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Edited Transcript of OCI.AS earnings conference call or presentation 25-Feb-20 3:00pm GMT

Full Year 2019 OCI NV Earnings Call

Mar 7, 2020 (Thomson StreetEvents) -- Edited Transcript of Oci NV earnings conference call or presentation Tuesday, February 25, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ahmed K. El-Hoshy

OCI N.V. - Group COO

* Hans Zayed

OCI N.V. - Director of IR

* Hassan H. Badrawi

OCI N.V. - Group CFO, Executive VP & Executive Director

* Nassef Onssy Naguib Sawiris

OCI N.V. - CEO & Executive Director

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Conference Call Participants

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* Christian Faitz

Kepler Cheuvreux, Research Division - Equity Analyst

* Faisal Al Azmeh

Goldman Sachs Group Inc., Research Division - Research Analyst

* Frank Claassen

Banque Degroof Petercam S.A., Research Division - Analyst

* Henk Veerman

Kempen & Co. N.V., Research Division - Research Analyst

* Lisa Hortense Maria De Neve

Morgan Stanley, Research Division - Equity Analyst

* Raghav Bardalai

Exane BNP Paribas, Research Division - Analyst of Chemicals

* Senan Kiran

Muzinich & Co., Inc. - Credit Research Analyst

* Thomas P Wrigglesworth

Citigroup Inc, Research Division - Director and Chemicals and Basic Materials Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the OCI N.V. Fourth Quarter 2019 Results Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, Tuesday, 25th of February, 2020.

I would now like to hand the conference over to your first speaker today, Director of Investor Relations, Hans Zayed. Thank you. Please go ahead.

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Hans Zayed, OCI N.V. - Director of IR [2]

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Thank you. Good afternoon, and good morning to our audience in the U.S., and thank you for joining the OCI N.V. Fourth Quarter and Full Year 2019 Conference Call. With me today are Nassef Sawiris, our Chief Executive Officer; Hassan Badrawi, our Group Chief Financial Officer; and Ahmed El-Hoshy, our Group Chief Operating Officer.

On this call, we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of OCI's outlook. As usual, at the end of the call, we will host a question-and-answer session. As a reminder, statements made on today's call contain forward-looking information. These statements are based on certain assumptions and involve certain risks and uncertainties, and therefore, I'd like to refer you to our disclaimers about forward-looking statements.

Now let me hand over to Ahmed.

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Ahmed K. El-Hoshy, OCI N.V. - Group COO [3]

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Thanks, Hans. If I first look at our operational and commercial performance during the quarter, we are focused on execution and leveraging our logistical advantages as our end markets remain challenging. As you recall from our last conference call, we carried out a large number of planned turnarounds and efficiency improvements during the summer. We're pleased that we're starting to see the benefits in our nitrogen portfolio, which I believe bodes well for overall production performance in 2020.

Our total own-produced sales volume increased by 19% to 2.9 million metric tons during the fourth quarter of 2019 compared to the same quarter last year. This growth was driven by a strong result of our nitrogen business, with steady operational performance and sales volumes up 24% during the fourth quarter of 2019 compared to the same period last year.

This was driven by, firstly, the addition of Fertil in Abu Dhabi to our portfolio, contributing more than 0.5 million tons and helping our nitrogen product volumes grow by up to 24%. Our DEF business in the U.S. was also a big driver, achieving once again a quarterly sales record. Our European nitrates business performed well despite relatively quiet end markets during the quarter. CAN volumes were just about level for the fourth quarter of 2018, and we are pleased with the healthy 7% increase in volumes for the full year of 2019.

Our North American UAN markets, on the other hand, were weak, and prices were under pressure. Given IFCo's production flexibility in Iowa, we can divert to urea and DEF depending on the profitability of each product and end market conditions. This resulted in a solid performance for Iowa overall compared to both the third quarter of 2019 and the same period in 2018. However, it also explains a 12% drop in our sales volume -- our UAN sales volume and an increase of other products during the quarter as a result of the shift in product mix.

Methanol volumes decreased by 4% during the quarter. As you are aware, Natgasoline was down from August until the end of October due to an isolated incident related to a waste heat boiler that was repaired successfully. This had a negative impact on production and sales volumes, but without any financial repercussion in Q4 as the incident is insured, and we were already past the deductible period.

In addition, we accelerated the turnaround at OCI Beaumont, which we had originally planned for the second quarter of 2020. We refurbished waste heat boilers, which were the primary cause of the repeated shutdowns -- repeated extended shutdowns in 2019. The ammonia plant finished the turnaround in the first half of January and the methanol plant in mid-February, with a solid safety record and no reportable incidents.

Finally, we achieved good methanol volumes in the Netherlands during the quarter following the start-up of the newly refurbished second production line at BioMCN. This was not, however, enough to offset the lower production at our 2 facilities in the United States during the fourth quarter.

I'd now like to turn it over to Hassan for the financial results.

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Hassan H. Badrawi, OCI N.V. - Group CFO, Executive VP & Executive Director [4]

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Thank you, Ahmed. Looking at the financial results for the fourth quarter, we recorded consolidated revenue of $848 million and an adjusted EBITDA of $237 million. These numbers are up significantly compared to the third quarter despite deteriorating price environment and reflect the ramp-up of volumes post the successful run of turnarounds that we had.

Compared to the same quarter of 2018, revenue and adjusted EBITDA are lower primarily because of our methanol group performance. This is also reflected at the methanol segment level with both volumes and prices lower.

Looking at the results of our nitrogen platform, however, the adjusted EBITDA for the European, U.S. and Fertiglobe segments were roughly flat year-on-year. This was an environment of meaningfully lower selling prices. But good volumes and a focus on premium products using our flexibility together with low spot gas prices in the U.S. and trending the lower European gas prices underpinned our margin performance.

Our Middle East export platform, Fertiglobe, our joint venture with ADNOC, also felt the impact of lower prices during the quarter, but was boosted by the first time inclusion of Fertil in our consolidated results during the fourth quarter.

Turning to the balance sheet and cash flow. Our free cash flow before growth CapEx during the quarter was $52 million and our net debt was $4.1 billion as of 31st of December 2019. Net debt was relatively flat from the end of September to the end of December, despite the good quarter-on-quarter improvement in EBITDA. This can be explained by several factors. First, the interest payments of $80 million during the quarter, and because of timing, are always higher than average in the second and fourth quarter of the year. There were some negative currency effects amounting to about $24 million, reflecting mainly dollar-euro movements. And there was no cash upstream from Natgasoline during the quarter as we build our reserves at the Natgasoline level.

Finally, we had some seasonal working capital outflows of a total of $21 million during the quarter. This was primarily driven by a temporary increase in trade receivables related to our successful urea sales into the India and Ethiopia tenders and reflecting higher inventories in Europe, with a combined effect of $115 million. Total CapEx was $53 million during the quarter, of which only a marginal amount was related to growth as we complete -- as we reach the end of our growth CapEx program.

As the business approaches a steady state reflective of our completed growth program, our priority remains to maximize free cash flow generation and achieve our financial policy target to delever towards 2x through the cycle. Additionally, we continue to evaluate our capital structure to identify further cost-effective refinancing opportunities. We believe there are potential opportunities to both further optimize our capital structure and reduce our weighted average cost of debt. And we will look to execute those as they become available, as we have done since the beginning of 2018. We have a number of debt instruments, which are either prepayable or callable at the company's option during 2020 and 2021, including both bonds and loans, and we will look at those opportunistically.

I would now like to hand over to Nassef Sawiris, our CEO, for further commentary.

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [5]

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Thank you, Hassan, and thank you all for joining the call today. Let me start by commenting on the strategic review of our methanol business. As mentioned in the press release, following the strategic evaluation, we have initiated a process with several interested parties that may result in a partial divestment or other structures. At this time, we cannot share additional information, but in due course we will update you on the results of this process.

Regarding our operational performance and outlook, I'm pleased that we have started to see the positive effects from our focus on operational performance during the fourth quarter. And I would like to thank the whole team for their commitment to safety and reliability across our platform. All our nitrogen operations achieved good results despite the low selling prices and some buildup of inventories in Europe, clearly helped by the strong execution on sales and distribution.

I would like to mention our high-margin businesses in Iowa and Algeria, in particular. Our plants in Iowa have been operating without interruption since the turnaround last summer. The upstream plants have been running at a utilization rate of 115% on average since the restart, and the downstream plants are doing equally well. We continue to push the utilization rates higher, which will be disproportionately beneficial to cash contribution going forward. We executed a heavy turnaround schedule in Algeria as well in 2019 and are starting to see the benefits. All 3 production lines ramped up during the fourth quarter and reached record utilization levels by December. We are pleased that the plants have been running at high levels since then, with currently all 3 production lines running above the nameplate capacity for the first time since their start-up.

In the last few months, we have also stressed our methanol operations following unplanned downtime in the U.S. last year. We successfully restarted Natgasoline following the shutdown from August to October, an event that was covered by comprehensive insurance. It is currently running at around 92%, 93% utilization, which we aim to increase over the course of the coming months. As the plant was shut down for more than 4 months during 2019 and contributed little to our adjusted EBITDA, we expect a much stronger contribution in 2020. We also accelerated a planned turnaround at the OCI Beaumont that we had originally planned for the second quarter of 2020 so that we can ensure improved performance going forward. Since the restart of the plant, they have been running well, the ammonia plant is -- at up to 104% and the methanol plant now running at 112% of nameplate capacity. This looks promising for a much improved contribution to EBITDA for this facility from the second quarter onwards.

Turning to outlook for our end markets. Nitrogen markets faced significant headwinds in 2019, especially due to challenging weather conditions. Other factors like Iranian exports at lower prices and [trade] (inaudible) has also played a role. We were hoping for an early spring application season, but current soil moisture conditions have prevented that. But we expect nitrogen demand to be higher in 2020 for a number of reasons. Firstly, farm economics are favorable, and the relative cost of crop inputs look strong. We expect demand in North America to increase, driven by an expected return to normal planting conditions and an increase in planted acreage. In addition, the ammonia season last fall did not achieve full potential due to weather conditions, which should bode well for the demand of nitrogen.

The European nitrates market is also looking healthy. This is a market that has been much more stable than the UAN and the market in the United States in recent months.

Finally, our analysis shows that there is very little new capacity coming into the market this year, supporting a further tightening of the supply and demand balance. Looking at our own portfolio, we are well positioned both in terms of our product portfolio and geographic locations.

In anticipation of the spring application season, we continue to build inventories using our advantageously located warehousing capacity. We feel good about the season and have healthy order books across our operations. In the mid -- in the U.S. Midwest, we are well positioned. Our forecast of additional soil moisture could mean that UAN and urea will be favored over ammonia, [a] situation beneficial to us. And from a logistics perspective, we are already close to flat levels in the region. So we could potentially see a repeat from last year of widening Midwest premium.

Our global export platform, Fertiglobe, has enabled us to offer an enhanced platform to our customers and our urea production is almost sold out for the first quarter at advantageous prices. This is partially due to our successful participation in the Ethiopia tender and other key markets. And we expect to benefit from a positive outlook for the diesel exhaust fluid market in the U.S., our fastest-growing product in 2019. This is further helped by the recent agreement with Dyno Nobel to market their products in North America.

Then if I look to methanol markets. Methanol markets have been getting tighter, and as a result prices have been steadily rising since last summer when they hit a multiyear low. Current spot prices have increased more than $100 over -- to over $330 since then and are currently also about 30% higher since the start of the year. Prices are still at levels well below mid-cycle, but increases bode well for a better 2020, especially as we expect a healthy increase in our production volumes this year as well.

We are also seeing some positive developments in demand. On the environment, on the conventional methanol side, we are pleased to see good progress of fuel blending in certain key energy consuming markets. For example, India is looking seriously at implementing methanol blending, which is lower cost and better for emissions relative to gasoline and easy to transport. Efforts on distribution pilot projects are progressing, and this could materialize into a several million ton per year market relatively quickly. Our initiatives in biomethanol are also starting to pay off. And we're encouraged by the momentum and a lot of inbound inquiries from new customers. As an excellent sustainable second-generation biofuel and renewable chemical feedstock, there are a multitude of applications across various industries.

Finally, natural gas prices are at a highly attractive level in both Europe and in U.S. and look set to remain at low levels going forward. As a result, we expect to continue to be a beneficiary in 2020 and beyond, keeping us at the very low end of the global cost curve.

In conclusion, market fundamentals are looking supportive for 2020 and our order book is healthy. Methanol markets have also seen some clear improvements this year. In any case, we expect that a healthy increase in our production and sales volume should drive our full year 2020 results. Overall, we expect higher and more efficient asset utilization rates across the platform, also benefiting from better conversion economics following turnarounds. Our volume growth combined with our competitive position on the cost curve will allow us to maintain a strong position in the market, and we look ahead to realizing an improvement of our leverage metrics.

With that, we'll open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we have one question, comes from the line of Christian Faitz.

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Christian Faitz, Kepler Cheuvreux, Research Division - Equity Analyst [2]

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Christian Faitz here from Kepler Cheuvreux. Three questions, if I may. First, can you please elucidate a bit what has led you to the decision to part from the methanol activities at this point in time, given, obviously, all the rumors and considering all the rumors last year?

Second, your turnaround in Beaumont is completed, as you said. When did operations actually restart?

And then third question, you just mentioned in your outlook statement that you see a healthy development in your nitrogen order books. Can you please share your view of how the crop season will be starting in the Northern Hemisphere compared to last year, assuming that there will not be any major winter events coming up? I mean are we talking about 2, 3, 4 weeks in your assessment? Or what your people in the field are actually saying?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [3]

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So methanol, we are not taking a full decision on the exact terms of -- that we are -- would be willing to divest the methanol stake. We are receiving inbound inquiries as we speak, primarily for a minority stake, but potentially for a full divestment. These are things that we are always open with to evaluate all our portfolio. And that is something we do constantly across all lines.

We believe that, subject to achieving a good value for a minority stake, that this would be a deleveraging exercise that will accelerate our return to investment grade and will give us the momentum to participate in future consolidation in fertilizers.

On the start of the season, we can't comment on exactly the weather in the coming few weeks. But what is clear is that India will come back sooner rather than later for -- based on local consumption in the last few months, which are ahead of last year. So they will be -- we expect them to come back in the coming few weeks. That will set the tone, in addition to both spring in the U.S. and in Europe around the corner. And the fact that we believe that inventories and warehouses for major traders are below levels of last year, that should be -- bode well, especially in Europe. And for urea, UAN is a different story. And there has been some confusion in the North American market due to some spot sales and auctions that took place in the last month, which the market had to digest the repercussions of that on UAN. But we have the flexibility in Iowa and we exercised that. So we are bullish on urea and then the outlook for urea. We are -- we feel very comfortable about the European market. We cannot decide exactly where UAN is going to go, given the position of the market leader there. So this covers both the weather and the outlook, but the fundamentals in terms of demand growth in India and where the product is at distributors compared to last year gives us the comfort that within the coming few weeks people will either wait and panic for the India announcement or will move ahead of that. So the next trigger event will be an Indian tender announcement. We're getting a lot of inbound inquiries for more volumes to the U.S. at higher prices every day. So obviously a shortage in the U.S. is pretty obvious, and potentially a short squeeze in the Midwest because of logistics being difficult could result in more spikes in prices in the second quarter.

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Christian Faitz, Kepler Cheuvreux, Research Division - Equity Analyst [4]

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Okay. Nassef, and just one quick comment on Beaumont. The question when operations actually restarted?

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Hassan H. Badrawi, OCI N.V. - Group CFO, Executive VP & Executive Director [5]

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So yes, from OCI Beaumont, the ammonia line started in early January and the methanol started in mid-February. And as indicated by Nassef, the ammonia line is running approximately 104% and the methanol line is -- line is 112% and slowly cautiously increasing capacity there.

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [6]

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The 112% is not our final ambition. We believe that in the coming few days, we should cross the 115% and stabilize. Some of the things we did on the turnaround were not strictly replacing old parts with new parts. But we did some engineering enhancements that we're starting to see the benefits of.

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Operator [7]

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And your next question comes from the line of Tom Wrigglesworth from Citi.

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Thomas P Wrigglesworth, Citigroup Inc, Research Division - Director and Chemicals and Basic Materials Analyst [8]

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Firstly, on Fertiglobe. What would the pro forma for full year 2019 look like for Fertiglobe? And -- that would be helpful. Secondly, can you remind me how the cash will be transferred back to OCI from the JV?

Thirdly, could you expand a little bit on your comments about the UAN market in North America. As you said, we've all seen these low implied spot sales. How do you interpret the dynamics there? How do you see inventory in the North American UAN market?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [9]

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So I'll leave Hassan to give you exactly the pro forma of Fertiglobe with full year consolidation of Fertil. So hypothetically, Fertil was consolidated for the full year. Hassan, what was exactly the number?

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Hassan H. Badrawi, OCI N.V. - Group CFO, Executive VP & Executive Director [10]

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On -- if -- assuming we would have consolidated Fertil for the full year, then the pro forma revenue would have been $3.4 billion. And our adjusted EBITDA, which we reported for the full year '19 of $748 million would be at $888 million, just to give you a sense of the impact of the -- what the pro forma of full consolidation would be. And at the JV level, we have no restrictions on our ability to upstream cash to the shareholders to both OCI and ADNOC in terms of the holding company. So I assume that answers your question.

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [11]

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On the UAN market, I mean, UAN has been commercially handled poorly in the last few months by the market leader. The auction process that they initiated sent a message of desperation to the market. So UAN traded at the same -- (inaudible) equivalent of ammonia, something that never happened before. So we defer questions on UAN and North America to the market leader. But the -- overall, the nitrogen market is quite tight. And we have a global view on urea, not so much on UAN, where we are not one of the key players.

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Thomas P Wrigglesworth, Citigroup Inc, Research Division - Director and Chemicals and Basic Materials Analyst [12]

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(inaudible) could you give us (inaudible) window when this might come to a conclusion? Is this something that might conclude in '20 or could this roll on before then? Just any kind of (inaudible) we might expect an update would be helpful.

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [13]

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The process [hasn't] been initiated. We expect that a process should be clarified within 2020.

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Operator [14]

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And your next question comes from the line of Raghav Bardalai from Exane BNP Paribas.

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Raghav Bardalai, Exane BNP Paribas, Research Division - Analyst of Chemicals [15]

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Can I ask 2 questions, please. Firstly, just on gas. Now that the portfolio is fully integrated for Fertil, I was wondering if you could share the sensitivity of the group's, maybe, EBITDA to sort of key movements in U.S. and European gas, if possible. And then secondly -- sorry, go ahead.

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [16]

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Can you -- can we take that question off-line with Hans later. We'll give you the full metrics of that, but you have to go plant-by-plant because U.S. gas prices are not directly correlated to European gas prices, although we're starting to see a pattern develop where European gas prices are range-bound into $3.50 to $5. But right now, we're paying below $3 in [Holland].

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Raghav Bardalai, Exane BNP Paribas, Research Division - Analyst of Chemicals [17]

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Sure. Okay. And then the second one, just on the first quarter outlook. I know you mentioned a healthy order book, but just given last year first quarter versus second quarter looked very different because of your proactive phasing, I was just wondering if -- I know it's early, but any thoughts on whether we should expect something like that again this year?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [18]

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Well, it's early, and we're sold out through end of February, and we have good order books in March. So March will be the key in determining the volumes and how much, but we're not going to rush to reduce our inventory for the key spring market at lower prices. So we think that prices in the coming months will see an obvious big spike. And we are not in a rush to liquidate our inventory in order to satisfy a quarterly guideline. I think what you should start looking at is a full H1 result. However, that situation could surprise, because we're seeing in the last 48 hours a consistent ramp-up in inbound inquiries at consistently higher prices. And we know that India has to come back to the market, it's a matter of weeks now. So we're going to be prudent in the coming week or 2. And the market is extremely tight.

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Raghav Bardalai, Exane BNP Paribas, Research Division - Analyst of Chemicals [19]

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Can I just sneak in another quick one just for avoidance of doubt on the planned turnarounds. I know you said OCI Beaumont was pulled forward. But can you just remind us what else is remaining for 2020 and when, if possible?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [20]

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So we have very limited, as an aggregate, as compared to 2019, I would say that what we have is much less than half the amount of lost volumes. What I can give you in terms of guidance on how the turnarounds are going to affect the volumes is that we are budgeting for double-digit volume growth, excluding the Fertil annexation, so double-digit like-for-like in 2020, without adding the major capacity addition that comes with Fertil.

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Operator [21]

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And your next question comes from the line of Lisa De Neve from Morgan Stanley.

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Lisa Hortense Maria De Neve, Morgan Stanley, Research Division - Equity Analyst [22]

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So just a small one. I'm sorry to go back on the methanol, but sort of a clarification on the question that Christian Faitz has asked. So I'm aware that you can't provide a lot of detail, but could you please clarify, given your comments made this morning and just now, whether the divestment route is now a more likely route? And whether sort of spin-off and merger are still on the table or not on the table anymore? And similarly, I mean, it's the first time I hear of partial divestments. Or is it just exploring broader options? Or is it just taking the best opportunity what's on the table? So any sort of qualitative guidance would be very helpful.

And secondly, it's a bit of a higher-level question on the ESG side. So your slide deck contains a number of ESG slides, which are very helpful. And it's obviously a theme which appears to have become more prominent across investors' minds. And my question is sort of, amid a landscape of tightening policies, including European Emission Trading System moving to Phase IV quite soon, the EU Green Deal aiming to rightsize the application of crop inputs including fertilizer in Europe, what are sort of the initiatives that OCI is taking towards managing its CO2 emissions on a forward basis? Do you have any targets or plans to set targets or additional initiatives beyond your recent expansion in biofuels in the U.S.?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [23]

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So I'll start by -- on the methanol, and I don't want to dwell too much. The only thing that I can communicate today is that the spin-off has been taken off the table, was completed in the review, the pros and cons of that, having a smaller entity and dissynergies led us to believe that that is an option that we will no longer pursue.

On the terms of the minority or an outright sale, these are -- if they materialize, they will materialize if we believe that we can achieve a good balance between our deleveraging target and obtaining a fair price for the assets. So nothing is cast in stone there, and the process is highly flexible, and different parties have different scenarios to contemplate with. And we will not comment any further on that. I think I already commented more than I was supposed to.

So on ESG, we really appreciate that question. That has been one of our major focus points in the last few months. And you will see that, moving forward, every single CapEx that is being considered is -- takes ESG as a key parameter in terms of capital allocation. So one of the options that -- for CapEx spending -- that is in the tens of millions is to increase certain urea production, which automatically absorbs more CO2 that is stranded in certain of our plants in North Africa. So these are the types of initiatives that we're doing.

But in addition to biomethanol, DEF is extremely supportive for the environment. This is -- has 2 significant effects on the environment: number one is that it's used to eliminate NOx emissions coming out of trucks; and second of all, it's improving by -- significantly the fuel efficiency of trucks that use DEF. And it's been mandatory now in Europe and in the U.S. for all new trucks. We're just seeing it grow as a result of replacing old trucks with new trucks. And our plants, especially in Iowa, have the flexibility to produce more DEF. So these are to give you a color, but a lot of work is being done on ESG, and we're going to be exploring all of that and giving you more guidelines on it. Green ammonia is something that is also being considered. And we have several other initiatives.

But on the matrix of all fertilizer producers, we would actually stand out and do exceptionally well as a result of our low carbon utilization to produce the same ton of the same commodity, mainly because of our plants being -- having -- or being of a newer generation, plus the amount of environmental CapEx that we have put in our plants in Holland. So the plant in Wever is the most efficient plant in North America that we know of. So in terms of emissions, it sets the bar very high. Our plants in North Africa are all last-generation older plants with excellent emission record.

So if you want to compare our emission on a per ton basis, that will be something that would make us quite compliant, but we are not satisfied with where we are. We have a lot of initiatives. But the key message is that the entire Board has taken a decision that the environmental aspect will be a key parameter for any future capital allocation.

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Lisa Hortense Maria De Neve, Morgan Stanley, Research Division - Equity Analyst [24]

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Okay. That information was very helpful. Can I just sneak in a small one on CapEx. Is there any sort of growth CapEx we should put into our numbers for 2020 you can mention?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [25]

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Yes. Some -- the criteria for 2020 on growth CapEx is that a payback within months, not years. So I think we haven't looked at anything that has a payback beyond 18 months. So you can assume that in the tens of millions of that CapEx will be growth. Some of the environmental compliance CapEx that we are doing in France and Europe are also growth. So you're improving efficiency, and you're adding production volume.

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Operator [26]

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And your next question comes from the line of Faisal Al Azmeh from Goldman Sachs.

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Faisal Al Azmeh, Goldman Sachs Group Inc., Research Division - Research Analyst [27]

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Maybe just starting off with going back to kind of methanol volumes, and obviously Q4 volumes were slightly subdued. And how do we think about -- I mean you've had a few turnarounds already in Q1. How should we think about the volume of -- on a sequential basis for methanol? And then we -- if we want to tie that up with the current run rate at the EBITDA level, if that's possible?

And my second question is more relating to -- or is linked to one of the previous questions asked about the divestment or the minority stake sale. You've mentioned that you're thinking about further consolidation in the fertilizer market. Is that something that I understood correctly? If you can kind of (inaudible).

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [28]

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We're always -- so on the sequential and the volumes and all those, we don't usually comment in that detail. So I will pass on that because it's very difficult to calculate, especially that we are -- we still have a month of production. All I can say that, as we speak today, all our trends are running well. On the divestment, the -- we're not going to comment any more on that. I think we have the flexibility in the process to look at various options. And...

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Faisal Al Azmeh, Goldman Sachs Group Inc., Research Division - Research Analyst [29]

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And you've mentioned effectively that you're -- maybe I understood it correctly -- incorrectly...

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [30]

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Yes. On the consolidation, we believe that the fertilizer market has been waiting for a moment that is not happening because it's still quite fragmented. If I compare that to other industries, this is an industry that should predict weather patterns in terms of spring always coming after summer. But sometimes, the industry fails to do so. And the primary reason for the industry to be surprised every year that spring comes after winter and autumn comes after summer is that the industry is not consolidated enough, it's highly fragmented. Some consolidation will change that, to where producers will start to offer the customers products that they need when they need it, rather than try to stop the more products that they don't need when they don't need it. So that only happens when producers are large enough and sophisticated enough to look at and work closer to the consumers, rather than look to their own situation and try to target quarter-by-quarter results. And that will probably -- in other mature commodity markets, we rarely see commodity swings in 30% due to factors that are quite predictable and repeated year after year for the last 20 years. So it's very clear when the consumer needs the UAN. But sometimes, the producer is actually pushing that volume in a post -- at the wrong time rather than adjusting his own sales and production volumes to meet what the consumer needs at the right time. So we have our eyes open on consolidation. And we always look at shareholder value-enhancing opportunities. That's our thinking on the industry.

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Faisal Al Azmeh, Goldman Sachs Group Inc., Research Division - Research Analyst [31]

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Very helpful. Maybe just one final question on underlying demand and how you're viewing underlying demand in the methanol market today with the coronavirus, I mean in terms of lifting product, and what you're seeing in China? That will be quite helpful as well.

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [32]

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So China, the situation is not yet clear how much local production is impacted. But we see it in fertilizers that there is -- the plants are not operating at normal levels. We see logistics being quite impaired, to the extent that the warehouses in the ports won't have a lot of products. So we don't anticipate China to be an active exporter in Q2 or in the upcoming India tenders, for example, and that will further enhance the tightening.

On methanol, the situation is very similar. We see the -- some of the capacity that are curtailed. But demand, in general, if you look -- rather than on a quarter-for-quarter basis, if you look in the last 10 years, methanol demand has been growing in the 6% to 7% region consistently. Methanol is being discovered as a clean fuel, as a clean building block for petchems.

To give you an idea, we anticipate that if India goes ahead with the adoptation (sic) [adoption] this summer of methanol as a blending fuel, which we think is highly likely because, a, methanol is cheaper than gasoline, and it's better for the environment, something that is very critical to India, that could add up to 3 million tons of methanol demand. Methanol to olefins are something that recently added a lot of demand. And we're starting to see some interest for companies wanting to know more about biomethanol and getting samples and all that from industries that we didn't expect, such as the aviation industry, the automotive industry. So biomethanol has also, we think, has a lot of legs to grow. And basically, it's normal methanol, but produced from natural gas that is coming from -- recovered from waste.

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Operator [33]

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And your next question comes from the line of Frank Claassen from Degroof Petercam.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division - Analyst [34]

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Coming back on the CapEx, could you maybe quantify the expectation for CapEx for 2020? So both the maintenance and the growth CapEx you envisage.

And then secondly, on the situation of the Iranian or Chinese urea exports. Has the situation improved versus last quarter? What is your current view on that situation?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [35]

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So on the CapEx, just to give you broad numbers, but obviously, those numbers have to be adjusted for ForEx movements, for some anticipation and all that. But we're talking about roughly a $250 million maintenance CapEx run rate and something closer to $30 million in growth CapEx and environmental initiatives for 2020.

And on the exports, I don't know what improved or what you mean by improved, but we're seeing less exports in urea from Iran. Brazil has become an official dumping place for the whole world, whether it's Iranian product or low-cost products being diverted to Brazil as a buyer of last resort. We haven't shipped any significant volumes to Brazil in the last 3, 4 months because the prices there are not attractive and are being affected by over 1 million-plus tons of Iranian product going to Brazil. But obviously, prices in Brazil have to react to any shortage coming out of Iran. But other than Brazil and some products going into China, which I think also will stop because of what is happening with coronavirus in Iran and China. Those are where we have identified consistent volumes going out of Iran.

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Operator [36]

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And your next question comes from the line of Roger Spitz from Bank of America.

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Unidentified Analyst, [37]

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This is (inaudible) for Roger. So I was just wondering for Fertiglobe, how much of the sales and EBITDA came from your legacy segment? And then the next question, just on Natgasoline, would you be able to disclose the average operating rates for the quarter?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [38]

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On the first question, we're not going to go and split Fertiglobe on a plant-by-plant basis yet. I think we have enough information in that. And we've given you the adjusted number for 2019. You're going to see that on the run rate, and you can come to your own conclusions. And the second question?

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Hassan H. Badrawi, OCI N.V. - Group CFO, Executive VP & Executive Director [39]

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I mean the second question...

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [40]

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The second question, also, we're not going to comment on production on a month-by-month basis. That would be counterproductive for the shareholders' interests. But all that we can say is that as we speak now, all our plants are running with a big part of the plants running above nameplate post debottlenecking initiatives, like Iowa, like Beaumont, like Sorfert. So we are happy with the technical performance.

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Unidentified Analyst, [41]

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All right. If I can just sneak in one more. So I was just wondering what's the [profitability] of your traded volumes for the quarter? Could you disclose that?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [42]

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No.

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Operator [43]

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And your next question comes from the line of Henk Veerman from Kempen.

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Henk Veerman, Kempen & Co. N.V., Research Division - Research Analyst [44]

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My first question is on the refinancing opportunity in 2020. Hassan, could you remind us how much debt approximately is callable in 2020, and how much you paid, like an indication, in terms of interest rates over debt instruments in 2019?

Second question, maybe also for Hassan, on the working capital side. There was an outflow over '19. And I can remember that you made some comments related to more efficient working capital position in, I think, around mid-year. And could you give some color on how you expect this working capital position will develop in 2020, especially as you are ramping up volumes? Should we expect a large outflow or maybe an organic outflow is compensated by organic or, let's say, self-help?

And my third question, small question. Has any further insurance payment been received in Q1, or do you still expect further insurance payments related to Natgasoline?

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Hassan H. Badrawi, OCI N.V. - Group CFO, Executive VP & Executive Director [45]

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Sure. I mean just to give you -- just to contextualize your question, at the end of the year, we obviously have a -- we're in a very comfortable liquidity position. We had the last $600 million of cash in our systems and about $700 million of undrawn revolver facility at the OCI N.V. level, only $150 million of drawn facilities. That's -- I think that's a good background for any color we give on any potential refinancing activity, which we continue to look at opportunistically.

You're right. We do have over $1 billion in bonds and $400 million of facilities across the group that we could look at opportunistically in 2020 onwards. And again, we are constantly evaluating the NPV of such potential refinancing. And we'll make the decision at the time and according to what makes sense given the market environment. And as I said, we are -- there is no pressing liquidity needs for the -- at the company level. So in terms of the working capital, I mean, given the -- given our liquidity position and given the size of the company, and as Nassef mentioned earlier, we are not focused on quarter-to-quarter pressures. We take positions as necessitated to get the best possible netbacks for our products. And that means some movement in inventory, as we mentioned earlier, in the -- as part of our participation in tenders in Q4, there is some deferred collection that happens in later quarters in Q1 and into Q2. And again, our balance sheet and size on our liquidity position allows us to take these flexible positions to support our commercial team.

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Ahmed K. El-Hoshy, OCI N.V. - Group COO [46]

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Well, I think you had a question then with regards to the insurance payments at Natgasoline. As indicated in our earlier discussions, the waste heat boiler incident was fully covered by insurance, and the deductible for business interruption and property damage was already exhausted in Q3. So we continue to be fully covered on that. There is potential $10 million to $15 million that is in discussions with the insurers. We can't go into further detail on that right now, but that's something that we're going to be studying over the next coming months at the JV level.

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Operator [47]

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(Operator Instructions) And your next question comes from the line of Senan Kiran from Muzinich.

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Senan Kiran, Muzinich & Co., Inc. - Credit Research Analyst [48]

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You have been there popular on this call, but just a couple of very quick ones. Did you just say that the potential claim that you are discussing is $10 million to $15 million?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [49]

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Yes.

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Senan Kiran, Muzinich & Co., Inc. - Credit Research Analyst [50]

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Okay. And on the refinancing, do I understand correctly that that's separate to the methanol talks you're having right now? Like whether that happens or not, or, let's say, what form it might take that's independent to the refinancing activities you're considering?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [51]

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Not totally independent, but opportunistic in terms of that we have cash in the company and some of the bonds are callable in April. So we're going to continue to monitor the situation. But as we get close into the methanol process, we do not want to burden ourselves with debt at a rating that is significantly inferior to what we would be after we correct our balance sheet with a small divestment or a big one.

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Senan Kiran, Muzinich & Co., Inc. - Credit Research Analyst [52]

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Okay. And in terms of your ratings, currently you are on negative outlook from both. And I believe you mentioned your aim is to get to investment grade. Can you comment on like the current ratings? And if you expect any improvements given what you expect in terms of outlook for this year and the plans you have?

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [53]

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So you might have seen that the Iowa fertilizer company's rating has been upgraded by a notch in the last few days. We expect that as a few quarters pass with the improved efficiencies that reflect -- that we paid for dearly last year, that that will bode well with the rating agencies, also prices and gas prices. Currently, we feel good about both heading in the right direction in our favor. So -- but we can't comment on all these things, and potentially proceeds from a methanol transaction will also play a major role in that. So we're doing what we can do. And the rest will be clear in the coming -- hopefully, during the course of '20.

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Operator [54]

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There are no further questions at this time. Please continue.

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Nassef Onssy Naguib Sawiris, OCI N.V. - CEO & Executive Director [55]

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Thank you for participating, and looking forward to our next call.

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Operator [56]

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And that does conclude our conference for today. Thank you for participating. You may all disconnect.