an article highlighting the new consumer pest spray initiative, Procter and Gamble Corporation.
Known under the brand name of Zibo, which is based upon our advance formulations.
The article cites the us market per household insecticides, and an estimated 1.3 billion per year and the global market at 8.7 billion.
This market is expected to post mid to high single digit annual growth with international demand rising even faster than domestic.
Given the size of the market and the novel attributes of zero products. We are confident that our technology will help zibo to succeed in this marketplace.
As we've indicated previously zibo, leverages formulations and technology from our subsidiary advanced technologies.
This patented technology platform targets biological receptors that are only active in an invertebrate pests, such as insects and parasites.
These targeted receptors are not active in mammals.
Or vertebrates.
As such the unique differentiation of products based on this technology is that they are highly both highly effective and safe for use around humans and pets.
Another important consideration is that as promising as zero is we have only just begun to expand the potential uses of endurance technology.
The mode of action of this technology makes it ideal for mosquito repellent C products lawn and garden animal health and agricultural applications.
Turning now to some pass at our annual shareholder meeting presentation on June 5th.
We discuss the overall precision AG sector and highlighted the significance of our technology for the prescriptive application of crop protection and plant nutritional products.
As you May recall, we also outlined our domestic base case on three crops in which we forecasted annual revenue about 100 million.
2024 growing to 160 by 2026.
To attain these kind of numbers.
We are working on multiple fronts to develop some past, including with respect to technology Department field testing packaging design distribution infrastructure and agronomic advisors.
On the technology side, we continue to work with Trimble Corporation for their Geo positioning capabilities.
Their software integrations synchronization skills.
And their vantage dealer network for provide an expert customer interface for the introduction of this new equipment system.
Trimble has helped through the design and interface that enables our system to be plugged into virtually any ISO base tractor control system.
Which we believe constitutes about 90% of the new systems on the market.
Beyond the extensive field work that we've done with Simplot grower solutions, we are adding new distributor and retail organizations like Atmos farm supply in Iowa, and harvest line co op in Indiana to use prototype systems during the upcoming 2020 planting season.
In addition, we're working to finalize some past testing protocols with two of the largest USA based multinational distributor retail organizations.
Some pass will feature products that are available and smart cartridge containers, which we have designed for ease of use worker protection and convenient return for reuse.
These containers can be snapped into place on a planter to facilitate the use of multiple crop inputs in each row.
Also we have designed to the entire platform for some past products, which we call ultimate us.
Through this system, we can track product from factory to field and back.
The farmer can track the amount of each product used on his or her field in real time.
And partially used containers can be returned for credit.
Smart cartridges will be filled and rebuild at both filling stations, which we are fabricating this year.
Finally to facilitate the ready at the option of Sim pass by farmers were developing a core group consisting of some of the 13000 certified crop advisors in the United States.
As you can see some past is really a suite of technologies that together enable the grower to use only what is needed where it is needed.
Insufficient because a farmer can do so much more than one pass of the field.
As smart because it informed by GPS data Youll data and agronomic analysis.
And it's sustainable because it minimizes the environmental footprint and field.
From technology, let's turn to our full year forecast most of which we covered in our.
Preannouncement last year or last month.
For full year 2019, we expect that net sales will be around $500 million gross profit margin percent will be approximately 38% operating expenses about 155 million and an overall tax rate in the neighborhood of 26%.
By year end, we have.
Targeted a reduction in inventory of about 45 million and a reduction in borrowed debt of about 50 million.
In summary, I'd like the resiliency that I've seen in the organization.
Well it is never enjoyable to encounter factors that are out of one's control like unprecedented rainfall in a major market those things can serve as a test of business its character.
And I believe that in the face of adverse conditions organization handled itself well.
And the crop sector, we allowed distribution to run through channel inventory, while at the same time, we preserve brand value.
This sets us up well for 2020.
In the non crop sector, we capitalize on the wet weather to maximize sales.
In the international realm, I'm pleased to see continued growth at good margins, including in markets that are relatively new to us.
Granted we still have work to do on our balance sheet.
And businesses large and complex as ours. However, one cannot turn the ship around in an instant.
Over the next few quarters, we expect to increase sales drive down inventory and generate cash.
The key to succeeding here will be the exercise of continued discipline through normal business cycles.
To that discipline, we will add continued investment in our future through technology and the initiatives like invest and some fast.
We have had a history of working through headwinds building upon the experience and from it.
Attain greater growth and profitability.
And that is what we will do in the coming months.
And we'll now take your questions.
Donna.
Thanks.
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Our first question is coming from Jim Sheehan of Suntrust Robinson Humphrey. Please go ahead.
Good afternoon, Thanks for taking my question.
Hi, how are your international margins shaping up compared to your expectations for the acquired businesses.
I think I think were right on target.
Our business model for each of the acquisitions.
I think we're plus or minus 1% from what we expected.
And so for the quarter were exactly in line with Lily.
Okay.
There are there any one.
Yes. So we're we're year to date, we're up we're up a point.
The quarter was exactly one month, yes.
Okay and on the advance product that.
You just covered.
Are you generating.
Any sales to that in 2019 or can you describe the ramp of that product.
So were we have a.
Royalty stream on a base of net sales.
Theres, a minimum which has been what we've been.
Dealing with I think this last year.
And.
At some point that that the sales will push past that minimum.
Great and then in terms of.
2020, what are your thoughts there what kind of growth can you get back to assuming no change to the current macro and tariff environment.
So again, we're we've got some cautious.
Optimism over 2020, because we know that.
That actually use of our products in the field were up.
And sales were down I'm talking to us crop.
And so are the inventories that are there have diminished.
And that's in light of a of a season that was.
Certainly.
And many sectors down the sluggish. So we again, we think we've gained market share in that process.
But I think it bodes well for for the 2020 season.
Assuming that.
The Chinese.
Move to to not purchase any agricultural products.
Doesnt affect that.
2020 season, so that could be the one factor were I think.
Since that's happened we've seen corn prices.
Diminish from they moved up.
No one and the end of June and then and then dropped over the last this last.
30 days.
Thank you.
Thank you. Our next question is coming from Chris Kapsch of loop.
Capital markets. Please go ahead.
Yes, hi, good afternoon. So just wanted to follow up to try to clarify some of the comments about how the season played out.
This notion that.
You feel like you've got greater penetration.
For some of your products in the Midwest, because I think you said that.
Your overall sales were down I think you also said biomet and counter sales were down versus prior year levels. So I'm just wondering.
Which product categories do you feel like you had greater penetration and especially against this backdrop is kind of characterize by other companies.
A little bit more discounting in the crop chemistries this year given.
With the backdrop of the disruption show and you made the point that you.
Preserved the brand value you didn't do that so you're suggesting for also greater penetration.
Without discounting so just want to understand where you're having that success and how.
So as tech.
<unk> was up 29%.
In the quarter.
And.
Yes, I think thats kind of reflective of a later planting season.
But so far the impact was basically flat in sales, but we're up we're up in usage.
And that's in our corn herbicide.
And I think jims by this time, we see most of.
Most of the returns from retail to distribution.
And at this point, it's extremely low.
So in looking at the sales as we were going through.
This last period I mean, we were we were getting a small orders every day and that it would appear that.
And I think distribution has reported that they just watch they didn't want to get stuck with the.
With inventories I think I think they are looking at some long positions on seed.
But with regard to chemical they watched fairly fairly closely and positions or they may have taken higher percentages of of an annual season.
People people knew when the planting season started to to get delayed or they just kind of shifted their whole buying pattern too.
If we we know there is product available and.
We'll just.
We'll just get on with our products and were generally able to deliver within a day.
We have products stations all over.
On the markets in the U.S so.
Kind of a just in time approach.
Maybe more than.
The more traditional.
Bode and move so I think when people thought was going to be an abnormal year the buying pattern shifted.
Okay, just to follow up on that.
Despite the present acreage you feel that your channel inventories for.
Presumably talking.
Sorry.
Soil applied.
Hi, Alex.
Our low.
Right and then where are you where you guys.
Greater adoption is in the corn herbicide basically.
Right.
Okay, and we have that we have.
We had a new.
Corn herbicide impact the.
That Weve launched and I think we've got two more.
In fact combination products coming out for next year as well.
And so we.
Okay, Amazon continues to be our impact product line and our continues to be.
Nice product fit for us going forward.
And just so is the broader adoption of that of your corn herbicide.
Really function on this increase resistance.
To round up or is it.
Or is it a function of some.
Commercial strategy you've had.
Well.
2012, Monsanto pick impact as there.
Roundup partner for resistance.
Management of the lifecycle, and so that kind of set the stage for us to to move continually in that market.
Thanks.
And then just one other quick follow up is so.
I mean the the.
Full year gross margin guidance.
Okay, 30% does that contemplate.
Any or increasing amounts of royalties from and bats.
Thank you.
Yes, thats going to be no no no the rest of this year.
Okay. So.
Does it doesn't it.
It does take advance into account, but there were no additional revenue in the revenue side, yes, yes.
So you don't expect any additional royalty payment this year.
Correct. So yes, we will be recorded.
Okay.
So did you have any additional questions.
Yes, maybe I was under the understanding that the royalty payments structure would be.
Gary maybe twice a year.
Later, I don't know maybe.
From June 20th your momentum from June 20, Omelettes, It will start to be quarterly.
Sure Im trying to its next June June 22 into June Twond, yeah. Okay.
Quarterly okay.
Yes.
All right. Thank you.
Thank you. Our next question is coming from Joseph Reagor of Roth Capital Partners. Please go ahead.
Afternoon, guys. Thanks for taking the questions.
Sure.
So I guess first.
And Vince.
Can you give us kind of up.
Magnitude of what that could mean to you.
You know maybe long term is it.
Is this a small royalty stream you know a couple of million a year Max or is this something that could be you know meaningful to the bottom line.
So there is a.
There's a minimum and yeah I mean.
You know in the range that you're talking about.
But there is a percent of sales as sales ramp up and we do think at least.
From.
Procter and Gamble.
Discussions in the way they are.
They they will definitely trigger pass that that minimum royalty.
On.
There are other technologies, which you know we're we've got a really effective mosquito repellent that we need to find the right.
Company too to take to the market, we've got lawn and garden products, which.
Which we're testing right now and we'll be looking for somebody to take that into the market, but then yeah with that lawn and garden development will come agricultural products, which we're really excited that that we would probably take to the market ourself.
And then there's theres also some animal health products as well that are there.
Okay Fair enough and then what's sort of your categories do you guys kind of consolidate that under so we can think about it long term.
Okay non crop yes.
Okay.
And then a bigger picture question, you know what the balance sheet stretched a bit right now is it fair to say that its unlikely you guys would be making any additional M&A announcements and then you know coming quarter at least.
I think thats probably.
The case, I mean, there might be something very minor but.
But I think because.
We look now there are opportunities that are out there.
We may be a little less aggressive than we might have might have been in the past as we wait wait for the for the.
Uh huh.
Sales of those acquisitions to kind of catch up and start bringing down or are correct.
Debt and improve our balance sheet.
Yes.
Okay. Thanks, the rest of my stuff has been touched on already.
Okay.
Once again that is star one to register any questions. At this time. Our next question is coming from Bruce Winter a private investor. Please go ahead.
Yes. Thank you.
Could you.
Tell us.
Who is using this past trips.
Because of wet weather and more are they using them for.
They're sold under a couple of different well several brands actually.
There is what you would find in the retail stores would be no pest strips that's marketed by spectrum.
In the if you pull up on Amazon, you will see new van and Uva and which are targeted towards the professional pest control operator, so those come in.
Multiple multiple strips per per bag and a resealable container.
And they come in different sizes, as small tenant a half gram and a larger.
65, Gram bar, which is what you find in the retail stores.
Then we have a.
Kind of them.
Bartlett brand called Barfly, which is an individual who has built a market and in.
Restaurants and bars for specifically.
NASA fruit flies that would hang around the bar.
We have business in Australia.
Thats, it's doing well and then Canada Scott.
Markets under.
I guess, the exact brand, but they they have a brand of strips. The MPT 80, Graham bar that they sell up there.
And wet weather benefits those applications.
So obviously, a higher higher amount of insects with wet weather and so again. This is inside of you know an area I mean in the.
You've got.
Cockroaches in your in your pantry or.
You've got flies when you're adding to house that sort of thing.
Yes.
Mosquitoes control as well.
What's that was a range historical range of die Brohm extended because of the floods in the upper Midwest.
Dibrom, we're up we're up a little bit some of some of the it's just timing of the placements in 2018, we had.
Some say some.
Purchased by our biggest customer.
In the first quarter and in this quarter and this time they took it in the second quarter.
But I think they do anticipate.
A fairly robust.
Season, and we've already had a couple of.
Of meaningful.
Tropical depression, which which have resulted in mosquito infestation.
And.
My last question is.
It does.
Is there any application to the Panama disease for bananas, either through distribution or through proprietary products.
You are saying the Panama disease.
Alex figure toga.
You have the fungus stuff.
I guess not.
Yes, Brian we that's probably a segment that we target the most in our Central America business. So we're very active in that.
Across the board with several inputs.
So what's the specific questions are we in that business yes.
And we tried to grow it yes.
And we do we do I mean this is throughout its not just a panama and the fees right. This is throw in Central America and you also have the Philippines Bucks, Okay alright.
Where we are but.
Yes, so for now.
Banana pineapple pineapple and Centrus.
And we work directly with the large.
Grower plantations key to Dole et cetera.
But we also have a nutritional business call grant green plants.
Yes, we have third party products and we we pull that together to give a complete solution to this should quito's.
Both agronomic leave but also commercially.
And we also sell our insecticides it to that.
And to that sector.
So there we are getting a.
The ambac manufactured products to the to the growers and of course that gives us an increase margin.
On our third party business, we're looking for quality growth. So we're.
Through contracts with third party suppliers were trying to increase our margins I think Eric mentioned that before our margin right now look at least what we're trying to target stable, but it's.
Continue focus on.
Improving our margins through our distribution system.
So there could be a lot of potential in Central America.
Sounds good thanks for taking my questions I appreciate it.
Sure.
Thank you.
The floor back over to management for any additional or closing comments.
Okay, well on behalf of management our board appreciate your tuning in further and appreciate the questions as well we look forward to updating you.
And our next conference call. Thank you very much.
Ladies and gentlemen, thank you for your participation. This concludes todays event you may disconnect. Your lines at this time and have a wonderful day.
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