塞拉尼斯 (CE) 2015 Q1 法說會逐字稿

Good morning, and welcome to the Celanese first-quarter 2015 earnings conference call.

(Operator Instructions)

Please note: This event is being recorded.

I would now like to turn the conference over to Jon Puckett. Please go ahead.

Thanks, Drew. Welcome to the Celanese Corporation first-quarter 2015 conference call. My name is Jon Puckett, Vice President of Investor Relations. With me today are Mark Rohr, Chairman and Chief Executive Officer, and Chris Jensen, Senior Vice President of Finance.

The Celanese Corporation first-quarter 2015 earnings release was distributed via business wire yesterday after market close. The slides for the call, and our prepared comments for the quarter, were also posted on our website, www.Celanese.com, in the investor relations section.

As a reminder, some of the matters discussed today, and included in our presentations, may include forward-looking statements concerning, for example, Celanese Corporation's future objectives and results. Please note the cautionary language contained in the posted slides.

Also, some of the matters discussed and presented include references to non-GAAP financial measures. Explanations of these measures, and reconciliations to the comparable GAAP measures, are included on our website in the investor relations section under financial information. The earnings release, non-GAAP reconciliations, presentation and prepared comments have been submitted to the SEC in a current report on Form 8-K.

This morning, we will begin with introductory comments from Mark Rohr, and then we will field your questions. I'd now like to turn the call over to Mark.

Thanks, Jon. Good morning, everyone. Our prepared remarks were released with earnings, so I'll keep my comments fairly brief, and then open the line for your questions.

Over the last several years, we have driven record earnings by building capability to support our core value-generating propositions, the acetyl chain and materials solutions. We're now taking additional steps to better align all of Celanese in support of these two value drivers.

In the acetyl chain, we create value by leveraging the fully integrated and industry-leading technology across an unmatched global platform to supply acetic acid and derivatives. This business is uniquely positioned to rapidly respond to market needs that best support global trade flows, and to serve a very broad array of customers. And in doing so, we distance ourselves from others in this space.

In materials solutions, our foundation of chemistry and polymerization technology is combined with leading application expertise and deep customer engagement to create products and applications for diverse and highly valued end markets. These two business cores are made even more successful by sharing technology, production assets, and research resources, allowing us to be more responsive to market needs, while operating at lower costs than others.

Our growth strategy has been based upon these two value equations since late 2012. And since then, we have delivered double-digit, year-over-year quarterly earnings growth for 8 of the last 10 quarters. So, organizing more completely around these cores is the next logical step to bring further gains in efficiency and higher earnings for our shareholders.

Now let's move on to consolidated results. I'm very pleased to report first-quarter adjusted earnings of $1.72 per share, representing 34% earnings growth sequentially and 29% growth year over year. This record quarterly performance also reflects the swift actions taken to help address the impact of raw material deflation, the precipitous fall in foreign exchange rates, as well as anemic growth in some of our end markets.

Our teams did a tremendous job of maintaining pricing in the face of significantly lower raw material costs. We also successfully offset a significant decline in the euro to dollar exchange rate with productivity programs, as well as lower energy costs. And we expanded our adjusted EBIT margin to 24.1%, a quarterly record, and an increase of more than 600 basis points from the prior quarter and the prior year. I'd like to thank all of our global teams who worked so hard to deliver these results amidst a challenging business environment.

As we look to the remainder of 2015, some of these headwinds we outlined last quarter have increased. For instance, the euro has weakened roughly another $0.07 to $0.08 since January.

We also expect lower MTBE prices in our Ibn Sina joint venture will impact affiliate earnings for the remainder of 2015. However, our building the first quarter to mitigate these and other headwinds through strong commercial performance, along with specific productivity initiatives, gives us confidence that we can manage this volatility going forward. As a result, we have increased our 2015 outlook for adjusted earnings to a range of $5.60 to $5.90 per share.

With that, I'll now turn it over to Jon for Q&A.

Thanks, Mark. We've got a lot of folks on the line. We want to get to as many questions as we can, so please limit your questions to one question and one follow-up. And, Drew, I'll turn it over to you now.

(Operator Instructions)

The first question comes from Laurence Alexander of Jefferies.

Good morning. Just two quick ones. Can you quantify your total FX assumption that you're looking as a headwind for this year? And have you seen any noticeable acceleration in any regions in your end markets?

On the currency for the remainder of the year, it's probably somewhere in the $0.60 to $0.70 range. And the assumption driving that would be a euro at $1.05 for the second, third and fourth quarters. Mark, do you want to cover acceleration in end markets?

Yes, I'd say that's a hard one, Laurence. We're seeing certainly Europe is doing better and we're seeing some enthusiasm on the part of the European car manufactures and some pretty strong growth. I think Germany was up 7% year over year, for instance in auto, it's very strong growth. We've seen China come back a bit from what was a very anemic first two months of the year and that's been encouraging, as well. So I'd call out those two areas, Laurence.

Okay, thanks. And just to clarify the FX hit, what was the FX hit in Q1, then?

$15 million to $20 million.

Okay, thanks.

The next question comes from Duffy Fischer from Barclays.

Yes, good morning. Congratulations, guys. The thing that investors have been focused on over the last quarter is the tow business and the destocking. Volumes seem to have come down about what you guys were projecting. Did the underlying business perform as you would have thought in that environment? And what kind of signals are you getting from your end customers about how that destocking is going and when we might see that abate?

Yes, Duffy. Great question. We communicated a lot in January, of course end of last year, as we ended last year and into January, about this destocking initiative. And the results that we've seen in January are exactly as close as you can be exact. It's going to reflect the outlook given to us by our customers. And, so we feel pretty good about that.

And I think that's consistent with our destocking initiatives based on what we knew about their end markets. If you roll it forward we're seeing some improvement as we enter into the second quarter, which again was consistent with improvement in terms of our orders, which is consistent with what they had told us. So we continue to predict that we're going to have this first-half impact, the first quarter being the most dramatic impact, and get back to more normalized rates as we hit the back half of the year.

Great, thanks. And then assuming, let's just say we hit the mid point of the guidance for the year, that $5.75, and then look into 2016, is that a good baseline to build into next year or might there be some kind of transitory spread benefit in that $5.75 that we need to mitigate a little bit as we get into next year?

I think, Duffy, you're asking about puts and takes as we would enter next year. As we outlined at the beginning of this year, we tried to just be real transparent about what headwinds we would have. Mark, I'll let you clean this up but wherever we end the year is going to be our basis to how we build the next year. And we'll try to highlight what we think is a head wind and what we think might be either a tail wind or an action item that we're pursuing to try to drive growth.

I think, Duffy, I would -- I'm not going too far out on this -- but I would expect 2016 is a lot better year than 2015. We'll have resolved methanol, that will be fully behind us and fully functioning. And it looks like, with the steps we've taken, that that head wind, as we let folks know last year, will have been mitigated as we get into next year, for the most part.

You would expect that there's some inflation starting to occur. If this year's marked by deflation there will be a back side to that, so there will be some inflation. Inflation is probably good for us. And we'll be operating more fully around these two cores which is going to generate a lot of new opportunity for us. So, my belief is it's a good foundation and my belief is there will be a lot more tail winds than headwinds as we go into 2016.

Terrific. Thank you, guys.

The next question comes from John McNulty of Credit Suisse.

Yes, good morning. Thanks for taking my question. With regard to the new segmentation, the Materials Solutions and Acetyl Chain segmenting, I understand the customer focus aspect of it for the Materials Solutions part. But it appears that all four of these assets are pretty well integrated into the Acetyl Chain. So, how did you decide on where to make the cut in terms of, say, putting Industrial Specialties in the Acetyl Chain and then maybe keeping consumer and/or AEM out of it, maybe is my first question?

What we really spent our time looking at, and we started this actually in 2012 and started practicing in 2013, is the ability to lever the interconnected relationships through the raw material chain up to the customers. And we found there's a lot more leverage the closer you are to earth, wind and fire than there is the further down you get. So, that runs, not completely, but it runs a lot of its course through the emulsions business pretty well. So that became the nature of drawing a circle around that.

And we actually drew that circle, John, a couple years ago and we've been working that. But what we didn't do was fully commit ourselves to an organizational alignment that really supported that, and that's the process we're going through now and that's unlocking lots of unique value options between ourselves and our customers when we do that.

Okay. And then just as the follow-up, it sounds like the organizational alignment, it all makes sense the way you're laying it out. Can you talk to the physical alignment of the plants? And do they work in a similar fashion where the Industrial segment and the Acetyl businesses basically all lock together and the Materials Solutions businesses may not be locked to them? Is that how we should think about it or not?

No. No, they're not totally locked. We have some places where we have integrated complexes where they're fully integrated and contain all aspects of our portfolio of businesses.

Generally speaking, when you get past the big acetyl complexes we have remote plants in the Industrial Specialties area around the world. So, there's a logistics component associated with this. But that's also a benefit of the full integration because we quite often will sell products to competitors of ours in these downstream markets. We're now arranging swaps, we're now changing that trade flow in a favorable way that's adding value.

Great. Thanks very much.

The next question comes from David Begleiter from Deutsche Bank.

Thank you. Mark, on AM, can you discuss your ability to retain more of this pricing in Q2 and beyond as raws have dropped here? And of the $0.30 - $0.35 decline you highlighted for Q2 versus Q1 would that be, perhaps, two-thirds in AI and one-third in AM?

Clearly, the more specialty oriented the business, the more opportunity you have to retain margins. So, it's never easy but I think directionally retaining raw materials and engineered materials is easier, materials segments is easier for us to do than it is necessarily in Acetyl Chain. We have some linked quite often with pricing on raw materials. So I think we'll do a good job retaining it there.

If you look at the drop quarter over quarter, Chris, do you want to comment on that, that $0.30, from first to second?

Yes, the Q1 to Q2, if you think about the big movers there, we'll have better cellulose derivatives volumes, like we've told you, moving towards a nice back half of the year. The Ibn Sina venture, this shows up in the engineered materials segment. It's MTBE and methanol. The earnings, you can think of the earnings of that venture being fairly correlated with Brent crude. And we actually report it on a three-month lag.

So, you're going to see a pretty decent-sized decline on that in the second quarter going through the remainder of the year, assuming that Brent stays in this range where it is. So, you'll have a little bit further currency headwind going Q1 to Q2, as well. And I think you can expect the corporate spend that shows up in that other segment to be higher in Q2 than it is in Q1.

So, that's roughly two-thirds the Acetyl Chain and one-third the Materials chain.

And, Mark, just quickly, now that you have these two cores, the natural question is do they belong together longer term given that they will be valued differently by investors eventually. How do you think about that situation?

Like I say, we've been practicing this for awhile. And we see ways to unlock more and more value. But what our objective here -- and we're being very vocal about that -- is we expect the value of these to be fully realized by investors.

So, we're going to work hard to get that full value realization out there and have the investors benefit from that as fully and completely as is humanly possible. We're driven to do that, David. And so we hope that, as we go through this process, that will start to happen, and certainly it's our expectation to continue to drive earnings the way we have been and in that process reduce volatility, as well. We're committed to see that that value is unlocked and realized, David.

Thank you.

The next question comes from Frank Mitsch from Wells Fargo.

Yes, good morning and great start to the year, fellas. On the productivity actions, you talked about last quarter about $16 million and now you're talking about an incremental $40 million to $50 million. Obviously seems rather high. Can you give us some examples of that and what segments we should be monitoring to see those productivity savings?

Sure, Frank. What I'd say is look at all of them because they're all working on it. This is a deep focus initiative where all of our general managers and all of our functional leaders are engaged. Mark is personally involved driving this from the top.

Lots of iterations of discussions on what we do differently to support this core business model going forward. So, you're going to be able, as you move through time here, to point anywhere and see some benefits from these initiatives.

All right. So across the board is how we should think about that. Nothing more focused on this segment or that segment. All right, fine.

And then in the release you talked about pricing in the Consumer Specialties business being down 2% sequentially, and also referencing a legacy flake contract that's having an impact there. Can you talk about what's going on from a raw material and end product pricing perspective in that business? Essentially, prices are set typically early in the year and that's it. So, we should be thinking about pricing year over year being all for the balance of 2015, correct? -- in this segment?

I think that's right. This is a price-mix combination here. A good chunk of that is mix. The effect of the legacy supply arrangement we have. And that arrangement is near the end of its term and it kicked up a little bit higher volume so that was the delta year over year, more negative.

Pricing was offset the end of last year, and we already commented on that. So, you're not going to see pricing change, Frank, in this segment as you go forward. And there's really not a correlation between pricing and raw materials in this business. There's still opportunities for us to drive a little bit of raw material value enhancement, we think, as we go through this year that will show up.

Thank you so much.

Next question comes from Kevin McCarthy from Merrill Lynch.

Good morning, this is [Wei Vang] calling in for Kevin. You've made good progress on free cash flow and deleveraging. Should we continue to see deleveraging trends to continue? And if not how might your capital deployment plans change?

Like we've talked about in the past, we're highly focused on strengthening our balance sheet over time. And if you look back to 2014, we did a lot that year. We returned over $400 million of cash to shareholders, we took debt down by somewhere around $230 million, and we also put $100 million into this US pension plan which is not fully funded. So, that's what we did last year.

That was a pretty high amount of cash outflow to use for that in what was a really good strong cash flow year, so it made a lot of sense. We're focused on doing those things going forward.

If you go back to what I said in the prepared remarks, right now, a lot of our cash, really almost all of our cash, is overseas. In order to use that cash for US purposes, similar to other multi-national companies, we have high cash needs in the US -- returning cash to shareholders, debt reduction, pension. A lot of cash needs here, so that makes it difficult to do as much this year as we did last year. Not to say that we're not working on ways to do that, and we will find ways to do that, but I think you can expect that activity generally to be a little lower this year.

Great, thanks. And a follow-up on your Bishop project. Just wondering how the estimated cost of that would compare to your project at Clear Lake.

It will be more expensive because there's not as much on-site equipment and utility systems that we could easily use. So, there's more in investment in base facilities in Bishop, but not a lot. So, I think that it's probably -- I'm speaking to you a little bit tongue in cheek because we haven't finalized that work -- but you should think in terms of 10% to 15% or 10% to 20%, not 30% or 40% or 50%, if that makes sense.

But there's a lot of work yet to do on that. We do have the permit applications underway, but to be very honest we really want the energy market to settle out a bit. We want methanol markets to settle out a bit. So, you shouldn't have a view that we're going to start construction on this thing soon.

But we do have a great relationship with Mitsui. We're excited about the partnership here to really evaluate it. We're also very pleased with the long-term supply arrangement that we have entered into with them over a five-year period. So, that should give you some scope of some of the considerations we've got on whether we build or not.

Great, thank you.

The next question comes from Bob Koort from Goldman Sachs.

Thank you very much. Good morning. Mark, could you talk a little bit -- there was some anxiety maybe as you'd shut down some of your European assets and actually were shifting into the region that you have transactional challenges beyond just the translational issues of currency. Can you give us an update of how that's progressed?

And then, secondly, it looked like you rejiggered a little bit your agreement with Mitsui at Clear Lake. Can you just tell us what the particulars and basis for that was?

Bob, I'll take part of that first question. I'll let Mark talk on whatever he would like to say about our plants in Europe. I think you're talking about transaction flows and how that flows through currency.

When we talk about euro exposure, at least three-quarters of that is related to that issue, where we have production in the US. So, you have the dollar-based costs and then you're selling a lot of this product in Europe so you have euro revenues. It's not any different than we've described it before. That right now is our business model.

And as you've seen, in spite of having that tremendous headwind in the euro, the businesses have done a really nice job of these productivity initiatives, and they're pricing to offset that stuff. That model is probably here to stay for the foreseeable quarters in terms of that disparity between where we produce and where we sell.

Just so you know, there are some offsets to that elsewhere in the business where you have US dollar-based revenues and local currency costs, and we've actually gotten a little bit of help in some other instances, to offset some of this. But the big number is the euro.

Yes, Bob. Most of these products that we're moving from the US to Europe are not produced in Europe by anyone, or certainly not produced in the EU by anyone. And, so, everybody has got the same incentive, I think -- or roughly the same incentive -- to moderate the FX impact.

We pushed really hard in the first quarter to do that and we had really good success. And to be honest, we've not priced in a lot of that going forward in this perspective we put out for the year, in part because we did lose volume in some areas, and we didn't see as much support by some as we would like to see. So, we're going to continue pushing and hopefully others will do that, and that would represent some upside for us for the year if we can be successful with that.

With regard to our production facilities in Europe, we continue work. We have a phenomenal team in Europe and phenomenal facilities in Europe. Some are disadvantaged or remain disadvantaged, even with the favorable change from the European point of view in FX in energy. So, we're going to continue to look at what the right footprint is in Europe and work with our employees there to address that over time.

Anything else on Mitsui?

Mitsui -- the nature of the question is we have entered this agreement. We're excited about it. We think it gives us access to competitive methanol for the next five years. It does not completely eradicate the headwind but we'll take a little bite out of it, we think, over time.

Great, thank you.

The next question comes from Vincent Andrews of Morgan Stanley.

Thanks. Just a broader question on capital allocation. Now that you're buying a lot of the remaining volume that belongs to Mitsui out of the plant that you guys JV'd, and you're thinking about building another one, I'm just trying to understand the point of the JV structure. And maybe I'd tie that to you've got this $850 million offshore and that's helping your tax rate be low. So, how do we think about the decisions you're making on capital allocation versus keeping the tax rate low? How does that all come together?

Listen, I'll go back to the Mitsui. That's a US-based venture. We made decision to build one plant. That plant should be operating around October of this year.

And we also entered a long-term agreement with Mitsui to evaluate the opportunity to build a second plant in Bishop. We haven't made a decision to build that -- we are set to evaluate that. And as part of that we have a supply agreement from the plant in Clear Lake to make up all of the balance we have of methanol.

So, that's what we have in play, so you shouldn't look at this as an announcement we're getting ready to invest another $4 million in Bishop. We have not made that decision yet.

Let me take a crack at the broader capital allocation question as it relates to where is our business is and where is our cash. This situation that we're in right now with most of our cash being overseas, it's not new. That's what happens in a multinational business model.

Across time we have figured out ways to deal with that so that it has not been a constraint in terms of our ability to invest where it made sense for the business to invest. And I expect that we're going to be able to continue to figure that out in the future. So, I wouldn't want you to have a view that says we cannot invest in the US because that cash is overseas. That wouldn't be the way we look at that.

Yes, my question is really just more, should we be expecting your tax rate to go up over time as you need to repatriate future income, not necessarily the money that's over there. And I just was thinking, on the Clear Lake facility, you're now paying Mitsui presumably a price that's above cost when you could have just been taking that product at cost yourself if you just owned the plant. So, I just was really trying to understand why the continued desire to JV.

Let me take the tax rate question first and what will happen over time. The tax rate is going to go up over time because we plan to make more money over time and that always pressures your tax rate because your marginal tax rate is higher than your average tax rate. I don't expect in the near term to be repatriating cash and taking a tax hit in order to do that. So, I'm going to separate what you see in tax rate movements from having to do with the costs of repatriating money.

Okay, thanks very much.

The next question comes from Jeff Zekauskas from JPMorgan.

Hi, good morning. The first question I've got is, when you look at your other activities line, I think it was a cost of something like $17 million in this quarter versus $30 million last year. The number can really bounce around. And I think your depreciation charges this quarter, your D&A, were $67 million versus $75 million in the year ago. Can you explain some of those positive variances?

On the other activities, are you referring to the segment? Is that what you're looking at?

Yes, that's exactly right.

Just as a reminder what's in there, it's corporate costs, corporate functions. It has our global pension interest expense. The return on assets for the $2 billion-plus that we have invested in the pension plan is there. So, there are a number of things there that can make that volatile quarter to quarter.

So, what is it that you saw in the first quarter? I would say, first, as we've talked about we're driving productivity hard and that relates to the functional spend that you see there. And that's reflected in the result in the first quarter. But there's also some timing on some favorable items that impacted that.

So, while you'll see some volatility quarter to quarter I think, generally, you could look for this year and expect that to be somewhere in the mid 20s. Part of that is the timing of our annual merit increases across the Company happens here in the second quarter.

Ask the question on depreciation again, if you wouldn't mind.

Yes, I think the depreciation in the quarter was -- depreciation and amortization -- was $67 million versus $75 million in the year-ago period. And maybe that was tilted down by $3 million less in amortization costs. But why should your depreciation go down so much?

I don't have the details in front of me but part of that is currency. Your entire European asset base is being depreciated then transferred into US dollars at a different exchange rate.

Right. And for my follow-up, just conceptually, is it roughly the case that your adjusted gross profit in the first quarter was more or less equal to your adjusted gross profit in the fourth quarter, and that the difference in earnings between the fourth and first quarter are all the different overhead items through SG&A? Is that roughly correct?

I don't think I follow what you mean by adjusted gross profit.

In other words, if you look at your gross profit ex non-recurring items, whatever that absolute number was, I thought it was roughly $382 million in the fourth quarter of 2014, and I thought that in this quarter it was roughly $383 million. Is that correct that those two numbers are more or less the same, in your opinion, or are they very different?

I don't have a reconciliation sitting in front of me because we generally don't look at adjusted gross profit. We do that on an EBIT level. But just to remind you, the driver in general behind gross profit here is the margin expansion that we've had quarter on quarter.

Okay, great. Thank you so much.

The next question comes from PJ Juvekar from Citigroup.

Yes, good morning. You had a big benefit from lower raw materials in this first quarter, especially in acetyls. So, how much of this benefit is sustainable if Acetyl Chain is running at 70% utilization globally? And do you think that acetyls have decoupled from methanol, and as methanol came down acetyls did not come down as much and that's driving the profitability? So, can you just talk about that long-term outlook?

PJ, it's a hard question to answer directly. If you look at what we do is we try to decouple it all the time. We work very hard to move our products into markets and get a proper return for those products.

We have over time, as you know, decoupled our contracts and given ourselves more freedom to price. And you've seen some of the benefit of that in this first quarter. What we are always dependent on, though, is for others to be thoughtful about how they price. And I generally would say it's a mixed bag right now.

So, if the industry doesn't try and doesn't care about driving margin it will be hard for us to maintain that. However, we've been running in the 70% capacity utilization for a long time as an industry. And you've seen the ability of the industry to drive higher and higher pricing. So, my gut, PJ, it's going to be somewhere between a replication and nothing as we go through the rest of this year.

Okay, thank you. And then on this new methanol plant in Bishop, what's the rationale there? Do you think that methanol is going to be tight and you would rather control your own supply? Is that the rationale?

The rationale is always just to make money, PJ. And what we're trying to say here is we've entered into -- it's hard to fully evaluate these projects. We've got a great partner in Mitsui, who has the same long-term vested interest as ours, which the last thing they want to do is invest money and not get a great return on it.

We put together a phenomenal project in Clear Lake that is going to be, we think, the most cost-competitive methanol plant -- it will certainly be the most cost competitive methanol plant in the US, and will be one of the most cost-competitive in the world when you look at it from a logistics point of view. That's going to be a phenomenal investment for us and for Mitsui.

What we've agreed to do is to ask ourselves -- can we replicate that in Bishop? That's what this announcement says. It doesn't say we've decided to replicate it. It says that we're going to devote ourselves to looking at it.

And as part of that process we entered a five-year agreement -- and key words there are five-year agreement -- to take some of the volume that Mitsui has out of the Bishop plant and roll it into the Celanese system, and we're doing that in a competitive fashion. We want to work with Mitsui, we want to see if we can develop a project, but we're not committed to it and we would not do it unless it made sense, economic sense in a very strong way.

Thank you.

The last series of questions will come from Hassan Ahmed from Alembic Global.

Good morning, Mark. In your guidance, you guys talked about the methanol headwinds being $0.10 to $0.15 lower than what you originally forecast. Now, probably part of the reason, obviously, is lower natural gas prices. But in this guidance, what are you baking in, in terms of methanol prices?

We did it, really, based on lower natural gas. That's how we ran it. From a raw material input point of view, remember we gave a range of $75 million to $125 million. And then last time we said we would be towards the lower end of that, and now we're saying we're going to be $20 million or so below that.

But that's all being driven by natural gas prices. Could it be a little worse than that or a little better? Sure, it could be, but that's how we're doing it, just raw material based.

And are you thinking about methanol being relatively flat with where we are right now?

Yes, I think so. We've just taken the marginal difference, so, yes, I think that's right.

Fair enough. And as a follow-up, another thing that you talked about on the Clear Lake side of things was that you have increased the staffing numbers, obviously, to get the plant up and running on time. And you talked about how there will be some higher costs. Now, some of these newer facilities that have come online we've seen inflation anywhere between 10% to 30%. So, just purely ballpark, is it closer to 10% inflation that you'll see, less than that, closer to 30%? Just any guidance around that.

Hassan, it's closer to 10%. What we're seeing is we're seeing, in pipe fitting and welding crafts, we're seeing an operation of about an 80% efficiency. So, that's about 80% of the level of efficiency that we would expect out of those crafts. And, so you compensate that by having more men and women there doing the work.

That's one of many trades and one of many systems. So we think a 10% range is certainly what we believe, and that's what we're rolling out internally as we look at it.

Super. Thank you so much.

Okay, thanks Hassan And, Drew, I'll let you wrap it up. But, folks, thanks for your time this morning and we'll be around for calls later today. Have a great day.

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