Companhia Brasileira de Distribuicao SA (CBD) 2005 Q2 法說會逐字稿

Good morning, and thank you for waiting. Welcome to the conference call of Companhia Brasileira de Distribuucao, CDD. Today with us we have Mr. Abilio Diniz, Chairman, Mr. Fernando Tracanella, Investor Relations Director, Mr. Aymar Giglio, Treasury Director, Mr. [Ina Passana] Administrative Director, and [Daniela Sebag], Investor Relations Manager.

Also, we have a simultaneous webcast on the internet that can be accessed at the site, www.cbd-ir.com.br/eng. This slide selection will be controlled by you. There will be a replay facility for this call soon after it is finished. We inform that the earnings release is available at the company's IR site, www.cbd-ri.com.br/eng. [OPERATOR INSTRUCTIONS].

Before proceeding, let me mention that eventual forward-looking statements that might be made during this conference call related to CBD's business outlook, projections, and operating and financial goals reflect the company's beliefs and assumptions and information currently available to the company. Forward-looking statements are not performance guarantees. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of CBD and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference over to Mr. Fernando Tracanella who will present the CBD's performance in the quarter. Mr. Tracanella, you may begin your conference.

Good morning everyone. Thank you for your participation in this conference call. I would like to make some comments on the company's financial and operating highlights in the second quarter of this year, followed by remarks about our strategy and outlook, and after that, we can proceed with a Q&A session.

On Slide 2, we have the main highlights of the company's consolidated sales. CBD gross sales reached BRL3.8b and net sales reached BRL3.2b, up 1.2% and 3.1% over the same period of 2004, respectively. In this quarter same-store sales grew by 0.7% in nominal terms and decreased 6.6% in real terms, applying the IPCA index.

It was mainly due to the calendar effect because of the strong comparison basis, considering last year Easter was in the second quarter and this year it was in the first quarter. Additionally, the period was characterized by a strong consumption slowdown, food products deflation, mainly commodities, and also a fall in the consumer confidence level.

Year to date gross sales reached BRL7.7b and net sales reached BRL6.4b, up 8% and 9.4% respectively. Same-store sales grew by 5.8%, food products growing 3.3% and non-food products growing at 16.5%. Same-store sales dropped by 1.6% in real terms when deflated by PCA, but if adjusted by the FITP-Alimentacao index which we believe better represents the CBD situation, same-store sales grew 1.1%.

The highlight for the first half of 2005 is the same-store sales performance of CompreBem business unit which presents a real growth and performance from both the companies' average.

In line with this, in the face of the falling consumer confidence level, we observed a reduction of the average take up in real terms. It's important to highlight that the 1% growth in number of same-store clients in the first half of the year which indicate that the company has not lost market share despite the highly competitive retail environment.

Now we move on to Slide 3 where we will comment on the company's operating performance. Gross income reached BRL964m in the second quarter, a 6.2% growth year-on-year. Gross margin was almost 1 percentage point above the same margin posted in the second quarter 2004, reaching 30.5% and the main improvements in this period of weak sales is mainly due to first of all an effective price management, reflecting the company's progress in category management, better negotiations with suppliers and third, the calendar effect since Easter, promotional effect was helped during the first quarter this year.

The gross margin improvement could also be observed in Sendas Distribuidora which registered a 30.9% margin compared to 29.8% in the first half of 2004. Gross income in the first half was BRL1.9b, up 11.2% over 2004. The 29.7% margin is higher than the 29.2% reported in the same period of 2004.

In the second quarter of this year, operating expenses represented 21.3% of net sales, maintaining the same level observed in the second quarter of 2004. It's important to bear in mind that such performance was achieved despite the Easter calendar effect and the same-store sales slowdown.

It's worth noting that ongoing reduction of G&A expenses as a percentage of net sales from 4% in the second quarter 2004 to 3.6% in this quarter, as a result of scaled end and expense reduction program underway. In SG&A the larger reduction occurred in third party services line.

As a result of the gross margin increase, and the expenses control, CBD registered a 9.2% EBITDA margin in the quarter, higher than the 8.3% registered in the second period of the previous year, and EBITDA reached BRL291m, a 15% growth over the same second quarter of 2004.

The first half of 2005, EBITDA reached BRL564m, a 20% growth compared to the first half of 2004. EBITDA margin also grew from 8% in the previous year to 8.8% in the first half of 2005.

Sendas Distribuidora continued to improve in terms of margin in the quarter, having registered 5.8% against 4.3% in the same period of 2004. As previously highlighted the company has been making several expenses and productivity adjustments in Sendas, and the additional operating profitability increase of Sendas from [1] is strongly linked to the increase in sales and consequent expenses dilution.

This will be reached through measures which are already underway, increasing price competitiveness, strong communication effort, and the recent store renovation process.

Over the next slide we highlight the company's financial results. Financial expenses reached BRL179m, a 13.3% increase for year-on-year, as a consequence of the rise in interest rates. On the other hand, financial revenues have also grown by 26.2% in the same period, reaching BRL116m due to higher income from cash investments and less promotional environment for credit-based sales of [inaudible].

Therefore, net financial expenses over the second quarter reached BRL63m, slightly superior to the BRL66m in net financial expenses over the same period of the previous year. I would like to point out that as of the third quarter, the company's financial results will represent a major improvement due to inflow of proceeds for the circulation of the accountancy note transaction at the beginning of July.

As a result of the main variations explained, along with the impact of BRL22m income tax provision, CBD's net income in the quarter reached BRL64m, 10% higher than the same period of 2004. Year to date income amounts to BRL122m, 42% growth over the BRL86m reported in the same period of the previous year.

Finally, on Slide 5, we briefly touch on the investments made in the quarter which totaled BRL195m compared to BRL132m in the same period of the previous year. The main highlights were the opening of a Pao de Acucar supermarket and CompreBem's 2 hypermarkets. 1 is [indiscernible] countryside of Sao Paolo, another 1 in [indiscernible], also the construction of 3 hypermarkets and 2 Pao de Acucar supermarkets.

Those investments represented 37% of the total CapEx. Also we had store remodelings including 27 Sendas stores, the conversion of 12 Pao de Acucar supermarkets into CompreBem that represented 52% of the total amounts of the CapEx. Additionally CBD invested also in the opening of gas stations, drug stores, IT and logistics, representing 11% of the CapEx.

Now we can open to the Q&A session and I'd like to make a comment that Mr. Abilio will be with us until 11.45. Thank you.

[OPERATOR INSTRUCTIONS]. Your first question is coming from Robert Ford of Merrill Lynch. Please go ahead.

Hey, good morning everybody and congratulations on the quarter. Just to take advantage of Abilio's participation, in the Portuguese call there was a question with respect to, I think, expansion or CapEx and - or no, it was the relationship with Casino and the value that they bring to the table and Abilio had mentioned that their leaders and hard discount and convenience store concepts and that there could be opportunities in Brazil with respect to those new concepts.

Could you talk a little bit about how that model works, and how does it fit with your existing assortments, and if you did explore those types of concepts, how would it change the focus that you currently have on the hypermarket and the supermarket business in Brazil, if at all?

Hi, Bobby, Abilio. So we do not intend to put the focus out of the supermarkets and the hypermarkets. Our core business is supermarkets and hypermarkets. I think we do very well this deal. We are expects in these 2 formats but we should have the eyes always open for the other opportunities. Casino is doing very well with the convenience stores, and his format of discounts is not a hard discount or neither a soft discount.

It's a special discount and the leader price, and they have success not only in France but in other countries mainly in Poland. I have been there a short time ago, and we are studying at this moment and paying a lot of attention in these 2 formats, convenience store and this kind of discount leader price.

And this does not mean for now that we are planning in a short time to open stores. We could do some experience, for instance, in convenience that Casino develop 1 very interesting format for gas station as a convenience. And we are just studying and it's possible that we do 1 experience, but the experiences are experiences, not big plans. Until now, our big focus is in the things that we do very well, supermarkets and hypermarkets.

Great, Abilio, and just to understand the model, the way I would expect you to proceed is, the CapEx if you did go into something like this, the CapEx is relatively negligible. The stores would be primarily leased. The inventory is largely supplied by the suppliers, at least the first time around. You'd probably develop another leased distribution infrastructure.

You focus on Sao Paolo, and you fill little gaps in the marketplace and is that -- if this did in fact develop, is that an accurate assumption of how your infrastructure and your costs might develop? And I don't know if you understood the question but I would expect --

I understood, Bob. I was thinking. Bob, you know me since long time, since the IPO. You know my way. What I should tell to you in this moment, we are studying and we are paying a lot of attention and we need some time to conclude these studies.

We have in this moment in the new corporate governance, we have 1 special committee for development. This committee is in charge to study this new format. All the things that you said make a lot of sense. You are expecting that in retail, and you know this. But give me some time to have some news for you and for the market, okay?

Okay, and I apologize for pressing on it. I just wanted to get a better sense of --

No, do not say apologize. We should talk as we always talk. There is no problem, okay Bob? Thank you.

Great, thank you. And then lastly, you mentioned the opening of gas stations and drug stores in terms of how they're complementing your stores. You didn't put numbers in the press release and I was just curious.

How many gas stations have you opened up in the last 12 months and how many pharmacies and how are they contributing to sales and profitability for CBD and maybe you could give us a sense of what the CapEx is on some of these ancillary concepts have been, and what the opportunity is like going forward in terms of some of these concepts, and possibly some others in the adjacencies to your hypermarkets?

Hi, Bob, this is Fernando. Today we have 45 gas stations. We see this as a great opportunity in our hypermarkets and also in some supermarkets. To give you a breakdown, we have currently gas stations in 28 hypermarkets, in 8 CompreBem stores, 2 Pao de Acucar stores, 6 Sendas stores and 1 ABC store.

So total of 45 hypermarkets, sorry gas stations, and we see this as a great opportunity to increase the traffic of customers in our hypermarkets. We have seen that the performance of stores with hypermarkets, even excluding gasoline sales, has been much better than the average of all formats, so it's a very important, let's say, weapon that we have to increase our competitiveness in Brazil.

And it is very, very important for the good image of the store with the gas.

So in Brazil, just like in the United States, consumers remember, or have tremendous sensitivity to gasoline prices, and I would suspect that your pricing is substantial below Shell or some of the other chains in Brazil?

Yes, of course.

Okay, and then with respect to the pharmacies, is that working out as well as gasoline stations? I understand there are some limitations in terms of the adjacencies of the pharmacy because of the regulatory framework in Brazil?

Bob, the drug stores is also something that in our view will be even more important in the future, also with the same objective to increase the traffic of customers in the stores, and we have opportunities in all formats to implement, to build drug stores. Currently we have around 40 drug stores and we see potential to roll out this project in many other stores.

Bob, it's Abilio again. About the drug stores, the majority of the drug stores that we have, we bought with the Sendas supermarket. And in this moment, we have a Group is studying very deeply the deal of drug stores in a way to improve what the drug stores are inside Sendas and inside the other stores, Extra and CompreBem.

We believe that it's a good deal, but we believe too that we need in this moment to make more - to understand better in respect of this deal for to launch in the next future for more aggressivity in these drug stores that we would have in the new drug stores, okay?

Oh great, thank you very much.

Thank you. Your next question is coming from Lore Serra of Morgan Stanley. Please go ahead.

Yes, good morning. You've talked a bunch recently in the conference calls about the goal to improve return on assets, and I wonder if you could help us. I assume that a key component of that is increasing the turnover of sales and increasing sales momentum, and I'm trying to reconcile that with a record gross margin, so can you talk about your commercial strategy?

It seems like your pricing was relatively higher in the second quarter. I know you talked about operational improvements as well driving the gross margin but is it a goal of yours to take your gross margins down in order to drive sales momentum, or should we think about CBD as having above average profitability on an ongoing basis? Thanks.

Lore, it's Abilio. I said during this last month when the market makes some remarks and some questions about our sales saying that the sales were low, and I said for many people that I do not make sales with the damage of the profitability of the EBITDA margin.

And we had -- we were very [careful] in this second quarter. We do not push too much in sales because it there was a very difficult period and the effort that we should do is not so compensated in sales in that moment. For now, which is our intention, we need to improve our aggressivity, but we need to increase our aggressivity much more because the work that we are developing inside the company that is starting with the capital management now, this project is called inside the company the commercial dynamic.

I believe that the first results of this project, the first result will fill in the last quarter of this year but I believe that in the next months, even August and September, we have more aggressivity and good margin, not better margins because the margin in the last quarter, it was good, but we can keep good margins with much more aggressivity in the next months.

Okay, so when you're talking about aggressivity, just to be clear, you're talking about price aggressivity, is that fair, and are there any guidelines that you could give us in terms of how you might adapt your commercial strategy?

We have a very important program about expense, about the costs. In the next week we will present to the board on August 16 the program and the schedule for this work that wants to cut costs, to lower the expenses and this gives to us more opportunity for more aggressivity in prices.

Thank you very much.

Thank you. Your next question is coming from Gustavo Hungria of Banco Pactual. Please go ahead.

Yes, hello, good morning everyone. I just have 1 more question about the gross margin as well, and just to quite understand a little bit better the strategy behind it.

In the second Q you said that maybe it wouldn't help if you were more aggressive on prices because the macro-economic environment was very, very weak so it wouldn't help much, but just to know your feelings about the market overall, if you noticed, perhaps, how the competition did and what were in terms of their pricing strategies they were more aggressive this quarter and what you -- how you see the competitive environment and if you think that this higher margin that you had in the second Q perhaps implies some market share loss for you?

And the second, just to have some -- if you could provide us some insight on the sales for July and August. You already said that July should be better than June but if you could quantify this a little bit and also if you are considering, I believe July last year had 1 more [expense] if I'm not wrong, so just if you're already considering this effect? Thank you.

It's Abilio. Fernando is reminding me that we did not give the sales of July. I cannot talk about the July sales. But what I think about the next months? First, about the aggressivity from the competitors, the market is difficult. The consume is lower and I cannot see at this moment 1 big improvement in the way of the consume.

The atmosphere in Brazil, the fundamentals of the economy are very steady. It's good. There are very good fundaments but the economic scenario is good but the political situation brings 1 atmosphere a little bit sad for everybody, for the people, the people go to their houses in the night, watch TV and the atmosphere is not pleasant or is not comfortable.

And this brings us some influence, psychologically, in the consume, [indiscernible]. But beside this scenario that I think it will follow in the next 2 or 3 months the same. I do not have problems with the competitors, [the organized] competitors, more specifically Wal-Mart and Carrefour. I think we have very good margins. We sold the same than Carrefour in the last quarter and of course, much better than Wal-Mart with the good margins that we had.

Our problem is the same, is the guys on the [informality] and this is our more difficult problem. But I believe a lot in the program that we are developing in our company. I already said about the work in category management, starting with category management and now it is called commercial dynamics because now it includes all the buyers in the same project.

The results of this program, I believe that we will have much more competitiveness, much more aggressivity against the market. We can't say much more and we can have better margins in the lower [customers] because of this, besides this specific program to decrease the expenses and decrease the costs.

I'm very, very optimistic with this work that we are doing inside the company, that we call the commercial dynamic. I think the first result is about this program. We will feel in the last quarter of this year, we will feel the first good results, and next year I think will be the CBD year.

Okay, thank you very much.

Thank you. Your next question is coming from Rusty Johnson of Harding Loevner. Please go ahead.

Good morning. This question relates to the comments you just made regarding offering the value to the customer and it really relates to the CompreBem stores where you've mentioned in your press release that trading results were better there, and you're doing some switching and reformatting over to that format. Could you talk about your format positioning and whether that format particularly suits better for the customer now and Brazil and what impacts, if at all, would be felt from what appears to be a move to focus on CompreBem?

Rusty, it's Abilio. Talking about CompreBem, if you remember, CompreBem was called Barateiro. We had a very important job with this format, with this supermarket. We changed -- we do not only change these stores, the locations of some equipment we do not change, but the other things we changed, all the things completely.

We changed the assortment. We changed the pricing completely. The way, the approach to the customer we changed. We transformed Barateiro in CompreBem but not changed only the name. We changed the philosophy. We changed mainly the approach to the customers, and we are having success with this.

We are discovering the format and the possibility to work to sell to the lower class income with success, without being formal, because until now, all the informal had the possibility to sell for the lower class, and we discovered the way to sell for these people with our company. Do you understand me?

Yes, in the past -- I guess I understand what you say about finding a format that fits the larger price sensitive class, but is it basically just stop selling, basically moving the format from a very high-end, luxurious 1 with the cigars, the cheese and the wines like France, to things that are very more budget focused and focused SKUs that are really the value offering that the little guy wants? I'm missing what it was before and what it is now, but I think I hear what you're saying.

We changed almost all, for you had 1 idea. It was a job. It was our work that started 2 and a half, 3 years ago. We made a lot of research. We put some people from CBD inside the houses of the people from the low class, [legally] with them, spending 1 whole day from the morning to the night cooking, washing their clothes, cleaning their house, watching TV, going to the supermarket with them. We made a long, long research to understand really the low class people.

And what changed? It changed all. It changed this new way to give this service, the assortment, as you said, the SKUs, not only the number of the SKUs but the quality of the SKUs. We changed all the assortment of the Group. The way to communicate with these people, the use of TV instead of the newspaper and other ways, and we [inaudible] to have a success with the low class.

Does that answer your question?

Yes it does. Thank you very much.

Thank you. Your next question is coming from Juliana Rozenbaum of Deutsche. Please go ahead.

Hi, good morning, 2 questions. First you mentioned in a previous call that you saw already - the family already sold the 5.5b shares. I would like to know if they were sold with a lock-up period or just in a regular block.

Juliana, it's Abilio talking. I specifically to this bank, I am not able to answer your question, but I believe, because the negotiation, it was done for other persons, and I believe it was made without lock-up but again, I just stress that they are not more the owners of the shares at this moment.

Okay, and additionally, I'd like for you to discuss a little bit the initial findings on the performance with the JV with Itau in the sense that in this quarter we saw a negative result that was probably [due] to operational expenses, but I'd like to know from you how this is going? Are they already opening stores in many of your stores? How are the first impressions about the potential of this business?

Juliana, it's Aymar. The [fixed] operations are fully performing in the Extra and Extra Electro stores. [CK] usage in those stores, the former [indiscernible] space and CK is operating all the products in these stores. The supermarkets, CompreBem and Sendas and Pao de Acucar, the credit cards were distributed, the credit cards were arriving to the clients and the operation in the supermarkets is still based on remote support for the clients and the clients use it as their use the [indiscernible] and other credit cards in the stores.

CK is putting the new stores, the new spaces in supermarkets along the next quarters. Currently we have around 30 or 40 new spaces in supermarkets, including CompreBem, Sendas and Pao de Acucar. This number will reach probably 250 until the end of the year, but again, the level of operation of sales is not depending on exclusivity on the inauguration of these new spaces. Most of the clients already are with the credit cards in their hands.

Okay, thank you and just as a last question, going forward, we should see slightly lower gross margins as you mentioned in the previous call but still EBITDA margin in the range of 8.5% to 9% even after accounting for the legal expenses? So we should expect something coming from SG&A? Do you think it's only going to be dilution into higher sales, or there are specific initiatives there that should already bear fruit in this second half of the year already?

Hi, Juliana, it is Fernando. You are right. We are keeping the initial guidance of an EBITDA margin between 8.5% and 9% for 2005 even considering that probably the gross margin, especially in the fourth quarter of the year, should be a little bit lower which is something usual and expected given the seasonality of the sector and a very highly promotional environment in the 3 -- in the last quarter of the year.

So even with this we believe that we can compensate maybe something a little bit lower in terms of gross margin in the fourth quarter with higher sales and the beginning of our initiatives to reduce SG&A in the company. But that should be more reflected, highly reflected from 2006 on.

Okay, thank you.

Thank you, your next question is coming from Tina Barroso of UBS. Please go ahead.

Yes, hi, I have a few questions. On Sendas, we continue to see losses there despite the better margins. Are overall sales down or it's just higher interest rates, etc, and are you planning to pay down any debt at Sendas to improve those results or not, it should just come as a result of better sales in the second half? That's my first question.

Tina, Sendas -- in the second quarter for Sendas was not great in terms of sales because most of the stores were being revamped during this period. In July and August we see a completely different picture with Sendas representing something much above the average of the company, double digit growth in terms of sales in July and also so far in August.

What we really need in Sendas is higher sales, and that's why we are very optimistic about the rest of the year in Sendas because the bulk of productivity and expenses adjustments are done. We made [indiscernible], so higher profitability, higher EBITDA will come from higher sales and we believe that this should happen in the second half of the year.

Regarding debt reduction, in principle we don't intend to use the inflow that came from the transaction with Casino, the BRL1b to pay down debt related to Sendas.

Okay, the second question is on CapEx. Going forward, not for this year, when the Casino deal was closed I believe that you made some comments on much more aggressive store opening program that -- relative to what we've seen before, if you exclude, of course, all the acquisitions. Can you shed some light on that figure? Are you planning to open 40 stores or 60 stores per year? Do you have -- can you quantify that for us for the next 4 years?

Tina, it's Fernando again. We are keeping our plans to open the next 4 years 120 stores and a CapEx that will be, on average, BRL625m in the next 4 years, a total of BRL2b in the next 4 years.

Okay, thanks, and my last question is regarding the EVA implementation. Have you signed already areas where you could cut costs and are you already taking some action there or is this already part of the commercial dynamic plan that Abilio mentioned or is it anything on top of that coming from the EVA implementation?

Tina, just to correct something. The right information that we announced at the time of the deal with Casino is that we are opening 120 supermarkets and 40 hypermarkets in the next 4 years. Those are a CapEx of BRL2b. I don't have the distribution of the number of stores that will be open each year but this is the objective that we have, long-term objective that we have. And I'm sorry, Tina, can you repeat the second question?

Yes, on the implementation, have you already signed areas where you could cut costs? Are you taking action on that? And are those initiatives on top of these planned -- it's called a commercial dynamic I think, that you are presenting to the board, some aggressive targets, etc, next week?

Tina, we haven't established official targets and presented to the board so far in terms of the EVA. What we are doing right, we are building the models. We are reasonably advanced in the models that will calculate the key performance indicators, the EVA metrics for the whole CBD and also by business unit, also we have already developed a model that will help us to analyze future investments in terms of store openings or eventually acquisitions.

And next year will be the year that we are going to involve a high number of people in CBD in terms of training, so we believe that we will have many opportunities in terms of value creation. We have opportunities to reduce expenses. We have opportunities to be more efficient in terms of the capital usage, but we also believe that this would be something that you guys will see in our numbers from 2006 on, and maybe even strongly from 2007 on.

Okay, thanks.

[OPERATOR INSTRUCTIONS]. Your next question is coming from Daniela Bretthauer of Santander Investment. Please go ahead.

Yes, just some color and actually, it's more an opinion also. I wonder why CBD has decided to sign out the Technical Assistance Agreement with Casino that basically translates into management fee charges of BRL3m. I think it's just inconsistent with the recent stance that the company has taken in improving its corporate governance disclosure.

As a matter of fact, I also read in your press release that you will be electing a minority representative for your board which I also think is positive. So can you add some color? I know the amount is not materially important but why again has CBD decided to do that when it has taken steps to improve its corporate governance recently?

Daniela, in our view Abilio -- unfortunately Abilio is not here with us, he has had an appointment, but in our view this is something that doesn't hurt our very positive corporate governance initiatives. It's something that was negotiated with Casino and that in our view will bring good returns in terms of procurement, in terms of exchange of good practice between both companies. Casino will be much more involved in CBD daily routines, and this is largely disclosed to the market, so I don't see problems in terms of disclosure.

Okay, and that would be booked as G&A expenses, I expect, right?

Yes, it will be booked as G&A expenses.

And do we see anything already in the second Q or it will become third quarter onwards?

Yes, we're going to have 50% of this amount in 2005 in the second half.

Okay, thank you.

Thank you, your next question is coming from Margaret Kalvar of Harding Loevner Management. Please go ahead.

Yes, hi, I was wondering if you could comment a bit on the food price deflation issue in Brazil and if you see it mainly as a function of the strong exchange rate and what your projections are for the next half year or so?

We have lived - it is not something new. We have lived with a big lag between food inflation, or IPCA. Just to remember some historical numbers, last year our same-store sales in real terms grew by 1.4% if adjusted for the inflation while if adjusted by IPCA it presents a drop of 1.5%.

This has been also the case in 2005. In the first half CBD grew in real terms 1% if adjusted by food inflation and we had a negative performance if adjusted by IPCA. Unfortunately we believe that this will continue. In the second quarter we saw a big deflation of commodities from products that have a strong relation in terms of pricing with the exchange rate. Unfortunately we believe that this is a trend that will continue for the rest of the year.

Okay, thank you.

Thank you. At this time, I'd like to turn the floor back over to management for any closing remarks.

I'd like to thank you all for your attention, for attending this conference call and say CBD management will be available for any other questions that you may have. Thank you, and have a nice day.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.