Luxfer Holdings PLC (LXFR) 2016 Q3 法說會逐字稿

Welcome to the Luxfer Group third-quarter conference call. We will first hear from Luxfer Chief Executive Brian Purves, who will provide a market overview for the quarter, followed by Group Financial Director Andy Beaden, who will review the financial performance for the quarter and year to date. Brian will then return to sum up and offer an outlook. After that, Brian and Andy will be glad to take your questions.

We request that you initially ask only one question. After you've heard the answer, we will give you the opportunity for a follow-up question. If you would like to ask additional questions, our operator will be glad to place you back in line. Thank you for your cooperation. We will now turn the call over to Mr. Brian Purves.

Thank you. Good morning, ladies and gentlemen. Welcome to the Luxfer conference call on the third quarter 2016. Turning to slide 4, the headlines for the quarter are our earnings result was $0.01 better than our updated guidance, but it was a difficult quarter. The current weakness of sterling is hindering us at the moment, but is expected to turn into a positive for us in the medium term. The current difficulties affecting parts of our magnesium business are expected to reverse but not until early 2017.

Quarter four is seasonally lower than quarter three. Overall guidance on full year EPS is now for a 15% reduction from prior year. And there are positive signs that demand is rebuilding for 2017.

Turning to slide 5, in quarter three adjusted full diluted EPS of $0.19 was $0.09 below quarter three last year. Cylinders continues to perform ahead of prior year and our product transition efforts for Elektron are progressing. The quarter three headwinds came from what is normally a relatively predictable source, sales of our North American magnesium products, and in particular defense related products. I'll go into this in much more detail shortly.

Turning to slide 6, following 2015 right-sizing actions, results from the alternative fuel cylinder industry remain much improved. European demand for our composite medical cylinders, however, remains low, although sales of aluminum cylinders were up in the quarter.

Our Superform business is selling record levels of tooling associated with new contracts on the future supply of panels, but is currently selling fewer than usual formed units due to old contracts finishing in advance of the new contracts commencing.

Sales of high performance magnesium alloys were again slightly improved, although towards the end of September, the largest sales customer that we supply entered Chapter 11 protection, citing the lower load rates on helicopters caused by reduced demand from the defense and oil and gas sectors. Just as we ourselves have previously reported, but from within a much more diversified business.

The end customers are the helicopter and engine manufacturers that have specified the use of our materials. So we can have confidence that the castings are required and will be made, but we have to count on some disruption over the next few months.

In the catalysis sector, sales of automotive material we actually a little higher in the quarter, but there remains the very significant potential for higher sales particularly from our new G6 technology on which we continue to get very positive feedback. We have further shipments of industrial material scheduled for quarter four.

A major impact on the third quarter was the lack of orders for several of our magnesium products in North America. On military powders, we have one customer still working towards a restock of a facility outage earlier his year, while another customer reported that they were short of orders from the military and would not require further optimized powder this year.

In response to reduce costs, we had suspended operations at our magnesium optimizer in Pennsylvania for the balance of the year and have laid off much of the direct workforce.

For each of the last 15 years, the US military factored in with an add-on for meals ready to eat, or MREs in the third quarter, adjusting the full year requirement above the contracted minimum in order to rebalance stocks. In 2015, the add-on dropped in the year to about 25% above the base level and generally weakened the need for additional flameless heaters from our Magtech business. This year, more add-on was forthcoming. This reinforces our focus on expanding the business into non-US and non-military areas.

We did have expectations that we could during the quarter bring in one of the several large commercial tenders that we have underway to offset the military shortfall. But the timing of these tenders has slipped into 2017.

The US military have also been very slow to issue expected orders for the chemical detection and decontamination products from Luxfer Magtech. Accordingly, having scheduled production to a degree in expectation of an MRE add-on on additional decontamination business, our New York Magtech facility became short of work. Again, to reduce costs and avoiding building stock, we have cut back on production and laid off several employees until yearend.

Finally, we have invested in improving the flexibility of our manufacturing processes at our Madison rolling plant. And this has given us the ability to offer a direct service to more of our North American customers for photoengraving sheet. This will improve customer service, lower logistics costs, and grow customer loyalty.

The downside is that the distributors to be bypassed have to be allowed to offload their stocks. And while this happens, our sales are reduced.

Turning to slide 7, addressing these matters, at the very end of September we saw one large new contract award for military flares placed by the DOD with one of our customers for 2017 through first quarter 2018 production. With an expected resumption of production at the facility that had the outage, both major customers are expected to be back taking supplies from us early in the new year. I would remind you that we are only two years into the five-year contract for the core countermeasure flare requirements of the US military and that we have 100% of the powder supply for the manufacturer of these flares.

Three weeks ago, the new five-year contracts for MRE supply were released by the US military, split between three meal providers. We had already secured back to back contracts with all three for the supply of the flameless heaters, carrying over the 100% supply position that we inherited on purchasing Luxfer Magtech. The minimum annual quantity is carried over from the previous contract and an informal indication was given that there would be an add-on in 2017 where there was none in 2016.

We've also received around $2 million worth of orders to date related to stock replenishment following usage of emergency supplies during the recent hurricane season and we expect those to benefit quarter one, 2017.

The castings made by the customer now in Chapter 11 will be required, so we should at most expect short term disruption. And as mentioned earlier, we have submitted tenders to several non-US buyers of self-heating rations and we are targeting incremental business in this area.

The stock held by terminated photoengraving distributors should be largely exhausted by the end of quarter four, removing the current depressing impact on sales. Overall, while we still await some order cover, particularly for the decontamination products, we do expect a strong recovery in materials for these magnesium products early in 2017. Albeit the quarter one may still be somewhat affected as production is restarted at our customers.

Turning to the slides on our update on the strategic growth projects, on slide 8, Biotronik launched their magnesium scaffold product, branded Magmaris, in several countries including in Europe, Middle East and Australasia. Although for a small amount in this launch phase, it was a big moment for us when we received our first royalty statement during the quarter.

On slide 9, when we bought the business that we now call Luxfer Magtech two years ago, we thought that one of our objectives would be to expand its geographic presence. Last year we established new sales positions outside the USA and in the second quarter of this year we purchased a small European competitor in the field of flameless heaters and ready to eat meals, largely for their customers.

As stated earlier, we have now quoted for several million dollars' worth of business to a number of non-US buyers of self-heating rations.

Slide 10, we now have three portal type components in testing for possible inclusion in new aircraft seat designs and we remain confident of getting at least one of those parts into a production seat during 2017.

Slide 11, we continue to get good feedback from customers on the benefits from our next generation automotive catalysis technology. The customer still needs to complete engine testing on catalysts made using the material, but we are already planning for how we can start making the material in commercial quantities.

Slide 12, the automotive industry increasingly demands a supply of assemblies rather than panels. We are currently investing in our Superform facility in the UK, installing a restrike press to allow secondary operations to remain on Superform panels and also on hemming sales where we fold the outdoor panel within the inner panel and supply an unassembled, unpainted door. These new facilities will be used on the new work for Ferrari and another high-end customer expected to start in the second half of 2017.

Andy Beaden will now take you through some of the details on the financial results.

Thank you, Brian, and welcome, everyone, to the call. My first set of slides will cover the sales analysis for the quarter. Total revenue for Q3 2016 was $98.9 million compared to $113.2 million for Q3 2015. FX translation was a negative $3.9 million underlying the revenue reduced by $10.4 million compared to Q3, 2015.

Gas cylinders underlying revenue reduced by 7.2% and Elektron by 12.3%. Slide 15 covers gas cylinders. While underlying demand in the US for our self-contained breathing apparatus market remains stable, with full FEMA funding for the US firefighters, actual sales in the quarter were impacted by a major customer slowing down its requirements while it worked through a production issue unrelated to our products. However, the same customer remains very positive on 2017.

Medical composite demand remained weak in Europe. However, we have now won new business in this market and expect improvements in 2017, also helped by new product launches.

AF and aluminum cylinder sales improved despite the difficult economic environment for these sectors. Superform tooling revenues were pushing towards record levels with new work won at several high end automotive OEMs including very significantly, as Brian covered, Ferrari. And this should lead to higher forming part sales in the second half of 2017 when they begin to manufacturer the new models.

Forming sales have been recently reduced with the transition from legacy contracts to these new customer models. For the long term, volume forecasts for the new business outweighs that of the legacy contracts now ending.

Now onto slide 16, as you will see, recently Elektron underlying revenue is currently compressed and was down 12.3% in the quarter. It remains impacted by the continued weakness in lower margin automotive recycling which year to date is down $10 million.

Automotive catalysis sales did show some year on year improvement though from a lower base level. And magnesium aerospace was pretty good in the quarter with stronger European sales.

The major impact for us was in the US magnesium business and its defense related products, with weak powder sales for US DOD countermeasures down approximately 50%, and Luxfer Magtech's product lines all down 20% to 25%, along with some general industrial softness.

Demand is being impacted by the continuing production outage of one major account's major customer which we did report on our last call. And tightness in DOD procurement spending which has led to some general destocking.

Our PE sales were compressed by the destocking in the US distributor sector as we transition major customers to direct sales accounts as Brian covered earlier, something which we certainly think will be beneficial both for us and our customers from 2017. The destocking factors will continue well into Q4 as we cover in the guidance, but should rightsize themselves through Q1 2017.

Slide 17 shows the trend in sales for Q3 2016 by geographic region. There was very little change in regional sales mix meaning North America remains the largest region for sales at 54%.

Turning to the trading profit and adjusted EBITDA results on Slide 18, trading margin was down at 7.4% but trading profit is $7.3 million, the fall being in Elektron division mainly as a result of the weaker US magnesium defense related sales.

FX did reduce profit by $1 million, so the underlying profit flow was $2.3 million. The adjusted EBITDA was similarly compressed at $12 million. FX differences being $1.3 million and trading explaining $2.2 million. Again, consistent with defense sales disruption in magnesium partly offset by gas cylinders underlying EBITDA being improved adjusted for FX.

Slide 19 covers net income and EPS. Low trading profit, we have made a charge for a doubtful debt of $1.2 million relating to the US aerospace customer that's entered into Chapter 11, though we continue to trade with the customer. The historical receivable is frozen. I thought it prudent to make an accounting impairment now whilst awaiting the outcome of its Chapter 11 legal process. We also had a charge of $0.3 million in relation to some rationalization and legal costs. This meant the operating profit was $5.8 million against $10.3 million Q3, 2015.

Net interest costs were lower at $1.2 million as we now benefit from the refinancing of our loan notes and investment income from our JVs. IFRS net income for Q3 was a net profit of $3.3 million, compared to $6.1 million for Q3 2015. Adjusted for exceptional items and excluding the IS19 pension plan cost, Q3 2016 was an underlying net profit of $5 million compared to $7.6 million for Q3 2015.

The effective tax rate on adjusted net income was 23.1% versus 21.6% for Q3 2015. Year to date the effective rate is averaging close to 25%, very similar to last year.

Adjusted diluted EPS was therefore $0.19 for Q3 2016 compared to $0.28 for Q3 2015. Slightly better than we suggested in the earnings estimate we made in early October and still providing significant cover against the dividend of $0.125 in the quarter.

The next slide, 20, is on liquidity and capital resources. Detailed slides on the balance sheet and cash flow can be found in the appendices. The key points are as follows. Return on invested capital was 12% after tax, this being consistent on the 12% achieved last year. Net debt was $105.2 million. This has increased since the start of the year position by $10.5 million but includes the funding of the share buyback and increased dividend payouts. The net debt to EBITDA ratio remains respectable at 1.8 times.

Our year to date operating cash flow after taxation for 2016 was a positive $19.8 million, net cash flow before financing was $10.3 million. Year to date for 2016 we have returned in cash $16 million to shareholders compared to $10 million year to date for 2015.

Thank you. I will now hand you back to Brian to sum up.

Thank you, Andy. Summarizing quarter three, our cylinder business continues to do much better than prior year. The Elektron division has been affected in North America by defense related orders and by some short-term market disruption. Our adjusted Q3 EPS is $0.01 above the updated guidance but $0.09 below quarter three last year.

Turning to the outlook on slide 22, we must assume that the shortage of orders for various magnesium products will continue through the balance of the year. For quarter four it is likely to be similarly impacted to quarter three and is seasonally lower than quarter three. So quarter four's profit result is likely to be lower than the Q3 figure. The combined impact leaves us looking at an adjusted EPS for the full year some 15% down on prior year.

After a decent first half, this is very disappointing. But we do believe the factors affecting demand for our magnesium products to be largely temporary and we can already see evidence of orders being placed for 2017 production. We have repeatedly secured our position as the supplier of choice of certain military materials including in the last few weeks on flameless heaters. Unfortunately, while that is a great position to be in when demand is high, it can be painful when military budgets are tight.

The weakness of sterling does hurt our reported figures by reducing the translated dollar value among US earnings. But in the medium term, a weaker sterling against the euro is potentially very beneficial to the profitability of our exports into mainland Europe. We expect the current net of this benefit to continue for the balance of 2016 because of our near term For-Ex hedges. But we expect a significant net benefit in 2017 and beyond if exchange rates stay roughly where they are.

We now have several new products and sale initiatives that are expected to make a progressively meaningful contribution during 2017.

Overall, despite seeing a recent softening of demand in North America and even if the first quarter orders for magnesium products might not be fully restored, we feel that there are sufficient positive signs to be confident of getting 2017 profitability back to the 2015 level.

By now you will have seen the announcement that I intend to retire in 2017. This is something that I have been thinking about for some time and forced to talk to the board about around the 2015 APM. There is now a process in place to identify my replacement and I am working with the nominations committee to identify my successor. You will be sure that it is my full intention that our profitability will be much improved by the time that I hand over the business.

Thank you, and we will now take questions.

(Operator Instructions). Phil Gibbs, Keybanc.

Good morning. I had a question on the high-performance alloys market. I think you had made mention that the business was up year on year and I know a lot of that goes into the helicopter markets. How is that achieved in the third quarter amid that call it end market weakness? Or are you starting to see some signs of stability in the helicopter market excluding call it this bankruptcy issue short term with Waman?

Well first of all, the comment was in relation to quarter three. I'm not quite sure where we are year to date. We were -- we reported quarter two was a little bit up and Q3 is a little bit up again. But Q1 was down, so not quite sure where the year to date is. We have actually a little bit of pickup. It's mainly coming out of European manufacturers rather than North American. We continue to see softness in the North American market. Generally speaking, the European market has been pretty flat for us for quite some time. When we're talking about softness, it's mainly North America that we're seeing rather recently.

So we do think that the demand for the aerospace alloys has stabilized and is picking up a little bit in non-US areas, but the US still had a degree of recovery. The customer that went into Chapter 11 in the third quarter does take these aerospace alloys, but their move into Chapter 11 happened quite late in the quarter, in the middle of September, so there wasn't really time for that to impact very much on sales. And indeed it may not impact in the fourth quarter. We just have to be careful how we are trading with that business and we have to anticipate that there will be some disruption. Because we've obviously taken a provision against the $1.2 million that they had ordered at the point they went into Chapter 11, and we must be very careful to ensure that we don't add to that exposure.

Okay. And my follow-up here is on the chemical decontamination piece. I think you said it was down pretty materially year on year. Can you give us a sense of the size of that business, one? And then two, why is that business being call it unusually impacted year on year? And what tends to drive that? Thanks.

Well it's difficult to be sure. I mean the Magtech business is, the biggest revenue stream is the flameless heaters. But after that, the chemical warfare detection and decontamination kits is the next biggest product line. And the situation there is that we've been told that orders are on their way. In fact we've been told that orders were less than 24 hours away. At the very last minute, the orders have been cancelled because the budget has been reallocated elsewhere. So we believe it to be budgetary tightness on the people trying to juggle the military expenditures.

We don't think that it's indicative of an underlying lack of demand, but all of these products have fairly significant stocks in the system. And they tend to use the product out of stock and then occasionally replenish the stock. So they do have the ability to, for a while, run without significant production. They also have some in-house capability to manufacturer the end products and we have been selling during the course of this year the active ingredients to their in-house facility. So we do get some of the business, but we don't necessarily get the added volume. If they had unlimited capacity to meet large volumes then we'd have to come onstream. We've been short of that degree of work in the recent past. We're not being told that there's any change in the underlying needs and indeed when you see various articles in the press about people like the ISO lab giving them chemical warfare capability, you have to think that it would be a prudent expenditure for the military to be laying out. But right at the moment, we've been struggling with lack of orders.

We do still expect those orders to come through, just delayed. And obviously we are working at the moment to see order recovery in quarter one.

Just to follow on that, Brian, so just covering a few of those questions, Phil, back to aerospace, we're probably flattish for the year, year to date now, having been improved in Q3. And then onto the question you just asked, whereas in the quarter we're down on the likes of Magtech full range, both the chemical side and the MREs, year to date we are down on the MRE side, the meals side, but on the chemical side we're more flat. So it was down in the quarter, where actually year to date it's still around where it was last year.

One of the issues here, Phil, is that we obviously manage the business to try and smooth the production. If you take the MREs, and the same applies with the decontamination products, we schedule our production to be as flat as we can in the expectation the orders will come through. So if you take the MREs, we've been producing MRE flameless heaters at a fairly flat rate through the first eight months of the year. And then when the ad-on that we've had every year for the last 15 years doesn't appear, all of a sudden we're in a situation where we've overproduced against the annualized requirements. So we're short the business for the remining months of the year.

When we reach the first of January, we are in a new year with a new contract with a new minimum and we will schedule production accordingly. And obviously we'll be a bit more circumspect in 2017 about the level of add-on that we anticipate. There has been an informal indication that there will be an add-on next year which we take to mean that the underlying usage rate is higher than the contractual minimum that they offer the meal providers. But we're obviously a bit more careful about not counting on too much of an add-on next year. And so the first quarter will be up on the last few months of this year just because of those impacts.

Jonathan Sacks, Stonehill Capital.

Thanks for taking the questions as always. I just have two small questions. The first was on your guidance. You said that you have confidence that 2017 will be a significant uplift on 2016. And just curious, when you said that, were you thinking in terms of sales, EBITDA, EPS or all of the above?

Well we're focusing on EPS. Because that's the figure that people are measuring on. So yeah, we're focusing on EPS. Obviously underlying that, the operating profit or the EBITDA will have to move to facilitate that. And revenue, just is whatever the revenue is, it's obviously (inaudible), so EPS is the answer.

Okay, great. Thank you. And then one other thing, I think in your press release or news release there was a mention that you sold $10 million of pensioner liabilities during the quarter. Can you just explain what that transaction was?

Yes, as you know, we've been trying to manage our way through our pension liabilities progressively over the years. And last year we achieved quite a big reduction in our UK liabilities with the change to the forecasting assumptions. And that actual application of inflation depended on payment. But the other way that we're always looking to reduce the liabilities is by finding an insurance company that's willing to take on the liability in return for a lump sum. And we found an opportunity in North America this year to sell $10 million worth of pension liabilities to an insurance company, actually for a very modest premium over the liability that we recognized on our balance sheet. So of the payment that we made to the insurance company, $10 million came from the assets of the pension scheme and only $100,000 or thereabouts came from the company as the premium that was required for them to take on that liability. So it was really an extraordinarily good opportunity to reduce the liability. Now that doesn't of course reduce the deficit as it happens, but it does reduce the gross liabilities, does reduce the volatility going forward.

Okay, that's great. Thanks for the explanation and it sounds like a very good transaction, so nice to see that. Thank you.

(Operator Instructions). Phil Gibbs.

Thanks so much. Andy, can you remind us how the pension works in terms of the discount rate adjustments? I think under IFRS accounting, the discount rate gets set every year, mark to market every quarter. And let's say through the balance of the year you've got a 50 basis point increase in interest rates, 40 to 50 basis points. Is that going to be a material assist to your liability calculation if that unfolds?

Okay, so you're right. So under IFRS, you recalculate the deficit every quarter and that means you use the latest discount rates per quarter. And you also apply the discount rate relevant to that country. So at the moment we have quite a difference between the rate that we're applying to the US liabilities, to the rate we are applying to the UK pension liabilities. That difference is something like 1.3%. And in fact, if you used the US discount rate on the UK liabilities, which obviously you can't at the moment, you would virtually wipe the deficit out, there's such a material difference between the bond yield rates used in the two countries.

A 40 or 50 basis point change in the UK discount rate, if it happened, could down the UK bond deals, would be a very material change in the liabilities. Off the top of my head, you've been looking at a $30 million, $40 million potential change. Depending of course on other factors. If that if happens the same time as active values go up or down, you clearly can have other factors. But discount rates moving at the level you said would have a material impact as sadly they have had in the last quarter going in the opposite direction.

Just one additional thing on that, the pension trustees have invested in some financial instruments which do reduce the volatility of interest rate movements. It only protects the scheme by about 30% of liability, so you don't get the full negative while interest rates fall, you don't get the full benefit when they go up. But certainly if you reflect on what actually hit us in quarter three, then the new rate should make a very material improvement in there.

Okay, and then a question on your $4 million net benefit. Assuming that the sterling remains in and around current levels, are you assuming in that that you pick up any volume next year from being in a more competitive cost position in the UK? Or are you just assuming that relative to whatever your current call it existing opportunities are in the marketplace, that that would be the benefit --

Our assumption really for 2017 is that we get a benefit to the margin of what we're already selling. The situation is really too volatile for us to count on the new exchange rate being perpetuated such that we would materially alter the pricing of our products. During the course of next year, if the exchange rate proves to be stable, we will progressively start to take some advantage of that or particularly on specific tenders where we can see the opportunity to grow volume using the bigger margin available to us. But the primary impact is just that our existing level of sales will enjoy a better margin on even lower profitability made outside the USD that's translated back into dollars at as less favorable rate. The overall benefit is a very positive one. Because we really don't buy very much in euros. We export a lot out of the UK in euros. And the net benefit to revenue and profitability is quite significant with the 18% or so devaluation that we have seen since the end of June.

And that's, Phil, on new business rather than going business. We are now more competitive operating out of the UK. And as you know, a number of the key drivers for growth over the next two to three years are with European customers. I mentioned one of them by name and you know that in the catalysis business that we have key customers based in Europe as well.

Over time, yes, it could well turn into volume, but in quoting these numbers out here, we're just assuming the current new business.

Then I just have one last question on some of these new products. I think you mentioned that the stent piece of the business, you actually received your first royalty stream. Probably modest, but at least somewhat encouraging that that's finally being reflected in the results in terms of the commercialization efforts. Can you give us an idea about how incremental you think it would be to 2017? And then secondarily, the Superform opportunity, the body panels for some of the higher end automobiles, the question on that is, what could be the revenue opportunity or market opportunity, and whether or not you're a sole source to those applications? Thanks.

Okay, well talking about the Superform application first of all, the forecast volumes under the new contracts are really quite exciting. And provided that they happen in the way that has been indicated, then we should see an increase in the revenues out of that business. It is something which is scheduled to impact the second half of next year, that's when the production is scheduled to start. So we won't see the benefit until then. We get benefits from some tooling and then there's a gap until the start of production. So we would expect to see an uplift in the results from our Superform business in the second half of next year. And certainly from a profitability point of view, I would expect that to add at least $1 million to the operating profit in 2017. Obviously with a higher run rate as you go into 2018.

And that's something that we've been looking to do to increase the run rate at Superform for some time. It's basically been capacity constrained, but with the work that we've done on reducing cycle times, on the investments that we're putting into aid its capacity, then we do think that that is entirely feasible. The new business which we have won is scheduled to deliver that sort of scale of improvement.

In the nature of that industry and of our business, we're not usually selling a complete set of panel work for a vehicle. We sell panels, more door assemblies in this case, for Ferrari, based on the particular design on whether it fits in a process. So if there's any particularly deep drawn aspect, then that favors us. And the Ferrari type role is very much in our sweet spot. The benefit of course is that Ferrari tend to be very, very accurate in terms of the number of cars that they sell because they have a very large order book and are very disciplined about turning their model base. So we've got a high degree of confidence that that will happen next year albeit that in the automotive sector it's always possible for things to slip by a few moths. But we're very confident that it will happen.

Sadly since I've taken so long to answer that part of the question, I've forgotten what the first part was. Oh, the stent, yes. Yeah, the statement that we got, I mean it was really a very big moment for us, but as you'll imagine, in the launch phase it's pretty small beer. But it's important from our point of view because it's the start of a revenue stream, of a royalty stream, which obviously in its nature can be in the 100% margin. And we're obviously encouraged depending on how successful Biotronik are with that product. But while we are not medics, the early indications seem extremely promising. Their results seem very good to us. And so I'd be very disappointed if that didn't come into a material revenue stream over the next couple of years. I do expect it to be a significant positive benefit in 2017.

The statement was important to us because it sets down there in black and white what the financial arrangements are between us and everything was entirely in line with what we expected. It's just nice to get that one under our belt.

So just to reiterate on that, Brian, you are anticipating that the stent business will be a nice incremental contributor to next year?

Yes, when I said that there were a number of things in the market or in the schedule for 2017, the stent was certainly in there. As indeed is the Superform increase in capacity and a couple of other medical products that we have that have had a long gestation period. So I do think that in 2017 we should start to see, in aggregate, a progressive -- [audio connection to speaker is lost].

At this time there are no further questions in queue. I will now turn the conference back to Mr. Brian Purves for closing remarks. This concludes today's conference call. You may now disconnect.