Scorpio Tankers Inc. Q2 FY2022 Earnings Call

Good morning and welcome to the Scorpio Tankers Inc. Second Quarter 2022 Conference Call. All participants will be in listen-only mode. I would now like to turn the conference over to James Doyle, Head of Corporate Development and Investor Relations. Please go ahead.

Thank you for joining us today. Welcome to the Scorpio Tankers second quarter 2022 earnings conference call. On the call with me today are Emanuele Lauro, Chief Executive Officer; Robert Bugbee, President; Cameron Mackey, Chief Operating Officer; Brian Lee, Chief Financial Officer; and Lars Dencker Nielsen, Commercial Director. Earlier today, we issued our second quarter earnings press release, which is available on our website, scorpiotankers.com. The information discussed on this call is based on information as of today, July 28, 2022, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release, as well as Scorpio Tankers SEC filings, which are available at scorpiotankers.com and sec.gov. Call participants are advised that the audio of this conference call is being broadcast live on the internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days. We will begin with a short presentation today. The presentation is available at scorpiotankers.com on the Investor Relations page under Reports and Presentations. The slides will also be available on the webcast. After the presentation, we will go to Q&A. For those asking questions, please limit the number of questions to two. Now, I'd like to introduce our Chief Executive Officer, Emanuele Lauro.

Thank you, James. Good day everyone. In the second quarter, Scorpio Tankers generated its largest quarterly profit in the company's history. The quality of the company as an investment continues to improve, and we are positioned to create shareholder value in what we believe will be a multiyear cycle. We also believe consistent with our actions that the best way to do this is first through improving our balance sheet. In the first half of this year, we reduced our outstanding debt by $511 million. Additionally, our pro forma cash balance has increased by $360 million to $591 million through July. As we start the second half of the year, the company has declared repurchase options on six MRs under sale leaseback arrangements for $95 million. With this and scheduled amortization, we will reduce our debt by almost $700 million in the first nine months of the year, counting for a 22% reduction in overall indebtedness. This debt reduction, combined with rising asset values, leads to a material improvement in the company's loan to value as well as net asset value. The third quarter earnings have started strongly. We have booked 44% of the days in the third quarter at a rate close to $45,000 a day. If we were to average $10,000 less, so $35,000 a day for the entire third quarter, the company's pro forma liquidity would be close to $700 million at the end of Q3. Our customers expect the current market conditions to be sustained, as evidenced by the increase in time charter rates, duration, and activity, and we agree with our customers. Global inventories remain near historic lows. The reopening of the global economy from the COVID-19 pandemic continues to increase the demand for refined products and seaborne exports. Demand for product tankers is expected to increase over the next few years while supply remains constrained. As we've mentioned before, there is a record low order book, an aging fleet, and upcoming environmental regulations coming into play. To conclude, our top priority remains reducing our leverage and increasing our liquidity. Thank you for your continued support. And I will now turn the call to James for a brief presentation.

Thank you, Emanuele. Slide eight please. Our thesis and outlook remain the same as they did at the start of the year. We expect quarterly increases in refined product demand as the global economy reopens from the COVID-19 pandemic against historically low inventories and a constrained supply curve. Lars will speak to the factors that have resulted in a strong rate environment. But first, I will review a few key points as to why we expect the current strength to continue. Slide nine please. At a high level, it may appear that Russia's invasion of Ukraine is the driver behind the current strength in the product tanker market. While it certainly created significant commodity price volatility, we have not seen shifts in Russian refined product exports going to Europe. Year-to-date, European imports of Russian refined products have increased slightly year-over-year. The European diesel deficit shown in the lower right-hand graph is less about the conflict and more about a reduction in refining capacity and a shift to renewables. However, the EU has announced plans to reduce Russian imports of refined products by next year. If European countries were to completely ban Russian product imports, it is expected that these hydrocarbons would flow to Africa, Asia, and Latin America. To replace the lost Russian imports, Europe would have to source barrels from the U.S., Middle East, India, and Asia. In the event this happens, there would be a substantial increase in ton miles as every replacement scenario requires replacing a barrel from further away. So what's been driving the market? Slide 10 please. Similar to Europe's diesel deficit, regardless of the conflict in Ukraine, there is a global mismatch of refined products. However, continued improvement in demand as the global economy reopens from COVID-19 has exacerbated this mismatch. For several quarters, refined product demand has continued to outpace supply. Despite an increase in refinery utilization, inventories remain at historically low levels, and the increase in supply has not been enough to offset the increase in demand. This has been most evident in the global diesel market, but similar scenarios exist for gasoline and other refined products. The supply and demand mismatch becomes quite clear when looking at refining margins, which reached record levels and remain extremely strong. We view elevated oil prices and refining margins not as temporary but rather reflective of consistent under-investment in the supply chain. Reason Brent crude oil is currently trading at $112 per barrel while diesel was trading at $140 is because there's not a shortage of crude oil, although that may come later, but a shortage of refining capacity. Put differently, global refined product demand is at or above pre-COVID levels, more refining capacity is lower, and more dissipated than before COVID. This has led to an increase in seaborne export and ton mile demand for refined products as product tankers serve as the conduit to reallocate refined product barrels around the world. Slide 11 please. Changes to the global refining system continue to increase ton mile demand, which is the quantity of cargo multiplied by the distance it needs to travel. This is important because an increase in ton mile demand tightens supply and drives a higher freight rate environment. From 2019 to 2021, about 2.6 million barrels of refining capacity closed, which is a reason why refined product prices remain so high today. After a refinery closes, in most cases, the loss in output needs to be replaced with imports. As you can see in the lower left, as Australia's refining capacity declined, refinery product imports have increased to replace the lost production. Over the last decade, we have seen a structural shift in refining capacity, which has moved further away from the consumer and closer to the wellhead. Excluding China, export-oriented refining capacity additions in places like the Middle East have offset closures of older, less efficient domestic refining capacity in places like Europe. Simply put, these refinery changes lead to an increase in seaborne exports of refined products and the distance those products need to travel. New export-oriented refining capacity additions in the Middle East, U.S., and India will help to alleviate the global shortage in refined products over the next few years. However, it's difficult to change refining capacity in the short-term, and thus we expect the global supply-demand tightness in refined products to continue to persist. Slide 12 please. Our view at the start of the year, and now remains the same, refined product demand continues to increase as COVID restrictions ease. Given the challenge for refiners to increase main play capacity in the short-term, we expect existing refining capacity to continue to operate at higher utilization levels. We have seen this in the U.S. Gulf, where refineries have operated at 97.6% utilization over the last four weeks, while diesel exports have hit record highs. Seaborne exports of refined products have been above pre-COVID levels since March, and the underlying refined products market is expected to get tighter going forward. We expect refined product demand to increase by an additional 2 million to 4 million barrels a day through the end of this year. If 25% of this increased demand is exported, seaborne exports of refined products will increase by an additional 500,000 to a million barrels per day. We started to see the additional uptick in volumes in June and July. With inventories at historically low levels, the ability to supply demand from inventory draws is limited, and thus refinery runs and exports will need to increase. These developments create a very constructive environment. Seaborne product exports and ton mile demand are expected to increase 3% and 10% this year, and we see several scenarios where this could be higher. Next year, seaborne exports and ton mile demand are expected to increase by an additional 4% and 6% respectively. And these demand increases will be met by very limited fleet growth. Slide 13 please. The product tanker order book is at a record low, with 5% of the existing fleet on order today. Shipyard capacity is fully occupied with short-term orders from other shipping segments such as containers and gas. With only 19 products ordered year-to-date, we do expect more orders, but even if those were ordered today, they would not be delivered until 2025. Unlike other sectors, product tankers were not built in mass until the early 2000s. So scrapping has been minimal, and basically everything that's been delivered hasn't left the fleet. Today there are 249 product tankers 20 years and older; by 2025, excluding scrapping, it will be 664 product tankers 20 years old. Perhaps more than half of the fleet will be 15 years and older by 2025 without additional rebuild orders. Using modest scrapping assumptions, product tanker net fleet growth will average 0.3% in 2022 and 2023 before going negative. However, if scrap rates reflect the age profile of the fleet, supply growth is essentially zero next year before going negative in 2024 and 2025. All of this said, it's likely that the product tanker fleet trading in clean petroleum products will shrink over the next few years. Slide 15 please. The quality of Scorpio Tankers as an investment and balance sheet continues to improve. As Emanuele mentioned, our focus has been on improving the balance sheet through debt reduction and maintaining a strong liquidity position. In the first half of this year, the company reduced overall indebtedness by $511 million. Net debt has also declined almost $750 million from the start of the year through July 27. In addition, we recently gave notice to repurchase six MRs under sale lease arrangements for $95 million, further accelerating the deleveraging of the company. This voluntary debt repayment, along with scheduled amortization and debt repayment related to a vessel sale, will reduce our indebtedness by close to $700 million in the first nine months of this year. At the same time, given the strong rate environment, if the fleet average is $35,000 a day in the third quarter, the company could have close to $700 million in pro forma liquidity by September. This would result in a net debt reduction of $1.1 billion in the first nine months of the year.

Thank you, James. Over the last few months, we have witnessed a solid and constructive market across all the green product tanker segments. In my view, this is the real and sustainable market recovery that we have highlighted since 2019 and before COVID came and delayed the expected return of a healthy product tanker market. The rate environment for Scorpio’s modern fleet in all segments and geographies is very strong, with spot rates for LR2 trading today at $50,000 to $60,000 per day, MRs at $40,000 to $50,000 per day, and the handy segment trading at $30,000 to $40,000 per day. These are the right levels for both index and non-index voyages. We can today see a robust diversity in cargo mix and destinations, providing owners with greater flexibility and optionality. The time charter market has taken a considerable upturn, and we are seeing substantial interest in first-class charters for long-term transactions. Today we see elevated interest for three-to-five-year deals in LR2 and MRs, where rates have increased to $23,000 per day for MR and $30,000 for LR2. It is reasonable to assume from this substantial activity that our customers are aware the market has firmly transitioned into a sustainable and meaningful recovery. Going forward for the second half of the year, we expect cargo flows from the Middle East and India to increase, as the art from this key export region appears to favor more voyages over the coming weeks, limiting swing barrel supplies to Singapore and raising supplies to Europe. Again, this improves the incremental ton mile demand equation. U.S. Gulf exports of distillate and gasoline are now topping 2 million barrels per day, which is an all-time high. Even with the recent weakening in global refining margins, U.S. margins are currently averaging $22 per barrel at the prompt. U.S. Gulf exports continue unabated to Latin America. We anticipate that with the plant maintenance at three Brazilian refineries and the still firm Argentine power sector demand, this will add to the tightness in the Atlantic basin product markets and will support distillate margins this autumn. We anticipate Brazilian imports will need to rise by up to 340,000 barrels per day between August and October, pulling further supplies from the U.S. Gulf and incremental swing barrels in the east of Suez, all again very positive for product tanker demand. The global market will remain short on diesel as the deficit in refining capacity remains unresolved. This is despite Europe still importing Russian barrels and, should Europe sanction these barrels, they will have to compete with barrels further afield. It is important to keep in mind that the global product markets are reacting to their own refining capacity and stock constraints, regardless of the regional dislocations brought about by the Ukrainian conflict. We have yet to feel the real benefits from the new Middle East refineries, Jazan in Saudi Arabia and Al Zhour in Kuwait, which are coming on stream later this year. Refineries are moving into turnaround, reaching approximately 1 million barrels per day by September, adding to their requirement to maintain imports. Products stock levels are low in many areas, and the market cannot flex with demand, as was the case previously. The fleet is aging, there are very low deliveries, and we are on the doorstep of increased environmental regulations in January 2023, reducing effective supply capacity. And with that, I'd like to pass it over to Robert. Thank you very much.

Thank you, Lars. Thank you, everybody, for attending this morning. Obviously, the present looks absolutely fantastic, and we're really focusing on the present as well. But we can't help thinking that, however good the present is, the future does look fantastic too, especially with the constraints around refineries and the actual new building order book as well. Without both those two factors, the lack of investment in refineries plus the new order book is really very unusual for any shipping market at all. So I don't have more to do, let's just go straight to Q&A please.

We will now start the question-and-answer session. Our first question will come from Omar Nokta of Jefferies. Please proceed.

Thank you. Hey, guys. Good morning and good afternoon. First off, congrats on a strong quarter. Clearly, your guidance here for the third quarter is looking even stronger. Spot markets have been strong. Eco ships you guys have been fantastic, and scrubbers are paying off in a big way. I did want to ask kind of a bigger picture on the market. Lars, you touched on this. The past few months, we've seen these very, very strong refining margins across the globe, record levels in Europe and Singapore. We have seen those numbers come off quite a bit here in the past several weeks. How do you see this affecting the market in the near term and as we go into the rest of the second half?

Hey, Omar, welcome back. Look, as we've discussed before, it's back to the fundamentals that we've been discussing for a while now. And they're all in play; we have to think about this in totality. The stock draws are important that we've seen over the last 18, 24 months. The refining margins, of course, play a very big role, but it is only a small part of the overall picture. I think as we move into the fourth quarter, we'll start seeing a pickup again in terms of that. The issue really is that there are logistical issues all over the globe. The problem is sourcing restocking storage tanks; replacement product is going to go further afield, and I think that's going to play a much stronger position overall in the tanker market. So I think we're going to start seeing ton miles really playing a much bigger role than we've seen in the past.

I would also add to that, Omar, that it's not like the refinery margins in the last few weeks have been low. They may have come off, in the same sense as the oil price may have come off from its recent highs, but it's still been a fairly healthy market.

That's true, Robert. Good point. Yes, I guess it's recently biased. But yes, they fall into levels we haven't seen. They fall into highs still that we haven't seen in years. I guess, you asked about, we've seen in the release, you booked nine ships on these three to five-year charters at good rates, really rates we haven't seen since at least these terms, going back to maybe before the financial crisis. Lars, you also mentioned that that market looks fairly liquid, the time charter market. I guess, how do you guys see yourself deploying your fleet? Now you still have a good amount of spot exposure, but you have taken these nine ships and put them on charter? What do you guys think about adding more? Do you expect to put a significant amount of your vessels on charter or stay primarily still spot focused?

To that, Lars, I believe we will mainly adopt a spot-focused strategy. While nine ships may seem substantial considering we started with none, it's actually under 10% of our fleet. We still have over 90% of our capacity long-term. It's a wise move given that current time charter rates are generating impressive returns based on asset value, providing strong double-digit cash flow per share. These rates are exceptionally robust. Maintaining a limited number of ships during this period, as we've mentioned previously, allows us to stabilize our balance sheet and establish a solid foundation for increasing shareholder returns and capital returns. This approach also signals our potential lenders as we consider refinancing options that could reduce our financial costs, lower breakeven points, and enhance cash flow for shareholders by showcasing these three-year and potential five-year charters. This reduces uncertainty for new investors as well. As Lars indicated, we've secured several high-quality charters willing to commit for three to five years at competitive rates. Instead of relying solely on our projections for lenders, we can present the confirmed three-year time charter rates as a baseline for their calculations. This provides them with reassurance and security. New shareholders can also treat this as a solid base rate in the worst-case scenario, knowing they'll have access to plenty of information. If refineries and oil companies are willing to agree to such long-term rates, it's indicative that they expect rates to rise significantly in the future; otherwise, they wouldn't commit for three or five years. Thus, I view this as more of a signal and reassurance rather than just a bullish market statement.

Thanks, Robert. That's great. Maybe just you had me thinking just now regarding those charters; I guess we can just simply say, in passing, yes, three to five-year charter is pretty significant. Can you compare that? I guess the last time we saw a big surge in time charter demand was, I guess, the whole floating storage trade from a couple of years ago, early in the pandemic.

I will ask Lars, and that wasn't a very big surge compared to this. Those were the one-year rates, two-year rates, nothing like six-month rates. So what these are across a long period, two, three months now, gathering pace every week for a lot of different charters across all of the sizes and the product market. We haven't seen this since 2004, 2005, or 2006.

Yes, you are spot on, Robert. No, I mean, what happened during the super-contango in 2020 was kind of a window of six to eight weeks. You saw time charter rates that were reflecting the value of the contango, and charters were done for six months. There were maybe one or two done for a year, and that was it.

Yes, okay. Thanks, Lars. We can feel the market today. Thanks, Robert; things looking great. Well done. I'll turn it over.

And Omar, good luck and congratulations on your move.

The next question comes from Greg Lewis of BTIG. Please go ahead.

Hi, thank you and good morning, everyone. I want to echo Omar's congratulations on the strong quarter and our robust bookings. One recurring question from investors is about how Scorpio plans to generate or return cash to shareholders. It's interesting to note that just a couple of quarters ago, this topic was not a priority in our discussions, but given the recent market developments, it has become a significant focus. You conducted buybacks and repurchased stock during the quarter. Could you please outline how you prioritize capital allocation, especially considering the existing debt on the balance sheet that needs to be managed? Also, how should we view Scorpio’s cash flow plans for 2023 in this context?

I think it's important to note that just six months ago, there were concerns from investors regarding the company's liquidity. During our first-quarter call, we made it clear that we planned to use our cash flow in the second quarter to reduce debt and enhance liquidity, which we have accomplished. We also indicated that if we saw significant pricing dislocations or liquidity events, we would be ready to repurchase stock. That situation arose, and we took the opportunity to buy the maximum amount allowed by regulations that day. We have followed through on our commitments. Additionally, we stated our intention to maintain this strategy throughout the third quarter and would discuss capital allocation with our board in September. We haven’t earmarked capital for any spending we haven't secured yet. Our presentation reflects our current position accurately. If things go well, we could benefit from lower rates in the remaining weeks of this quarter and significantly increase our liquidity, even if we pay down another $100 million in leases. Reducing debt will also help lower our breakeven point over time, providing a buffer against potential rising interest rates. As Emanuele mentioned earlier, our first priority is to enhance the quality of our investments. We plan to stay the course in the third quarter. When we reconvene in September, I can tell you we will not be looking to acquire assets or order new buildings. Our focus will be on achieving a lower balance sheet. The decision on how to allocate any free cash after meeting our debt targets will depend on the stock prices relative to the net asset value, be it stock buybacks or dividends later on. However, it's too early for us to provide specific guidance for 2023 at this time.

Okay, super helpful. Just as we think about products, and just given the demand for products globally. I believe earlier this month, China provided its quotas for its refined product exports. Lars, any kind of comments around what is coming out of China in terms of the market where we are today? And do you view that as a headwind that could become a tailwind as we move forward here? It just seems like we're hearing conflicting information around China's exports or lack thereof products.

Look, Greg, the refined utilization in China for the main refineries is much lower than in other places. So I won’t argue that anything that comes from China is going to be in the positive as they increase. They came up with some new allocations this week. We're starting to see in the prompt as well more products coming out, particularly with diesel from China. Throughout the last three or four months, there has been a steady supply of cargos going pretty much everywhere, U.S. West Coast on the gasoline but this leads mixed products into Australia and also long haul going into Europe with distillate. The thing that's really interesting is that it's not only on MRs that we are also seeing a lot of LR business being concluded out of China, and most for that matter, also out of Korea and Japan as well. The cargo mix is interesting. The volume; I haven't seen a very much of impact on rates. I think it’s fair to say that as we are moving into the third and fourth quarters, if there was an incremental increase in exports, they will benefit quite positively on the overall market in Asia.

Okay, super helpful. Thank you very much everybody.

The next question comes from Liam Burke of B. Riley. Please go ahead.

Thank you. If we could stay on the macro for a second, the redistribution of global refinery capacity and margins and inventories are pretty clear. How much thought or concern is there about the potential volatility of overall crude demand as we look into the end of the year and 2023? I know the expectations are for a bit of increasing consumption, but does that ever work through your thought process on the macro?

James, why don’t you take that?

Liam, good question. Absolutely. It will be interesting to see what happens with crude oil when U.S. and global SPR eases. We think, and our view is that both crude oil and refined product markets are going to be extremely tight going forward. Continued elevated pricing will result from the lack of investment in the supply chain over the last several years.

Your dividend has been very consistent throughout the cycle, whether in good times or bad. Are you considering the stronger end market to reevaluate it, while also keeping in mind your desire for consistency in your approach?

Yes, I think that, as we said previously, that comes to how we're going to allocate these cash flows. The first thing is, the first thing that sort of, let's say I've sort of observed over time here is that whenever in these bull cycles, you embark on something, whether it's buybacks or whether it's dividend policies, etc., you better be doing that at the point that you're ready to really make it consistent and keep it going throughout. I mean, in my last company, we actually waited out the first year in the strong market before we embarked on a share buyback, but ultimately bought back 37.5% of the company. Other companies who embarked on dividend payment policies were very successful in their valuation when they did so from lower leverage positions, and we are able to constantly do it. The important part to us or what you said, remaining consistent in doing that. Obviously, that will become one of the topics that are alternatives that we could use in time. But right now, we don't want to get ahead of ourselves. We don't want to think or discuss in detail, money that we haven't yet earned. This has happened extremely quickly; this turnaround, this move from a company where we were keeping our mind on liquidity and ensuring we didn't have to do any dilutive offerings or anything like that to a company that's generating enormous cash flow and capital. You can see yourself that if you start modeling the guidance we fill in, and what we're doing there, that the company really is transforming very fast and creating that solid balance sheet that you can look at providing not something that looks good in a headline or a news flash with regard to returns on capital, but rather, things that are more permanent and more continuous. We're just going to wait on that; if that's okay. Thanks, Liam.

Okay. Thank you, Robert. Thank you, James.

The next question comes from Turner Holm of Clarkson. Please go ahead.

Hey, good morning, gentlemen. I was struck by the management commentary in the earnings release and also in the prepared remarks, and you're all are talking about structural changes in the market rather than a sort of brief cyclical change. Of course, you put the nine long-term charters, I mean, you're still seeing at least what's being quoted below newbuilding parity. So I'm just wondering what you all are seeing on asset prices, as we think about any changes going forward.

They're going up; asset prices are going up primarily as a result of the charters coming into the market. The security and income provide the ability to finance that, combined with stronger spot cash flows, has created more cash and capital in the market, and a tremendous scarcity of new building deliveries and the requirements of many companies to renew their fleets. There’s a clock on a product tanker, and there's such a difference in earnings profile between a modern vessel compared to older vessels that's leading to the prices there. You're correct, they haven't yet reached newbuilding parity, but the negotiations that are going on right now that we're hearing about indicate the prices are about to take another step up. That's perfectly consistent with the increases in the duration and the dollar price of time charters.

Thanks, Robert. And then just jumping back to the market. I mean, I think a lot of the talk in the product tanker market has just been about the disruptions to trade to the Russia-Ukraine situation. But I think, as James referenced, it's worth noting the EU embargo, for example, hasn't gone into effect yet. Lars or James, just wondering if you could guide us through your thinking for the rest of the year. Obviously, very strong booking levels for the third quarter. Any thoughts so far on how the market could develop, especially if that EU embargo comes into place towards the end of the year?

I think that, the moment that the EU embargo becomes reality, the ton mile story goes out the window because the distance is simply going to supercharge the base case scenario in terms of how far product, in particular, distance is going to have to move to satisfy that demand. Demand is expecting to increase about 2 million to 4 million barrels per day throughout the end of the year. That product needs to be sourced further afield. You look at today's market, and you look at the volatility we're seeing and experiencing and what normally should seasonally be a very slow market during the end of the summer. But if you look at the U.S. Gulf, just this week for the MRs, this is on the back of all the diesel exports heading down to Latin America, as I was mentioning earlier on, I mean, there is so much product that needs to be moved. The thirst for the product is pretty much insatiable. Suddenly people say, oh, there’s been a bit of a lull in the U.S. Gulf market. Then from Monday to Thursday, today, you've seen the market rally by far across by a $700,000 increase, you've seen the TA move, was going to 242, towards 335. You see Chile runs move from 2.8 million to 3.8 million. This happens with such veracity that just tells you the capacity utilization in the market is across the board. So, if Russia is going to turn off supplying Europe, that product is going to go to Latin America, go to Asia, but then at the same time, you've got all this other product that needs to go back into Europe. So back to my point, ton miles is going to go through the roof. Irrespective of what the market says about the dislocations of Russia today, it's immaterial in terms of the product market right now because every market out there, irrespective of Russia, is requesting and needs oil. It's being supplied further afield. So, it's a very bullish scenario that I would paint if you suddenly come up with Russia having to shut off its taps for Europe.

Thank you very much, gentlemen, appreciate it. I will turn it back.

Thank you, operator. I don't have any closing remarks. I just would like to thank everybody for their time today and look forward to speaking to you soon. The call concludes here. Thank you.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.