GCP Applied Technologies Inc (GCP) 2016 Q3 法說會逐字稿

Good morning, everyone, and welcome to the GCP Applied Technologies Inc. third-quarter 2016 earnings conference call.

(Operator Instructions)

Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. Joe Decristofaro. Please go ahead.

Thank you. Hello everyone and thank you for joining us on today's call. With us on the call are Greg Poling, President and Chief Executive Officer, and Dean Freeman, Vice President and Chief Financial Officer. Our earnings release and corresponding presentation slides are available on our website.

To download copies please go to gcpat.com and click on the investors tab. Some of our comments today will be forward-looking statements under US Federal Securities Laws. Actual results may differ materially from those projected or implied due to a variety of factors.

We will discuss certain non-GAAP financial measures, which are described in more detail in this morning's earnings release and on our website. Our comments on forward-looking statements and non-GAAP financial measures apply both to the prepared remarks and to the Q&A.

References to EBIT refer to adjusted EBIT, and references to margin refer to adjusted gross margin or adjusted EBIT margin as defined in our press release.

Greg will start us out today with a business update and insights into 2017. Dean's commentary will include highlights of our third-quarter financial results and 2016 guidance.

We are discussing these results excluding the impact of Venezuela, and we have provided a reconciliation of the financial information in our press release. All revenue and associated growth rates in this discussion are stated on a comparable constant currency basis which adjusts for the impact of foreign currency. With that, I will turn the call over to Greg.

Thank you, Joe. Good morning and thank you for participating on today's call. We delivered strong EBIT margins and cash flow performance in the third quarter, yet GCP's consolidated revenues were negatively impacted primarily due to market conditions in Europe and weaker demand in North America, which occurred mostly in July.

Our construction revenues were down 2% in the quarter and are up 3% year to date. Our Darex packaging business grew revenues about 3% on continued strength in our coatings business. Adjusted EBIT for our construction businesses combined increased 8% in the quarter on a solid earnings performance in our specialty construction chemicals business, which grew adjusted EBIT 27% on a 350-basis point margin expansion. Adjusted EBIT for our construction businesses has improved 24% year to date.

This morning we are pleased to have announced the acquisition of Halex Corporation, a supplier of commercial flooring underlayment products. Halex, with revenues of approximately $45 million, will be integrated into our specialty building materials businesses.

Halex includes a specialty product called VersaShield which is an innovative moisture barrier underlayment. We believe the product has the potential to be a category creator in interior building underlaymet flooring applications as it provides improved performance at a lower installed cost.

Halex flooring products are sold for both new construction as well as renovation products. Once integrated and when synergies are completed by the end of 2017, we expect Halex to deliver EBITDA margins equivalent to GCP's average margins. We also expect Halex to be accretive to earnings and cash flow in the first year. We welcome the Halex employees to GCP, and we look forward to working together to deliver on the opportunities for growth we see for this business.

Now on to the third quarter. Despite a convergence of external factors that negatively impacted our revenue in the third quarter, we were able to deliver improved EBIT margins and cash flows. This demonstrates the resilience of our business model.

GCP also made good progress in commercializing new technologies including growth in our precast products, air barriers, and verified concrete management systems. For the remainder of the year, we are focused on execution to close out the quarter, the integration of Halex, and positioning GCP to capture opportunities for 2017.

And I would like to provide some insights into our framework as we look out into the next year. Our outlook for worldwide construction markets in 2017 is for low single-digit growth with much of that growth weighted towards North America and Asia-Pacific, flat growth in the EMEA region, and we will see improvement in Latin America due to the lapping of negative impacts of lower commercial activities in 2016.

We will continue to focus on market penetration with our leading technologies, including our preapplied waterproofing products, self adhered residential underlayment membranes, our new sprayable and precast concrete add mixtures, our verified concrete management systems, and our innovative BPNI formulations. And of course we will look for growth with our new VersaShield product line.

Our SBM, Specialty Building Materials, pipeline is similar to the pipeline we carried into 2017, although it is weighted to the back half of the year. The acquisition of Halex is expected to add approximately 3 points of revenue growth to GCP, and we expect the canned packaging market to grow in the low single digits.

Our expectations for inflation is to remain relatively stable, and we will continue to focus on margin improvement across our businesses through both price increases and productivity. Specifically in our SCC, Specialty Construction Chemicals business, we expect to continue to see improvements in the trailing 12-month EBIT margins due to sales of higher margin products, continued focus on productivity, and additional commercial rationalization designed to improve the quality of our earnings.

As to the seasonality of our revenues next year, we expect the first quarter to be weaker on a comparable basis to the prior year quarter, with year-over-year growth picking up in the second half of the year. We will provide guidance on 2017 revenue, earnings, and cash flow during our fourth-quarter earning call in February. Now I would like to turn the call over to Dean for a more detailed discussion on our results.

Thanks, Greg, and good morning, everybody. As Joe mentioned, today's discussion will be excluding Venezuela. As you know, we devalued the currency of our Venezuela subsidiary at the end of the third quarter 2015, and we're finally lapping the quarterly effect of that as of the end of the third quarter 2016. The third quarter is the quarter most impacted by the Venezuela devaluation on a year-over-year basis. And for your reference, we've included a schedule in the appendix in both the press release and in the earnings slides.

GCP's consolidated revenues were down 1% to $346 million and up 3% on a year-to-date basis. Adjusted EBIT declined slightly in the quarter versus prior year, and was up 12% year-to-date. Adjusted EBIT margins increased 40 basis points in the quarter due to strong performance by our Specialty Construction Chemicals business, as Greg mentioned.

On a year-to-date basis, adjusted EBIT margins expanded 170 basis points due largely to volume mix with the continued positive effects of raw material deflation and the productivity improvements which partially offset the impact of unfavorable FX and price.

Looking at our revenues in more detail, the combined construction revenues declined 2% in the quarter principally as a result of Europe, which was negatively impacted by geopolitical events including the Brexit vote and the coup attempt in Turkey. Overall, EMEA was down 5% in the quarter but is up 3% on a year-to-date basis.

North America construction revenues were up approximately 3% in the quarter and about 8% on a year-to-date basis. The North American region benefited from 10% growth in our building envelope business as well as continued growth in our residential and fire protection businesses.

SCC had softer volumes in North America at the beginning of the quarter. However, we have seen order rates improve in the segment throughout the fall months.

In Latin America, revenue for our construction businesses declined 8% due to a 30% decline in Brazil, partially offset by growth in countries such as Mexico, Colombia, and Argentina. We'll lap the effects of the market decline in Brazil in the fourth quarter.

In Asia-Pacific, our construction revenues declined 5.5% in the third quarter and are down about 1 point on a year-to-date basis. Asia-Pacific performance was impacted by project timing in our Specialty Building Materials business which had a number of large projects in China and Australia in the third quarter of 2015. Our Specialty Construction Chemicals business grew about 1% on increased volumes, primarily in Australia, Vietnam, and in China.

Our Darex packaging business delivered growth of nearly 3% and is up about 1.5% on a year-to-date basis. Regionally sales for Darex in both Latin America and Asia were up across all product segments. The majority of the sales increase came from our coatings business, which was especially strong in Latin America due to new formulation introductions and a shift in can production in this region where Darex has a strong market position.

Looking at our segment margins, SCC's adjusted gross margin of 38.3% improved 330 basis points due to a favorable raw material deflation and price, which was partially offset by the negative impact of FX and lower add mixture volumes. Adjusted EBIT margins expanded 350 basis points to 14.2%, again, largely on the improvement of gross margins. Year to date, SCC's margins improved 300 basis points year over year to 11.4%.

SBM's adjusted gross margins increased 100 basis points to 46.5% due to favorable price, raw material deflation, and productivity, which were partially offset by the negative impact of foreign exchange. Adjusted EBIT declined 4% to $25.6 million, and margins were 80 basis points lower at 25.4% on higher expenses as we invested in sales initiatives and higher G&A allocation costs. On a year-to-date basis, adjusted EBIT has grown 21% and margins expanded 330 basis points to 27.9%, driven by the higher volumes and favorable product mix throughout the year.

For Darex, adjusted gross margins declined 70 basis points to 34.4% during the third quarter as productivity and volume are more than offset by the negative impact of foreign exchange, product mix, and lower pricing. Adjusted EBIT was down versus prior year due to lower gross margins and the increase in general and administrative expenses.

Rounding out the consolidated results for GCP in the quarter, interest expense totaled $18.8 million, the effective tax rate was 30.9%, which includes the impact of the early adoption of the ASU2016, adjusted earnings per share were $0.35 with diluted share count of about 72.2 million, and we delivered cash flow for the first nine months of 2016 of $71 million on track with our expectations. While we've invested $33 million in CapEx so far this year and plan to hold that no more than -- because we talked about 4% for the full year.

Let me turn to 2016 outlook. Note that my comments exclude the results of Halex. In the fourth quarter we do not expect to recover the revenue shortfall from the third quarter, and we do expect EMEA region to continue to be soft.

We are reducing our top line revenue guidance to 1% to 3% growth on a full-year basis versus our previous guidance of 4% to 6%. We are also narrowing our adjusted EBIT range to $210 million to $218 million, and our adjusted EPS range to $1.38 to $1.45 per share, while delivering approximately $100 million of adjusted free cash flow. With that, I'll turn it over to Greg for closing comments.

Thank you, Dean. In the third quarter we continued to deliver improvement in the quality of our businesses, despite lower than expected revenues. Our margins and cash flow remained healthy as we focused on factors within our control.

We continue to make progress on our strategic initiatives, and we are pleased to be executing on our bolt-on acquisition strategy with the addition of Halex to our portfolio. As we look out into next year, we will build on our geographic diversity, our strong market position, and innovative products, while continuing to focus on improving the quality of our business to deliver superior value to our customers and shareholders.

With that, Dean and I would be happy to take your questions.

Ladies and gentlemen, at this time we'll begin the question-and-answer session.

(Operator Instructions)

Our first question today comes from Ivan Marcuse from KeyBanc Capital Markets. Please go ahead with your question.

Hi. Thanks for taking my questions. The first one I guess more the topic of the day is how would you gauge the sensitivity to your businesses and increased infrastructure spending? How much of a percent of sales would you say that are related to US infrastructure spending? And do you have any idea what the sensitivity is to your sales and earnings on increases in that spending, or I guess how would you gauge it?

Ivan, look, for us, as you sell the add mixture products, clearly any increase in infrastructure is a positive for us. People will build more airports, bridges, dams, anything that uses those types of waterproofing concrete products is a plus.

Today, about -- if we have to measure it, it's not always easy to follow the products through to their end use, but about 30% of what we sell ends up in infrastructure. It does vary around the world. For instance, Middle East in infrastructure has been good for us. North America infrastructure has been not as strong.

But we'll benefit as governments around the world and people invest in infrastructure. It's good for us. So it would depend on how much it would drive concrete and cement production for the SCC business. And the more sophisticated the infrastructure investment, the better that is for our waterproofing business.

Okay. And is it safe to say -- you said 30% of your construction sales are infrastructure related, roughly, and then a third of your sales are in the US. So 10% of total sales would be US infrastructure related? Is that the right way to think about it?

It's Dean. The way I guess I would describe it is, if you look at the construction businesses, I would say about two-thirds of those revenues are really commercial. And of that two-thirds commercial, I would say probably single digits, high-single digits related to infrastructure, in and of itself. The rest is commercial mix, commercial construction.

But if we get a pick-up in construction activity in North America due to investment in infrastructure, we'll get our piece of that growth. If you get a fundamental growth increase in the construction market due to infrastructure investment by the government, that's going to be a positive for us on the growth and we'll pick up our piece of that. And the reason it's about a third has more to do with how much the mix of construction is at any given time.

Clearly if they're building bridges, tunnels, subway systems, all of those sophisticated would drive up our mix. If you're building just a highway in a normal situation, it would be good for add mixtures, but not as much waterproofing. If there's sophisticated construction in the city, urban centers, our mix will go up; we'll pick up a piece of that.

Okay, great, thanks for that detail. In your SBM segment, I know the margins came down; you said it was higher SG&A costs. Is that related to acquisition-related costs, and how much acquisition-related costs, I guess specifically with Halex, were in the quarter? And what kind of costs should we expect with inventory adjustments, et cetera, in the fourth quarter related to this acquisition?

The acquisition costs are not in that number. What's in that number is some allocations that, as we spun the Company, the share of allocations with the public Company got shifted a little bit as our product mix got shifted. So there's a little bit of allocation shift.

We're on our budget for the total business, but it shifted a little bit between businesses. And some of that is investment in sales activities, with the margins. Yes, we had a slight decline in our margins, but these are very strong margin businesses, and we invested in some sales activities in Asia as well as the US, and a little bit of marketing.

So that's what's in those numbers. The acquisition costs will be broken out and be below the line, I think.

Yes, we issue the third-quarter results, we'll see a little piece there.

Okay, and then the last question and I'll jump back in the queue: Your interest expense with the refi for the full year, how should I think about this going forward? I know it popped up on the one-time costs, but now with the refi it's going to go lower, right? So what would you gauge it for the year, or I guess on a quarterly basis, whatever way you want to give it to me?

We picked up about 125-basis-point savings for -- on a full-year basis, and I think for the balance of the year I think it was about $0.5 million total savings.

Okay. Great. Thanks.

Our next question comes from Jim Barrett from CL King and Associates. Please go ahead with your question.

Good morning, everyone. Greg or Dean, I had a question for you on Halex. First of all, it looked like technologically a very good fit. Is Halex sold through your current distributors, I'm assuming, or is it sold through flooring distributors? Can you talk about its route to market?

Yes, great, Jim. In fact, it's a very interesting question because one of the fits we like here is, a portion of the Halex business, about probably 60% to 70%, is going into renovation. Some of that, of course, goes through the typical distribution, similar to what we would do with ice and water shield, so, big box and lumberyard, those types of things. The rest would go through specialty flooring distribution. So the specialty flooring distribution is new to us, but some of the renovation, retrofit distribution we think is a real overlap with some of our existing business.

And then there's a piece of that business, Jim, that goes direct to the contractor, end user. We're used to that, but you have the salespeople come along with the business. So we do think there's some good distribution overlap, especially in some of our SBM distributed businesses.

Any idea, and I know it may not be well measured, what the market share of their core product is in that space?

Let me put it to you this way: We bracket the underlayment business US at about $1 billion. And this is a relatively new methodology to go in under these underlayments and use membranes for that. Rather than give you market share, as we bring in the Company we'll talk about how it's impacting our Business.

But you're competing with normal two-part epoxies that are used traditionally for these applications. So it's similar to, if you go back whatever it was, 25 years ago, we started putting self-adhered membranes under shingled roofs. This, we think, is a category that's new.

Any synthetic underlayments on the roof? Is this growing? It sounds like it's growing above -- partly due to size, partly due to technology -- growing above the rate of the underlying market.

Yes. We expect the segment of the acquisition that has this technology in it to grow at a faster rate than the market. We did get some traditional products and pieces that go through the distribution. They have good margins. We'll work that side. But the VersaShield product line where we're looking at the underlayment business, we think we're going to have that same opportunity to be 2 times plus the market because it's got a cost performance advantage.

Okay. Last, Greg, you may not want to comment on this. I notice they had three facilities. Is there the potential to integrate their manufacturing footprint into some of your existing plants that make underlayments and/or similar products?

Jim, it is a little early to talk about the specifics, but I will tell you, part of how we improve this acquisition to give it equivalent margin, EBITDA margins to our Business, is to integrate it into our infrastructure and sales footprint on a [manufacturing shelf]. There's some opportunities across the business, and we also expect there will be some opportunities to globalize as well.

Well, thank you very much. Congratulations.

Thank you.

Our next question comes from Laurence Alexander from Jefferies. Please go ahead with your question.

Good morning. It's Dan Rizzo on for Laurence. In terms of Darex and the performance there, is there any lingering effects from the switch in the technology from three-piece to two-piece cans? Has that played out already or is it still lingering?

I think, as we said with that, the switch has some legs on it to go in the future. We haven't seen as much of an impact this year as we did last year because we had one of our accounts make the switch last year it impacted. But this quarter wasn't a big impact on it.

What we saw this quarter was some good growth in our BPA-NI in some of our coatings business, and we saw some shift of business relative to Latin America being stronger. And I would say the coatings business mix was a stronger portion of the business. Now, that tends to go up and down a little bit with the packs, and what cans are being manufactured and ships quarter to quarter.

So I wouldn't look at that as a trend as I would with three-piece to two-piece. We had a good quarter with our coatings business and fairly stable growth, stable business on the sealant side. That's what the impact was.

Okay. Thank you. And then, just with the benefit from raw material or lower input cost, that seemed to be still with the quarter. Is that something that's going to peter out as we head to the end of the year and into 2017?

As we look at this, there's two pieces to that. One is the productivity side, and we are building out with our operating plan, productivity that I would bracket as consistent with the productivity we got this year.

We're looking at the raw materials going out relatively stable. You're not going to see the kind of drops that we saw. And we'll monitor that piece pretty carefully. But we would expect to continue to be able to deliver productivity.

And, Dean, I would say on the split this quarter, it was probably more raw material delivery or probably two-thirds of it was raw material. We got some pricing and then we had the productivity. Productivity piece we'll keep driving going forward.

All right. Thank you very much.

And our next question comes from Chris Shaw from Monness Crespi. Please go ahead with your question.

Good morning, everyone, how are you doing? I guess starting in the SCC segment, I assume heading into the quarter you thought North America would be a little bit better. What changed?

I was wondering, was there any -- from the -- I know it was strong in the beginning of the year because of the weather. Was there any leftover pull forward that caused some of the weakness in North America this quarter?

It's a good question, Chris. As we look at it, and I don't want to blame weather, but it was a wet area, especially in some southern parts of the country earlier in the quarter and that hurt us. And frankly, if you just look at the cement statistics in July, they were down double digit.

13%.

At 13%. I don't know that I have the best explanation for that July. We've seen that business, in terms of our order book, rebound. This month we're getting a good order flow.

There's discussion in July that people -- you had difficulty on the way the vacations fell. It was just a tough July, and that's what flowed through the numbers. We're not going to recover that July. But the order book is getting steadier as we go into the fall.

So I'm not sure if we pull a little business forward because of the good weather in the earlier quarters. That also could be part of it. But July was just soft.

Okay. I had a couple margin questions on the segments. I guess starting with SBM, I think margins were up around 300 basis points in the second quarter, but are down this quarter. What's the big movement there that I might be missing?

Really the first half of the year they really benefited from mix and obviously the volume. If you look at the sequential volumes being down, the bulk of that is the impact of the lower mix coming out of the first half of the year. So they saw good mix in the first half, and the third quarter was just a weaker product mix as well as the volume declines.

Maybe I'm thinking about mix the wrong way. North America was up fairly strongly. I assume that would have been a higher margin region for the segment relative to the ones that were down. Is the mix happening just in the product slate instead?

The mix can be -- if you look at the underlayment product category in the first and the second quarter, we saw improvement in volumes there. In the third quarter it was more of the building envelope, still very profitable, but then largely -- and I'm just talking North America -- the offset in Asia and the declines in Europe were also an impact on the margins as the volume came down.

We have some good margins in that business, in Asia. Our Asia business, especially segment on some projects was timing, and I think we had some timing on our pre-proof product line is also a very nice margin business. And, frankly, big projects there moved the mix a little bit. So it's a shift in the product lines within where the projects are, as much as it is overall region.

And then a similar question for Darex, too. To be fair, I think it might have been that I was a little high on the margin for my forecast for the quarter. It came in less than I thought. Is there anything there that specifically that you can highlight that caused the -- ?

The canned sealant business grew a little stronger, and the canned -- I mean sealant business was a little softer, and the canned coatings business was stronger. And we had a little bit of higher revenue coming out of Latin America and that shifted the mix on us on the margins a little bit.

As we said in our discussion, our raw material program is good. The productivity is good there. There's a little bit of price in that decline of the margin on contracts, and you see some of the deflation as we've said come through on some of these set contracts as well. So we had a strong coatings quarter, and that does drive mix a little bit.

I guess the mix thing seems to be hard for us to model. Thanks a lot.

And our next question comes from Erik Karlsson from Bodenholm. Please go ahead with your question.

Thanks so much for taking my questions. First, could you help us understand how your pricing is looking at the moment on a year-on-year basis? And also what your price adjustment plans are for 2017?

I think we'll hold the 2017 price until we give the guidance and also have a chance to chat with our customers about the pricing there. We've seen some price. We've been able to recover price in Latin America specifically.

We've had some price in the SBM businesses that have flowed through, and that's where you saw the improvement in the third quarter relative to that business. That's where the bulk of it is. We look at the opportunity where we're creating value to bring those prices up. And we can give you a little bit of view into that for 2017, but I think I'll wait just because we'd like to get out to our customers and discuss it with them first.

Right. I would love to understand the weakness you're seeing in EMEA in a little bit more detail. Because I look at other construction-related names with big European exposure, I'm generally not seeing that trend. Do you think it's all the environment that you're seeing and it's nothing internal that you need to adjust, or do you think there also might be some internal issues for you there? Thank you.

It's a great question. Let me give you a couple of statistics. Our business in the UK for the first half of the year was up mid-double digits and was down 5% in the third quarter. Our business in Turkey in the first half of the year was up low-double digits and was down 18% because of the coup. We were just shut down from doing some business there. Overall, our Middle Eastern business, and as we've said, I think we said this going into the quarter, we expected with the lower price oil.

I think our regional mix because of our business in some of those countries had a little bigger effect than you might see overall in the overall European. But there's no question, we were impacted by those external events in those marketplaces. We will continue to work on our structure and our costs and our products, but they're important markets for us over the long term.

Very good. And just on Halex, sorry if I missed this, but what is the EBITDA margin right now in Halex?

You didn't miss it. We haven't given out the EBITDA margins. We have said that we expect to get those by the end of the year to equivalent of GCP's average by the time we have it integrated and completed that process.

And can I just follow up on that? Over time, is there any reason they couldn't reach the SBM divisional average? I'm not talking next quarter or so, but in a couple of year's time?

I think we've got a nice objective out there. We'd like to bring it in, and frankly, as the higher technology products gain more position, we would expect that mix to be a positive, let me put it that way.

I'll take that as a yes (laughter). Thank you very much, gentlemen.

Thank you.

(Operator Instructions)

Our next question comes from Owen Douglas from Baird. Please go ahead with your question.

Thanks for taking the question here. A lot of good ones already been asked and answered, but wanted to dig a little into 2017. The commentary around the second half shaping up to be better than the first half of the year, can you give a little bit more color as to what leads you to believe that the year will evolve with that sort of cadence?

Some of it is the comps that we have. We had a very strong -- the stronger first quarter. You have some inverse on the comps.

We think we're going to have a more -- we're planning on a more normal seasonality relative to both weather and season than we had last year. A lot of construction got done in the first quarter last year. We think this is going to be a more normalized situation when we look back over our history. I think that's the big driver in looking at this.

We'll continue to work the penetration in new products the same, but we think it's going to be a more normalized seasonal quarter. And frankly, we also think that it's going to take -- if you see some improvement on some infrastructure, it's going to take a little time to move that through the process. And I would also tell you that some of the geopolitical issues, if they stabilize, it takes some time to move those through. That's really how we bracketed it.

Just to clarify, the normal seasonality is typically the first quarter is the weakest quarter, the second is the strongest, modestly lower in the third, and then lower again in the fourth, with the fourth typically being a little bit stronger than the first, depending on weather and other dynamics. That's the normal seasonality that we expect to see.

Okay. That's very helpful. And moving on to Darex packaging, how do you see that -- do you have any indications whether or not you'll see the change happen the next leg down in the three-piece to two-piece conversion hit in 2017, or do you not have that level of sight?

We don't have the level on a customer sight that would be able to tell you: Oh, it's going to happen. We think that we're in the later innings of that transition with our existing customers. We didn't see as much of an impact in this year, so far as we saw the previous year. And we think it's probably going to be relatively consistent and stable. But we're not -- I can't give you that granularity on 2017 on that shift.

Okay, understood there. But also just wanted to go back to the comment about the July business. I guess I think of these projects as typically being in the pipe, and once they're in there, they're likely to happen. Just trying to understand a little bit better why some of the business that didn't materialize in Q3 won't be coming to you in the subsequent quarter or two.

Look, if the projects are going to get built, we'll get them over time. We just don't think that the project pipeline is going to recover in a quarter from that downturn we saw early in the quarter. It takes longer time to pull itself through. And you just didn't have as much activity where we're doing business in July.

Actually, I think a number of, especially in the SCC business, our customers have good backlogs and they're running pretty hard. So they pour as much as they can pour. So I think that's the issue.

You also run out of time in some parts of the world because of the weather. I mean, clearly there's parts of the world where it doesn't impact, but you do run out of time on the winter side as you get out through the end of the year.

Again, when you saw the broad demand cycle in the first half of the year, as events unfolded, certainly as we think about Turkey and the events in the UK, I think it was just a pause.

I think Dean's right. In North America, as people have pointed out on the call, you probably got a little pull forward in the summer, before the summer as well. So it's our best call on it. July was a weak month for us.

Okay. Understood. Well, thank you very much. Appreciate the time.

Ladies and gentlemen, with that, we'll conclude today's question-and-answer session. We do thank you for joining today's presentation. You may now disconnect your lines.