Gildan Activewear Inc (GIL) 2006 Q1 法說會逐字稿

Good day, everyone, thank you for standing by and welcome to today's Gildan Activewear First Quarter 2006 Results Conference Call. As a reminder, this call is being recorded. Our speakers today are President and Chief Executive Officer Glenn Chamandy, Executive Vice President and Chief Financial and Administrative Officer, Mr. Laurence Sellyn.

Before turning the meeting to management, please be advised that certain statements included in this conference call may constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward looking statements involve unknown and known risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. We refer you to the company's filing with the U.S. Securities and Exchange Commission and Canadian Securities Regulatory Authorities that affect the Company's future results.

I would now like to turn the call over to Mr. Glenn Chamandy.

Thank you. Good evening and welcome to Gildan's first conference call. I will make a few brief comments before turning over to Laurence to review the details of our first quarter results and our forecast for the balance of 2006.

We reported another very strong quarter, with EPS up 93% over first quarter of last year. And our -- and we are forecasting continued strong earnings growth for the second quarter. For fiscal 2006 we are raising our full year EPS guidance from U.S. $1.85 to U.S. $1.90 per share. Our guidance continues to assume a 1.5% reduction in selling prices for the balance of the fiscal year.

We continue to have very positive market share momentum in the wholesale distributor channel. Our T-shirt market share for the first quarter was 41.7%, up from 30.2% a year ago. Our share in sport shirts was 33.9% up from 24.6% a year ago. And our fleece share was 27.7% up from 18.6% a year ago. Those selling prices in the first quarter were higher than anticipated. There has been promotional activity in the month of January and the Company does not yet have visibility to project whether market conditions will support the continuation of more favorable pricing for the balance of the year.

Retail sales are on track for -- against our forecast for approximately 1.5 million dozens for fiscal 2006. Feedback from retailer sell-throughs to date have been positive.

Our Dominican Republic facility is progressing very well and has reached an economical scale. Its ramp-up curve is ahead of Rio Nance's facility at the equivalent phase of its ramp-up. By the end of 2006 we expect the cost structure for the Dominican Republic to be close to our Rio Nance performance.

Our building of our Rio Nance sock facility is being completed. We have ordered the equipment in order to start production in the third quarter of fiscal 2006. As stated in December, we are evaluating acquisition opportunities in the sock industry to acquire a retail distribution which will allow us to accelerate the penetration into the sock market as well as the ramp up of our new facility. Construction of our Rio Nance Activewear facility is scheduled for completion during the fourth quarter of fiscal 2006. And the facility is expected to begin production in the second quarter of fiscal 2007.

We continue to expect overall end year production capacity of approximately 40 million dozens for fiscal 2006. And exit 2006 with a run rate of 43 million dozens annually, not including sock production.

Laurence will now present the first quarter results and our forecast for the balance of 2006.

Good evening.

This evening we reported EPS for the first quarter of $0.27 U.S. per share, compared with our prior guidance of $0.23 and up 92.9% from the first quarter of last year. Compared to our guidance, the higher EPS was due to better than anticipated selling prices, as well as favorable variances in manufacturing costs. Compared to last year, the $0.13 increase in EPS was due to continuing strong growth in unit sales volumes and higher gross margins, partially offset by higher SG&A and appreciation expenses.

Sales in the first quarter of at 120.3 million U.S. were up 10.4% from 109 million in the first quarter last year. The increase in sales revenues primarily reflected a 14.8% increase in unit sales volume. As Glenn explained, the strong unit sales volumes reflected continuing market share penetration in all product categories. Unit sales growth and shared momentum were particularly positive since the first quarter of fiscal 2005, included the initial inventory fill from two large new distributors.

The impact of our unit sales was partially offset of lower volume product mix. Mix is not expected to be a factor impacting year-over-year sales or earnings in the balance of the year. Selling prices were marginally higher than the first quarter of last year.

We experienced significant expansion in gross margins in the quarter. Margins increased to 35.7% compared to 29.7% a year ago. The higher gross margins were due to more favorable manufacturing efficiencies and lower costs of cotton, as well as the slightly higher selling prices. These factors were partially offset by the impact to product mix and increased energy and transportation costs.

The favorable manufacturing efficiencies were primarily due to the performance of our sewing operations and of our joint venture yarn spinning operations. We expect these trends to continue. And also to benefit from the ramp up of the Dominican Republic textile facility in the coming months.

Selling, general and administrative expenses in the first quarter were 18.1 million U.S. compared to 16.3 million in the first quarter of last year. The increase was due to higher volume related distribution expenses, a severance charge, the stronger Canadian dollar, and continuing development of the organization to pursue the next stage of our growth strategy. The higher depreciation expense amounting to 1.5 million U.S. reflected our recent capacity expansion projects in particular the investments in the Dominican Republic facility and the recent expansion of our U.S. distribution center.

Due to the more favorable than anticipated results for the first quarter, we have increased our full-year guidance for fiscal 2006 from $1.85 U.S. per share to approximately $1.90 per share, up 22.6% from fiscal 2005. Our revised guidance continues to assume unit volume growth of close to 20%, a 1.5% reduction in selling prices for the balance of the year, and sequentially higher cotton costs for the balance of the year, compared to the first quarter. The potential upside to our fiscal 2006 guidance is that we do not experience the combination of sequentially lower selling prices together with sequentially higher cotton costs. Using the assumption of lower selling prices, we have provided EPS guidance of approximately $0.45 U.S. for the second quarter of the fiscal year, up approximately 20% from last year.

We generated $20 million U.S. of free cash flow in the first quarter, even though this is a quarter in which we build up inventory for the peak selling season. Capital expenditures in the quarter amounted to 12.4 million U.S. and are now expected to total 90 million U.S. for the full fiscal year, compared to our previous estimate of 105 million U.S. Our original projections included certain non-expansion capital projects that we have now eliminated from the budget. Also some equipment purchases for the second Rio Nance activewear facility are currently projected for the first quarter of fiscal 2007, instead of the fourth quarter of fiscal 2006. These two factors account for the reduction in capital investment spending.

On this basis, we are projecting 20 to 25 million U.S. of free cash flow for the full year, not including, of course, the cash requirements for a potential sock acquisition. As stated in our last conference call, the cost of a potential sock acquisition is expected to be easily accommodated within our current cash reserves.

Operator, we're ready to take questions.

[OPERATOR INSTRUCTIONS] Sir, our first question is from the line of Jessy Hayem with Desjardins Securities.

Good afternoon. First of all, just on the $0.04 that you achieved that was above your guidance, was it mainly pricing this quarter?

It was -- I'd say a bit of everything, it was half and half, well, we had a $0.04 overall improvement or favorable difference from our guidance say $0.02 was selling prices, $0.02 was manufacturing variances, volume was slightly higher, say $0.01, and mix was $0.01 negative. So that takes you to your $0.04.

And I understand that you can't basically foresee what's happening with the pricing, but as we're into the current quarter and seeing that capacity seems to be tight, especially with one of your competitors, Russell, lowering capacities, is it fair to assume that you expect at least current pricing could remain firm for the quarter we're in? The second quarter?

Well, right now it's still hard to tell. This is typically still a promotion time of the year right now, January is being promoted now, but that's also typical to what it was a year ago. So it's hard to say what will happen as we go forward. And there are other competitors other than Russell out there that may have more inventory than we do or more capacity. So it's hard for us at this in time to tell. The one positive momentum is that we believe that as cotton in the later half of this year continues -- today is continuing to increase in cost, hopefully that will put some upward pricing pressure on the balance of the year.

Right. Okay. And Glenn you mentioned you had comments, the Dominican Republic being on track. Can you give us the annual run rate right now and what you're on track to exit at for the year?

Well, I'd rather not give it to you by plant. We sort of give you overall. Right now we believe that we'll finish this -- we're going to produce -- we started the year roughly at about 37 million annualized run rate at the beginning of October. We're going to produce 40 million dozens in the year and exit at 43. Just to give you an idea where our production capacity is going. The more important think, from the Dominican Republic's perspective, is that the cost structure of that facility, first of all the wrap-up of the facility is much further ahead of the curve of what it took for us to build Rio Nance. And secondly, the cost structure of that facility, by our fourth quarter, will be equal to our cost structure that we're currently running out of Rio Nance, which would provide manufacturing efficiencies as we go forward.

Okay. And can you -- is there any update you can provide us on the potential acquisition or the evaluation that you're undergoing, that's the first part of the question? And second, assuming you do find an attractive acquisition of a sock distributor sometime in the current year, how quickly can you ramp up the sock facility's output. Is it just incorporating the additional capacity?

Your first question is -- we're evaluating it right now, and it's part of our -- we're going through a process of determining if anybody out there would meet our requirements, that's the first part of our plan, which we believe there are. But we have nothing concluded today. And if we do choose to bring on an acquisition, the ramp up time to 100% of the plant capacity would probably be 18 months from the time that we go. So we're going to start production at the -- in June of this year, let's say for example, really let's say July to get going. And from 18 months from that time we believe we can have the plant fully ramped up. The ramp up time is not a function of equipment. It's a function of training and people and shifts and it just takes time physically, even if everything was standard today to get a plant ramped up. That would be a reasonable time. And that's actually similar to what you see from the Dominican Republic as we ramped up its capacity from the time that we started it.

Whether you acquire or not during the year, you still need that 18 months learning curve or ramp up phase?

Yes. The only difference is, in our organic plan right now, we don't plan on filling the capacity up in 18 months, this would really accelerate the growth rate of Gildan’s retail strategy and also accelerate the ramp up and bring additional opportunity to us.

And just a clarification, on the 1.5 million you're targeting in retail. That's excluding socks and underwear? The 1.5 million dozen?

There's a little bit of underwear, excluding socks, but it's activewear and underwear.

In Activewear, what's the push that you're going with that retail. Is it mainly fleece?

We start shifting fleece mainly in the fall of this year. We're now currently starting to deliver spring products and we're in the process of booking fleece and underwear for fall.

Okay, great. Thanks. I'll come back for more.

Our next question is from the line of Sara O'Brien with RBC Capital Markets.

In terms of gross profit, it looks like it was higher than we expected. Now you're talking about maybe having higher cotton costs for the rest of the year. Is cotton going to be quite a significant impact on gross margin for the remainder?

Based on our assumptions -- first of all, cotton will increase, but not beyond the same prices as a year ago. And based on the accommodation of sequentially higher cotton costs and our assumption of sequentially lower selling prices, we're looking at lower margins and what we reported in the first quarter, but still north of 30%.

Okay. And -- would you expect -- I guess I'm a little confused as to why the guidance isn't higher for Q2 given that you're expecting sort of decent margins, good sales lines. I'm just wondering if there's a portion of the puzzle I'm missing.

The assumption we're making in arriving at our Q2 guidance is the prices will be 1.5% lower sequentially than the first quarter. If that doesn't transpire, that's where the upside to our guidance would be.

And I guess SG&A costs last quarter, you guided to about 11% of sales or less for the year. Is that still on track given it's ahead of where we would expect for the quarter?

There's no change in our guidance related to SG&A.

Okay. I wondered if you could comment on the mix. You said there's a bit of a negative mix impact this quarter that would not roll out for the following quarters. What kind of mix issues were there in the quarter?

It wasn't really an issue, it was a timing situation where our mix changes from time to time. A little bit more white T-shirts and a little less golf shirts within the quarter. That's not a reflection of our sell-through, it's just a reflection of how the garments are sold to our customers, and it's -- overall, we're not expecting any mix changes whatsoever for the full year.

Okay. So --

For the balance of the year.

I'm sorry?

For the balance of the year.

For the balance of the year.

Okay. So you would expect then, versus this quarter to have more of a positive mix change for the remainder of the year?

Yes.

Okay. And I just wondered, it looks like inventory volumes were built up quite significantly. I was wondering if you could explain that in terms of days' inventory. It looks like 145 days and where are you comfortable that you have sort of the quantities that you need?

Well, first of all, we feel comfortable with our inventory levels, I guess to answer your question while Laurence is getting numbers here. We have about 130 days of inventory, basically on hand.

100 days.

Yeah, 100 days of finished goods inventory.

Okay.

Which is seasonally normal for this time of the year. We -- this is when our inventory peaks.

Yes.

It's going to be equal to or slightly down at the end of Q2 and then it's going to start coming down in Q3.

We're comfortable with the build-up of inventory. It's in line with our plans to build up and eventually support our projected sales growth.

Okay.

As you know, the equivalent time last year, we were tight for inventory and unable to fully fulfill demand so we're positioning ourselves to not be capacity constrained as we go through the peak selling season this year.

Right now would you consider yourselves capacity constrained with this inventory or are you more sort of normalized at this point?

Right now, we're normalized at this point.

And I guess just a question about the cotton costs, if they do go up. You talked about driving prices up. I guess we've seen margin improvement over the last year when cotton prices came down. Could we not expect then if cotton costs are going up a slight margin contraction from that?

That's what we're forecasting, Sara. It may not be to the same extent as what we have in our projections, though. Because we're not -- we're assuming not only cotton costs going up, but selling prices actually coming down by 1.5%. If you have a combination of cotton costs moving up and selling prices remaining at the current levels that would be a significant upside against our projections.

Okay.

As a result of higher margins.

Okay. Thanks a lot.

Thank you.

Our next question is from the line of Dennis Rosenberg with DSR Consulting.

Hi, guys, congratulations.

Hi, Dennis.

Could you quantify the impact of the inventory fill for year, two new customers in the quarter and what kind of impact would you expect from that for the rest of the year?

Well, that was only a factor in comparison with the first quarter of last year. And had it not been for that, our unit volume growth instead of being 14.8% would have been north of 20%.

So it negatively impacted you this year?

It resulted in understating our growth, if you took that out of the year ago base, our growth rate would have been higher.

And the rest of the year you won't have any impact from that?

No.

Minor.

Okay. Thank you.

Our next question is from the line of Candace Williams with Raymond James.

If you could help me with pricing -- I'm trying to get a good idea in terms of sensitivity. If pricing remains strong for the rest of the year, what sort of upside would that provide to the earnings?

If pricing remains at current levels, as in the first quarter for the balance of the year, that would favorably impact our EPS. What change in that one assumption would increase our EPS by between $0.15 and $0.20 in the middle of that range.

For the remaining three quarters.

For the remaining three quarters in total.

Also speaking to the manufacturing costs, they are obviously responsible for the (indiscernible) increase over guidance. But to what extent do you have the quicker than expected ramp up at the Dominican Republic the (indiscernible) facility worked into guidance.

Well, we've reflected what we think are reasonable assumptions for the improvement in the cost structure as we go through the ramp up phase. I mean, obviously, we're always trying to outperform our expectations, we built in reasonable assumptions for the ramp up.

Okay. And then one last question if I may. On the non-expansionary capital spending. If you could give us maybe a little bit of color on where that came from.

We had some business projects built into our budget in our Canadian textile operations that we're not proceeding with at this point.

Okay. That makes sense, great, thank you.

Our next question is from the line of Claude Proulx with BMO Nesbitt.

Thank you. First question, I mean, even though you said that if it was not for those two distributors that you added last year, your growth in unit would be north of 20%. I still look at the Star -- your growth in the Star report, and I understand it's at the retail level, but -- not of the retail, but it's -- the shipment of your wholesalers, it's well above 30%. So is it because the non-Star sales have been coming down?

No, that's not at all. That's also a function of the inventory that's in the market and the inventory at the distributor channel is in balance, and, you know, one of our major customers is managing their inventory basically. And we believe that the inventory in the marketplace is line relative -- it's down relative to where it was last year at the same proportion. If that answers your question.

Good. Second one, CAFTA what's the status right now, and any impact on your business? I think there's some delay in implementing CAFTA?

The CAFTA has not been implemented yet. But what's going to happen when it does, what they're saying is going to happen, what does get implemented would be retroactive to January first.

Of 2004?

January 2004. And it's just in the process of being ratified amongst all the Central American countries and the United States.

And it doesn't really have any significant impact in our existing product lines, the benefit will really be when we go into white athletic socks.

Up until now our products have been sold through a CBI, basically, up until CAFTA took effect, anyways.

Okay. Thank you very much.

Thanks, Claude.

Our next question is from the line of Scott Frolitz with ING Investments.

I was wondering if you could give me an idea of the margin differences in the various products between T-shirts, sweatshirts and fleece.

We don't provide that information for competitive reasons.

And a second question just on the statement of earnings, you have $108,000 negative expense, I was wondering if you could just explain what that is?

What are we talking about?

The noncontrolling interest in losses.

Yeah, that's the backing out of the interest of our joint venture partner, our yarn spinning joint venture which is Frontier Spinning.

Okay. Thanks.

Thank you.

Our next question is from the line of Scott Crasick with CL King.

Good afternoon. I missed some of your comments on your retail initiatives, could you go back and detail the timing of some of those, the shipments and the accounts that you have now and how you want to ramp that up?

Well, what we've done is shipped the fall season in small quantities, again, our whole strategy with the retail. Our retail strategies start with more regional type retailers, which we've successfully have been selling for fall. We're in the process of delivering spring merchandise which is mainly T-shirts, and right now we're in the process of booking additional business for the balance of the year. We've basically sold or are going to sell in our first 6 months for example, roughly about 40% of our 1.5 million dozen. That's all sold and being delivered. In the back half of the year, we're in the process of still booking the orders that they're required to support the growth.

What's the strategy for going after some of the bigger mass guys, are you looking at the dollar stores?

Well, right now what we're looking at is more original retailers right now. Up until now, we've only had limited capacity to service the retail market. We felt this year that we only had about 1.5 million dozens to allocate. Although you'll see our inventories are up a little bit. We need most of that inventory to support the height of the summer selling season, and actually when we do hit the height of the summer selling season, our inventories year-over-year will be very close to what they were last year in those type situations. We're allocating the 1.5 million dozens this year, but as we continue to ramp up our Dominican Republic facility and bring on our Rio Nance two facility and we gain more capacity, we'll definitely go and start soliciting the bigger box retailers in the mass market in both the United States and Canada. Also, our objective is to start with the smaller retailers and start providing them a full line of product of all the different products we do sell to make sure we get a good footing and distribution set up in order to take on the bigger retailers the with experience required to service the bigger customers.

Are there any different competitors than what you have in your art wear channel or is it pretty much the same guys?

Pretty much the same guys, and as well as there's some -- some of the retailers own brands themselves, basically, our objective is to leverage our low cost manufacturing and to be able to gain the distribution.

So basically, replace private label in certain situations?

Certain cases, the reason why retailers [won’t] go for private label right now, they're looking to make either higher margins or to differentiate themselves from somebody else. And we believe with our brand we can accomplish both of those objectives for retailers.

Okay. And are you adding any performance features to any of your product yet? Would that be coming later?

You know, Scott, I think we've had fairly extensive conversations with a lot of our investors and analysts on our overall strategy, which we weren't really seeing as the purpose of this call. If you want a separate discussion to kind of catch up on how we've communicated our entry into retail, we'll be more than happy to spend some time with you.

Sure, that's just a yes or no question, though.

Sorry, your question again?

Performance features on the -- you know, sweat moisture resistant things like that.

No, not at this time.

Okay, thanks.

Our next question is from the line of Phil Fisher with Travalet.

Hi, a couple questions for you. First, you took a reserve in the fourth quarter for doubtful accounts receivable. Did you take that back in this first quarter or is that still out there?

It's still out there. We have not brought that back into income. We'll evaluate the situation with these customers as we go along through the year and see whether we feel comfortable repatriating that reserve.

Okay. And with the inventories, did I understand that you said that maybe some of your customers are now trying to have you and your peers hold more of the inventory for them? Is that happening at all or no?

We're just saying it's probably -- there's an adjustment within the inventory in the market, the market share being up 30%, shipments not being up equally as high. Our product is selling through the market. There's an adjustment with inventories within the market. That's what I was referring to.

Finally. Do you feel comfortable giving volume increase guidance for the second quarter at this point?

No, I don't. I just have to think about it for one second. We're looking at in between 15 and 20%, Phil.

Thank you. One final question for you. Your cotton costs, I had thought that you had already locked in your pricing for the remainder of this year at prices beneath last year. Is that not the case?

For the whole year, our cotton costs will be well below last year. In the second half of the year, you know, we locked in at prices that were comparable to the second half of last year.

Okay. Thank you.

Sir, our next question is from the line of Martin Goulet with National Bank Financial.

Good afternoon, Glenn and Laurence. Can you elaborate on where you stand in the development of the Mexican market at this stage?

Yes, we're currently starting to supply the Mexican market. We have four distributors signed up and we're projecting to deliver about .5 million dozens for this fiscal year.

Okay. So that's still -- about .5 million is a little lower than what you thought initially. Is that because it's more difficult to develop, or you prefer to allocate to other markets?

We actually start shipping late in the first quarter and really starting in this quarter. So we don't have really -- that's not the effect of a full year in business, that type thing.

Okay.

About .5 million has been our forecast all along.

Okay.

But the truth is, if we annualized even the potential it would be more than that.

I understand. Lawrence, can you break down the improvement year over year in gross margin? I think we're talking 600 basis points. Can you break that down, please?

Yes. Cotton I'll give you approximate numbers. Cotton was about 450 basis points. Manufacturing efficiencies were about 650. Selling prices was about 50. So all of these positive areas add up to 11.5% increasing gross margins.

Correct.

And then unfavorable mix and higher energy and transportation costs were each in between 2.5 and 3%.

Okay.

So that would net out to the 600% -- 600 basis point improvement.

Thank you, that's all for me.

Thanks.

Our next question is from the line of Doug Cooper with Paradigm Capitol.

Whats was the volume in the quarter in terms of million dozen?

The volume in the quarter in terms of million dozens was a little bit below 6 million dozens.

Okay. And what are you hearing from your clients, if you will, about Haynes being spun into Sara Lee later this year? How do you see that playing out?

We don't have any view on that.

Okay. Thanks very much.

Thank you.

We have another question from the line of Sarah O'Brien.

Hi, just wanted some clarification, you talked about in SG&A higher volume related distribution expenses, can you tell me what that is exactly?

Well, there's a component of our distribution expenses that's variable according to volume. So even though they're in classified and overhead. There's a variable component. So that's what we're talking about there.

Okay. And the impact of the stronger Canadian dollar going-forward, would that be something to be concerned about just in the SG&A line?

Not really material.

Okay.

We have hedged as well.

Okay. And I just -- I missed an explanation you gave about deferring or cancelling some capital expenditure programs related to the Canadian operations?

We had some projects in our Canadian operations that were in our original budget that we're not proceeding with this year.

Okay. You don't need to expand those facilities at this point? Is that it?

They were not expansion projects, they were more maintain business nature and we're going to focus on our expansion projects in our offshore facilities over the balance of the year.

Okay. And I just wondered if there's any reason that the Activewear Rio Nance facility is just pushed out a quarter.

It's not really pushed out a total quarter, because it's going to -- maybe about a month and a half, really behind. Most of the -- some of the equipment that was scheduled to come in in fiscal 2006 was scheduled to come in September and it's going to come in October instead. I said that we're going to start production in the beginning of January which is our second quarter in '07. But it might start a little bit earlier, Christmas and so forth, I mean, in Central America is a two-week deal. So it won't be significant. The second quarter of '07.

Okay. Excellent. Thank you.

Our next question is from the line of Philippe Habeichi with Genuity Capital Markets.

I was just wondering you could break down the pricing and mix impact of sales as a percentage of sales growth.

I will do that. Pricing was minimal on sales. Volume was about -- say just over 15 million positive impact on sales, and mix was about 5 million negative. And prices was a couple million positive.

Okay. That's great. Thank you.

Thank you.

[OPERATOR INSTRUCTIONS] Sir, we have another question from the line of Jessy Hayem.

Thank you. I may have missed the explanation on that one, but is the volume growth you achieved in the first quarter, was it in line with your budget? I'm talking in terms of unit growth.

Yes, it was, it was actually very marginally higher.

Okay. And Glenn, there seems to be a slow down in the fleece market. I'm just looking at the industry growth rate of .5%, can you just expand on that a little bit?

Fleece was actually strong in December. It was up between 8 and 9% for the full year. And it was up about 3% in December. So I think you just have minor timing things that you can't extrapolate into being trends. It was strong in December and strong for the full year.

Okay. And in terms of your fill rate on orders right now. Can you give us an idea of what you're at?

Our fill rate in orders right now is strong -- a lot stronger than it was, it's still not 100%. But it's pretty good. I would say it's -- percentage-wise it's in the 90% range.

Okay. And on hedging, I understand you have '06. But anything in place for '07 or not yet?

We're monitoring the situation for '07 and -- for competitive reasons we don't really want to talk about our -- to what degree we're covered at this point.

Sure. One final one. I guess you guys are still generating substantial cash flow despite the requirements you have on the expansion plans. Are you at all discussing potential dividend at what point?

Dividend is something that we periodically review with the Board. But as you know, the position we've taken up to now and still continue to take is that we want to continue to conserve our cash to pursue potential strategic opportunities over and above what's in our organic plan or accelerate the projects that are in our plan.

Okay. Great. Thank you.

Thank you.

[OPERATOR INSTRUCTIONS]

Okay. Thank you very much, for attending our first quarter conference call and we'll see you next quarter, thanks.

Ladies and gentlemen. This concludes your presentation, and you may now disconnect.