Brinks Co (BCO) 2015 Q3 法說會逐字稿

Welcome to the Brinks Company's third quarter 2015 earnings call. Brinks issued a press release on third quarter results this morning. The Company also filed an 8-K that includes the release and the slides that will be used in today's call. For those of you listening by phone the release and slides are available on the Company's website at Brinks.com.

(Operator Instructions). As a reminder this conference is being recorded.

Now for the Company's Safe Harbor Statement. This call and the Q&A session contain forward-looking statements. Actual results could differ materially from projected or estimated results. Information regarding factors that could cause such differences is available in today's press release, investor presentation and notice Company's most recent SEC filings.

Information presented and discussed on this call is representative as of today only. Brinks assumes no obligation to update any forward-looking statements. The call is copy righted and may not be used without written permission from Brinks.

It is now my pleasure to introduce your host Ed Cunningham, Vice President of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thank you, Drew. Good morning, everyone. Joining me today our CEO Tom Schievelbein and CFO Joe Dziedzic.

Before we get started I want to remind everyone that we report results (inaudible) GAAP and non-GAAP basis the non-GAAP results exclude Venezuela results, US retirement expenses, Mexico, settlement losses, reorganization and restructuring charges, certain compensation and employee benefit items, acquisitions dispositions and some currency-related items.

We believe the non-GAAP results make it easier for investors to assess operating performance between periods. So our comments today, including those referring to our guidance, will focus primarily on non-GAAP results. A summary reconciliation of non-GAAP to GAAP results is provided on page two of the release. More detailed reconciliations are provided in the release and the appendix of the slides we're using today and in our website.

Finally, page eight of the press release provides a summary of several outlook items including guidance on revenue, operating profit and earnings-per-share.

With that I will turn the call over to Tom.

Thanks, Ed. Good morning, everyone.

Before covering our third quarter results I will start by thanking those of you who took the time to attend our Investor Day meeting on October 6th. For those who did not attend or listen in on the webcast a replay of the presentation and our question and answer session that followed is available on our website at Brinks.com. At that meeting we provided lots of information on our strategy to improve our overall performance so my comments today will be relatively brief.

Third quarter earnings from continuing operations came in at $0.37 a share, well above the $0.12 we reported in last years third quarter. Primary drivers of the improved results include a substantial reduction in corporate expenses due to improved security performance and our ongoing cost reduction efforts. We also saw higher profits in Argentina, Mexico and Chile.

Total revenue declined 13% but was up 3% on organic basis. Now, as most of you know negative currency translation has been affecting our results for the last three plus years and it's gotten progressively worse in recent quarters. Its impact on this year's third quarter results was particularly severe reducing our revenue by $136 million, operating profit by $17 million and earnings by $0.20 a share.

We delivered strong earnings growth for the quarter despite those currency headwinds and disappointing results in the US. Our overall guides for 2015 and 2016 has not changed from the guidance that we provided at Investor Day. At our meeting on October 6th we said results in the U.S. would be lower than expected due mainly to continued labor cost increases related to improving our service quality.

We have improved our service levels and we're now focused on driving a significant reduction in labor costs. The benefits of which we expect to begin seeing with our fourth quarter results. Our US fleet maintenance expenses were also significantly higher in the third quarter.

We implemented a centralized outsourced vehicle repair and maintenance program to improve our overall fleet availability and reduce our cost over time. We should realize cost savings from this initiative during the fourth quarter and into 2016.

Our US results in the fourth quarter and throughout 2016 should also benefit from the ongoing rollout of lighter vehicles and our transition to using more one man crews which are expected to drive additional cost reductions related to fuel, labor and maintenance. Our rollout of lighter vehicles is ahead of schedule.

We have 90 of these lighter trucks in use today and we expect to have a total of 140 deployed by the end of 2015. Our current target for 2016 is to have at least 300 trucks deployed. In addition to these initiatives, and consistent with our stated strategy, we are continuing to streamline our operating structure in the US by eliminating a layer of management.

Going forward a flatter organization should move us closer to customers, speed up decision making and improve our overall service quality and efficiency. We are also changing the compensation structure for key operational leaders including our branch managers. The new structure more closely aligns variable compensation to branch specific margin metrics including branch margin and our other performance measures of quality and efficiency.

While we have reduced our 2015 US margin guidance from 4% to a range of between 3% and 4% we believe we will deliver sequential profit improvement in the fourth quarter and our 2016 margin target for the US remains at 6%. So all-in-all our third quarter and year-to-date results are in line with the guidance we provided earlier this month for 2015 and 2016.

We still expect that continued profit growth in Argentina and Mexico and our ongoing cost reduction efforts will enable us to achieve our full year 2015 earnings guidance of $1.40 to $1.50 per share on revenue of about $3 billion. For 2016 we continue to expect earnings of $2.00 to $2.20 per share on a similar revenue base of about $3 billion. I think it's important to point out that strong progress we're making at the operational level.

In 2015 despite currency headwinds we still expect to grow year over year operating profit by more than $25 million reflecting a margin increase of at least 130 basis points. Sliding an expected currency impact of $50 million this equates to year-over-year organic profit growth of $75 million to $85 million.

For 2016 we expect a profit rebound in the US, continued organic growth in Argentina and Mexico and an additional $25 million to $35 million impossible cost savings to drive another $50 million to $60 million of year over year profit growth. Reflecting an operating margin in the 7% range.

Excluding an expected currency impact of $25 million this equates to another $75 million to $85 million of organic profit growth in 2016. When with you look at our outlook from the EPS level you can see that we inspect about $1.00 per share improvement in earnings from operations in year and in 2016. Even with the expected currency headwinds this would result in year-over-year earnings increases of about 40% or more in both 2015 and 2016.

Now we fully understand that currency fluctuation are a fact of life for multinational companies like Brinks but I did want to make if clear that we have immediate real progress at the operational level this year and we expect similar progress in 2016.

So, in a moment Joe will provide additional details on our results and the assumption behind our guidance but before I turn it over to him I want to briefly summarize our strategy which is to expand high value service offerings to drive efficiency and to change our culture.

We're working to provide more services throughout our customer cash supply chains while driving productivity and efficiency gains throughout our entire Company. The key to this success of to the success of this strategy is driving our culture to one that demands accountability, customer focus, and trust at all levels.

Successful execution of this strategy is critical to overcoming the challenges we face in the US and to sustaining the improvements we're making in Mexico, France and throughout our global markets. Improving results in US is clearly our greatest challenge, but it's also our greatest opportunity to create shareholder value and we expect the US to be a significant contributor to the substantial profit growth we expect in 2016.

In closing I want to assure you that our team is totally committed to driving increased value for our shareholders. We have an unmatched global footprint, strong positions in our key market and the best brand in the industry.

In most of the 40 countries in which we operate we're performing very well. The obvious exceptions are the US and Mexico where we expect near-term margin growth and longer-term gains to drive substantial value creation for all of our shareholders.

With that I'm going to turn it over to Joe who will provide the details behind our results and our outlook. Joe?

Thanks, Tom. Good morning, everyone. I'll start with a summary of our full-year-results using the same format we've used in prior quarters. Then I'll review segment results and finish with some comments on our outlook for the rest of the year

Our reported revenue for the quarter declined 13% as a negative currency impact of $136 million was only slightly offset by organic growth of $27 million. The currency impact was about $45 million from the Brazilian real, $25 million from the Euro and about $21 million from the Mexican Peso. The organic growth came primarily from inflation driven growth in Argentina and retail market growth in Mexico.

Operating profit grew were $21 million to $37 million. As the margin rate doubled from 2.5% to 5%. Profit grew organically by $34 million. Driven by a $22 million reduction incorporate expenses, strong revenue growth in Argentina and improvements in both Mexico and Chile.

The $22 million reduction incorporate expense is the result of lower theft losses as there was no repeat of last year's $10 million loss in Chile and lower SG&A costs from the restructuring and reorganization implemented in late 2014. The growth in Argentina was primarily inflation driven, but we did see some volume increases.

The team in Argentina continues to manage very well and in an economy experiencing significant inflation. Mexico continues to show improvement in line with our guidance. The profit impact of currency during the quarter was an unfavorable $17 million from the stronger US dollar. The reorganization and restructuring that we announced in December of 2014 was a major contributor to the profit improvement and we are on track to deliver the $50 million of year-over-year savings that we originally targeted.

The EPS bridge highlights the $0.45 organic improvement that was driven primarily by operating profit growth despite the currency headwinds we still grew EPS by $0.25 compared to last year. The next few slides provide an overview of the five largest countries and global markets. As Tom noted, it was a disappointing quarter for our US operations.

Revenue rose 1% which was in line with our expectations, but profits fell versus last year and sequentially versus the second quarter of this year. The profit decline in the US is the result of higher labor costs that were incurred to improve service levels, higher fleet maintenance costs and higher safety and security costs.

The US Management Team is working to reduce labor costs while maintaining the current service levels and delivering on the targeted efficiencies by making both organizational and process changes. Tom mentioned the delayering of the US operations management structure which will create a structure that provides improved support to our branch operations and therefore our customers. In Mexico profits improved last year on 6% organic revenue growth.

We have moved beyond the volume losses from late 2013, early 2014 and the gains we have made in the retail segment are reflected in the improving organic revenue growth. The aggressive cost actions we took after the customer losses have begun to show benefits on a year-over-year basis. With a margin rate of 6.3% for the first nine months of 2015 we expect Mexico to achieve its full-year target range of 6% to 8% as the fourth quarter is historically our strong quarter in Mexico.

We are on track to achieve our target of 10% margin in 2016. France, Brazil, and Canada round out our five largest markets and represent additional opportunities for improvement. On a combined basis these countries had 1% organic revenue growth in the third quarter and a strong margin rate of about 10%.

Profits in France fell due to strong currency headwinds. While 2015 continues to be a challenging year on the topline France has been able to deliver solid margins thanks to ongoing cost controls.

The third quarter is typically our best in France as reflected in a 12.4% margin rate that was roughly in line with the year-ago quarter. In addition to reducing our costs we are repositioning this business to pursue higher margin solutions within the cash supply chains of our customers. And we expect to see the benefits of these efforts in 2016.

Brazil's revenue increased 4% on an organic basis, which is consistent with the past four quarters. It is clear volumes have slowed in Brazil and that we are facing a more difficult macro-environment. Despite the slower growth we expect a strong fourth quarter due to retroactive price increases and seasonal volume increases that will enable us to maintain our high single digit margins in Brazil.

Brazil continues to be a very challenging market and we are taking additional cost actions to improve profitability in 2016. Profits in Canada were a solid 9.5% of revenue and were roughly flat against year-ago levels despite a slight revenue decline and higher pension costs.

Despite the negative impact of the strong dollar the steady performance of our global market segment continued into the third quarter. The combined operating margin rate of the 35 countries that comprise this segment was 14%. Up 200 basis points over the year-ago quarter.

The Latin America region delivered 17% organic revenue growth and solid margin growth almost entirely due to Argentina. Results in Chile also provided due mainly to recent restructuring actions but lower profits in Colombia largely offset these improvements. The EMEA region delivered lower but still solid margins of 8.4% as revenue declined were both currency and lower volumes. The organic revenue decline in Germany was expected as we exited a guarding contract last year.

Asia continues to perform well on all fronts. Year-to-date cash flow from operating activities on a non-GAAP basis declined by $48 million. Last year's cash flow was unusually strong due to the inclusion of Venezuela results being reported at a more favorable exchange rate. Cash flow in 2015 was reduced by the severance payments related to our reorganization and restructuring actions.

Capital expenditures and capital leases were down $18 million versus last year on decreased spend across all segments. We spent less on IT, primarily the shared services implementation, as well as less on facilities and other equipment. The transition to operating leases in the US for CompuSafes also helped.

Net debt increased by $15 million from the end of 2014 due primarily to the impact of the strengthened US dollar, partially offset by cash flows from operating activities that were slightly higher than CapEx spending and dividends paid. I will close by covering our outlook for 2015 and 2016. Last year our full year EPS was $1.01 with $0.58 being generated in the fourth quarter.

Obviously the fourth quarter last year was very strong as we benefited from the higher BGS volumes due to several macro events and improved results in Brazil. We expect $0.36 to $0.46 of EPS in the fourth quarter of this year.

In the first three-quarters of this year we have already delivered $1.01 EPS improvement from operations versus last year. Given the strengthen of last year's fourth quarter and the week macro-environment in Brazil, we expect only a slight improvement in operations over last year's extremely strong results. The currency impact of the first three quarter was $0.40 unfavorable and we're estimating another $0.20 of negative impact in the fourth quarter based on the current exchange rates.

This slide summarizes our outlook for 2015 and 2016 for revenue, operating profit and EPS. We provided details on the 2016 outlook during our recent Investor Day and the first slide in the appendix, slide number 24, includes the same assumptions for 2016.

We believe one of the key benefits to investing in Brinks is our global footprint that allows us to capitalize on the growth opportunities in less developed countries and creates the network for our global services business to serve our customers better than any of our competitors. With this footprint comes the volatility of foreign currencies.

Despite the unfavorable impact of foreign exchange we have taken actions to increase EPS by $0.40 to $0.50 in 2015 an expect to increase by another $0.60 to $0.70 in 2016. When the US dollar moves in our favor it will adds some tailwind to this improving trends.

That concludes my comments this morning. Drew, let's open it up for questions.

(Operator Instructions). At this time we will pause momentarily to assemble our roster. The first question comes from Ashish Sinha of Gabelli. Please go ahead.

Hi. This is Ashish from Gabelli. Thanks for taking my questions. I had a few starting with the US margins. If I look at your full year guidance that implies fourth quarter margins could range anywhere between 3% to 7%, which is a wide range and which kind of suggests that there are quite a lot of moving parts.

So maybe if you could talk about what are some of those moving parts which could cause fourth quarter margins to end up in either of those extremes? My second question is on the organic growth in EMEA and broader LatAm, excluding Mexico and Brazil, and if you could talk about price and volume trends in some of the key countries there and what's happening to your market share? And, lastly, the 2015 reorg and restructuring which you kind of mentioned in the press release (technical difficulty).

(Technical difficulty - phone disconnected)Very good. The next question is Jamie Clement from what please go ahead.

Gentlemen, good morning.

Morning.

So I, compared to guidance and commentary three and a half weeks ago, did I notice there was an extra potential $10 million of cost savings in here for 2016? I thought the number had been a firm $25 million. Now I think I see $25 million to $35 million. Am I right about that?

You are.

Are those actions. and you ran through a bunch of them with respect to the fleet and that kind of thing. Are those, have those already been planned in the flow through in terms of quarterly results next year or just a function of, you know, for example getting those trucks deployed or is there a significant heavy lifting that you all need to do to actually realize those?

Yes. I'm going to let Joe take the details of the question.

Jaime, the $25 million to $35 million, so first the Investor Day we had line of sight to the $25 million so we baked that in to our guidance. As we have gone through the continued planning process to identify specific actions, we have come up with another opportunity of zero to $10 million so we're giving a range of $25 million to $35 million. Most of the actions to a achieve those savings will happen in the fourth quarter, some will spill into the first quarter.

They do not include things like the one person vehicle, I think you were referring to, or some of the continuous process improvement. Most of the actions to generate the $25 million to $35 million relate to structural changes, organization changes or headcount coming out of the business. So we would expect to be able to tighten that up as we get into the first quarter and finalize all the actions necessary.

Joe, a follow up there. Is then, I mean it's hard for me to, I don't know if you're just, sort of, baking this into your US margin assumptions for next year or whether, basically to the extent that you get those, the lighter trucks on the road presumably you got better mileage there for those things, potentially lower maintenance costs over time.

I mean, so are those kind of savings included is this $25 million to $35 million or is what, the answer you just gave or is that actually potentially on top of this $25 million to $35 million?

Those are the, those are some of the actions necessary to achieve 6% in 2016 and to continue to improve beyond that. The $25 million to $35 million are very specific headcount and organizational changes. I would not think of the $25 million to $35 million as continuous process improvement.

Got it.

Or big changes.

You know, it's important to note that the lighter vehicles do have an impact in terms of, obviously, the labor costs, but they will obviously be new. That will reduce the overall age of the fleet and with it comes some substantial improvements in that maintenance profile.

Right.

So it's critical that we get those and we get them in, but that's not part of that.

No. That's why I was asking because it seemed like a big opportunity. Now, getting to just, you know, comments about the rest of the year, also with guidance three and a half weeks ago with respect to US was about 4%. Now 3% to 4%. I don't know if that's just semantics and you're just trying to be extra clear or did something deteriorate over the last three and a half weeks that we need to be aware of?

I don't think anything deteriorated. I think it's, we looked at, we were a little bit surprised by the magnitude on the maintenance costs and a couple others is all.

Yes.

We're still pushing, obviously, to get to the higher end, but I think it's only reasonable to say that there's some heavy lifting that goes with that and that's why we used 3% to 4%, to make sure that everybody understood what, you know, the range where we could come out.

Totally understood. Let me, I'll get back in the queue and let other people ask some questions but thank you very much.

(Operator Instructions). The next question comes interest Jeff Kessler of Imperial Capital. Please go ahead.

Thank you for taking my call.

Hi Jeff.

Hi. Hi, guys. Can you explain how the increased spending in service costs and other costs in the fourth quarter going into the US are going to translate into better margins and, hopefully, some better revenues in 2016? Because obviously you are taking some of the weight on the margin in the fourth quarter in the US, is coming out of some of these increased spending you're making on the service side.

I want to know how that's, more specifically how that's going to translate into more efficient better margins for next year?

So let me start with give you a little characterization for why we had to increase some of the spending to improve services levels. In the fourth quarter last year we brought on some new business. You saw that in our very strong revenue growth in the fourth quarter in the US of 7%.

In the first quarter we continued to bring on more business and then in the first half we had some business transition away. The business we brought on was in, largely, a different line of business and a different geography than the business that went away.

The business that we brought on we did not put enough resources in place to manage that as it was ramping you up and in the second quarter and in the third quarter we had to make some investments in resources and processes to handle that volume and get it back to the service levels that both we and our customers expect.

We have largely gotten ourselves back to the service levels that are acceptable to us and our customers. We're back within our largely within our SLA commitments and so now what we need to do is we need to become more efficient in those processes and lean out through continue process improvements in some of those projections.

So the increased spending was to address very specific service levels. We have done that. We made some investments in transitioning to an outsourced vehicle fleet maintenance company. That's their core competency. We believe they ultimately, overtime, will be better at maintaining our fleet than we will. That required us to put some extra money into third quarter into the fleet to improve availability of the fleet The up time in the fleet improved, we saw that in our performance and the availability and now we need to lean some of that cost out going into the fourth quarter and next year. So we expect the spending levels they have gotten us back to service levels that are acceptable. Now it's about leaning it out, leaning the cost out and continuous improvement going forward. The volume growth opportunities we have, arguably, are independent of the investments that we have made, Mike [Beach] talked a lot about some of the projects that we're working with customers, the discoveries we were doing to identify growth in the US. We feel good about that and the service levels that we have, we think, support that growth.

Okay. Second question is what was, how was the performance of global services in the quarter and can you do anything to, can you do anything to integrate some more of your on the ground business and, if you want to call it, slightly less valuable business in terms of the valuables you are taking? Can you do more to integrate that into the global services business, global services taking on a little more volume from your ground based business?

So, I mean, BGS had a good quarter and they're on track for what we anticipate they will be doing for the year. You know, we are, BGS basically takes advantage of our footprint around the world and so they utilize those ground operations. That's one of the reasons why we're successful in the BGS business. So having BGS take on more, just kind of moves the cost from account to another, Jeff. So I don't think that that's going to have a meaningful impact on our overall profitability.

Okay. I realize that BGS is a lot larger than its competition but the competition has consolidated a little bit and consolidated a little bit into some of your competition. Are you seeing any impact from that in the global market at this point? Or is your size and scale big enough to offset some of the pressures that we might be seeing from smaller operators getting eaten up or bought up by some of your major competitors?

So I think that in specific markets you always see impacts from competitors or situations. That is dwarfed by the overall macro situation of where diamonds and jewelry, that overall market is, by where the commodities markets are for precious metals and for bank notes. So yes we're seeing some of, you obviously see issues in any particular market, but the macroeconomics are driving more than the individual circumstances in a particular country.

Okay. Thank you very much.

Okay. And we have Ashish Sinha from Gabelli. Please go ahead.

Hi. Sorry I got cut off. Am I, can you hear me now?

Yes.

Great. I had a few questions on the EMEA and LatAm organic growth. If you could talk about some markets in terms of what's going on with volumes and price. And specifically LatAm, of the 17% organic how much was price and how much was volumes? And could you also talk about your market shares, what's happening, actually, with your market shares? And then secondly, could you give an update on CompuSafe in terms of any progress on that?

And lastly a question on 4X , and if I look at the LatAm 4X and specifically the Peso, Argentina Peso, which is down 10% year-to-date. Are you assuming it stays at current levels in your $3 billion revenue assumption for 2015 and 2016 or assuming further devaluation? Thank you.

Okay. Let me touch the CompuSafe question first. Then I'm going to let Joe take talk about the details of LatAm and EMEA. So we continue to be happy with our CompuSafe. We continue to have that be one of our new solutions for customers not only in the US but in a variety of other countries, primarily in Mike Beach's focus five markets, the largest markets. So we continue to be positive about CompuSafe and it continues to grow. With that, Joe, I'm going to lets you talk about LatAm and foreign exchange.

Sure. Alright. So I'll start with EMEA. So the EMEA revenues last year were $139 million. This year $112 million. So down $28 million. That was $11 million of organic, $17 million of currency so currency, the Euro largely, was a big impact. I will talk for a second, the $11 million organic decline was concentrated really in three prices, Germany, Ireland and Greece.

In Germany we had a guarding contract with the US Embassy that we intentionally exited last year, so that's the biggest driver of the German revenue reduction. Ireland has been a difficult market for us as of late. There has been some volume that has shifted away from us that that's just been a tough environment and Greece just continues to be a difficult environment and we haven't seen any opportunity to mitigate that.

So we've done a good job in Greece of maintaining profitability. The Management Team there has been able to take actions to preserve the profit. In Germany the guarding contract profit impact was very much as expected. So that covers the Europe revenue decline.

Latin America, if we look at the Latin America region growth, we had 17% organic growth that was $16 million and that was entirely Argentina and in Argentina you have a couple dynamics. The inflation continues to be 30% to 35%. We have been able to pass that through to our customers as has, as have our customer, or competitors as well. We have seen wage increases at a similar rate.

We also have benefited, from a volume standpoint, with the additional currency in circulation because the amount of Pesos in circulation continues to increase so the amount that we are counting and processing in our money processing operations is growing and the ad valorem pricing on the value of Pesos, the quantity of Pesos is driving our revenue up quite significantly.

Our Argentina organic growth in local currency is in the 50% to 60% year-over-year range. So we're growing local currency 50% to 60% in Argentina. In the last of the LatAm region we did experience some good growth in Chile the manager team there has implemented a number of different restructuring actions over the past two and a half years. We're seeing that translates into both profit improvement and organic growth.

Unfortunately that's being offset by some declines that we are experiencing in Colombia and both on the topline and on the profitability. So that's a summary for the Latin America. I think, Ashish, your last question was regarding our assumptions around the Argentine Peso. So it's at about 9.50 Pesos to the dollar at the end of the third quarter. We are assuming that it deteriorates or de values to about 11 by the end of this year so we just have kind of a gradual decline in the fourth quarter and then we're expecting it to de value very sharply early in the year in 15 Pesos to the dollar by the end of next year.

So for 2016 we're assuming somewhere in the neighborhood of 14 as the average for the full year. That's our assumption. I know we'll be wrong, but all indicators are that there's a devaluation coming after the run off elections later in November. We'll keep you updated as our assumptions change.

That's very helpful. Thank you. Could you also talk about the market share. Anything significant changes to flag there?

We compete in a very competitive environment and there's always some movement back and forth in each of our markets.

Thank you.

And we have a follow-up from Jaime Clement from Macquarie Securities Group. Please go ahead.

Thank you for taking my follow up. Joe, are we to assume that the Canada is still ranked number five from a quarterly revenue production standpoint or are we looking at this on a trailing 12 months basis with Canada in the top five?

So Canada will continue to be reported in our top five. I think, getting at your question, Argentina is about the same revenue size as Canada today. If that's.

Okay. Got it. Got it. Okay. And then a question I definitely wanted to have the opportunity to ask because it's been a long, long, long time since you guys probably fielded this question on earnings conference calls.

To the extent that the Fed starts lifting rates, I would assume that higher rates mean more money in deposit accounts and that would theoretically help your business. So if you all, kind of, look back at the history of Brinks, first of all, A, is that accurate and then, B, do you have to get really deep into a tightening cycle, you know, let's say 200, 300 basis points higher from the Fed to really start to see an impact or is it more of a linear where, hey, 50 basis points will actually help your business?

From a macro perspective with, at least what I anticipate the Fed will do, I don't think we're going to see any significant changes now. 200 or 300 basis points, yes, that could make a difference. 25 or 50 I don't believe so. Joe.

It's been so long since rates we're going in that direction I welcome that and think over time it will help but short-term I don't see a dramatic change.

Figured I would ask. Thank you all very much for your tamales always.

Good question.

And we have a Jeff Kessler from Imperial Capital please go ahead.

Yes. Just a quick question about Argentina. I don't want to focus on just one country but the growth there, even in an organic sense has been quite good. You have had a very strong competitor down there for years, the same competitor that you face probably in other parts of Latin America.

Why have, all of a sudden, you have been able to grow as well as you have? It has to be taking market share away from your competitor in Argentina so the question is how are you, how has your business become so strong down there? Is there something that has changed?

We have historically been I think performed very well in Argentina. Our profitability both measured by margin rate and the nominal local Pesos has improved much, much more significantly and dramatically. I would characterize it as the Management Team has done a very good job of managing in a highly inflationary environment it's not highly inflationary from an accounting standpoint but I think 30% to 35% inflation fits that category.

So I think the Management Team has performed very, very well. We have benefited from the increase in the amount of currency and circulation and when you look at the US dollar reported results that gets into our, that hits our consolidated results, we have not had the magnitudes of Peso devaluation in the last year and a half to two years that we had previously.

If you look back two, three years ago as we were having local currency growth of 30%, 40% we were having devaluations in the 30% to 40% range as well, so from a US dollar standpoint you weren't seeing it in our consolidated results. We have only had about a 10% devaluation today and with 50% to 60% local currency growths that's going to give us much bigger US dollar impact and growth year-over-year.

Yes, I mean-.

Okay. I'm sorry.

It's a good operation down there and they're, it's reflected in their results.

Okay. So what you are saying is from a competitive point of view not, I mean, you have gotten better in Argentina but there is ebbs and flows in all the countries in Latin America effectively, that's correct.

I would not characterize the growth in Argentina as taking significant market share from a competitor. It's a well-run business benefiting from an inflationary environment that they're managing very effectively in.

Okay. Great. Thank you very much.

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.