奧馳亞 (MO) 2015 Q1 法說會逐字稿

Good day, and welcome to the Altria Group 2015 first-quarter earnings conference call.

Today's call is scheduled to last about one hour, including remarks by Altria's management and a question-and-answer session.

(Operator Instructions)

I would now like to turn the call over to Ms. Sarah Knakmuhs, Vice President, Investor Relations for Altria Client Services.

Please go ahead, ma'am.

Good morning and thank you for joining us.

We're here this morning with Marty Barrington, Altria's CEO, and Billy Gifford, Altria's CFO, to discuss Altria's 2015 first-quarter business results.

During our call today, unless otherwise stated, we are comparing results to the same period in 2014.

Earlier today, we issued a press release regarding our first-quarter results.

For a detailed review of them, please review the earnings release on our website at Altria.com or via the Altria investor app.

Our remarks contain forward-looking and cautionary statements and projections of future results.

Please review the Forward-Looking and Cautionary Statements section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections.

Future dividend payments and share repurchases remain subject to the discretion of Altria's Board.

The timing of share repurchases depends on marketplace conditions and other factors.

Altria reports its financial results in accordance with US generally accepted accounting principles.

Today's call will contain various operating results on both a reported and adjusted basis, which excludes items that affect the comparability of reported results.

Descriptions of these non-GAAP financial measures and reconciliations are included in today's earnings release, which is available on our website and via the Altria investor app.

Now I will turn the call over to Marty.

Thanks, Sarah.

Good morning, everyone, and thanks for joining our call.

Altria is off to a strong start in 2015.

Our core tobacco businesses continue to deliver on their strategies, backed by the strengths of their leading premium brands.

Each of our reportable segments grew operating companies income and expanded their margins.

Altria grew its adjusted diluted EPS by 10.5%, paid approximately $1 billion in dividends, and repurchased 3.6 million shares in the first quarter.

And, earlier this morning, we reaffirmed our guidance for 2015 full-year adjusted diluted EPS growth of 7% to 9%.

Here are some important highlights from the quarter.

PM USA delivered on its smokeable segment strategy of maximizing income while maintaining modest share momentum on Marlboro over time.

The segment produced outstanding results in the first quarter, driven by higher pricing, higher volume, and Marlboro retail share growth.

PM USA has invested steadily to strengthen Marlboro, and those investments continue to pay off.

As a result, the smokeable segment grew adjusted operating companies income by over 12% in the quarter.

PM USA's reported cigarette shipment volumes grew 1.6% in the quarter, benefiting from a moderation in the industry decline rate, trade inventory movements, and retail share gains.

In the machine-made large cigar category, John Middleton continued to strengthen its leadership position in the profitable tipped-cigar segment.

The company posted strong double-digit volume growth in the quarter, driven primarily by Black & Mild.

In the smokeless products segment, USSTC grew first-quarter operating companies income by 5% and expanded its operating companies income margin by 1 percentage point to over 63%.

USSTC estimates that its adjusted smokeless segment volumes grew approximately 4% in the quarter, while smokeless industry volumes grew 2% over the past 12 months.

Copenhagen and Skoal grew their combined retail share by a 0.5 percentage point in the quarter.

Turning to innovative tobacco products, Nu Mark remains focused on building a robust portfolio of innovative tobacco products for adult smokers and vapers.

Nu Mark began shipping its next-generation e-vapor product, MarkTen XL, into lead markets this month.

In the wine segment, Ste.

Michelle posted a quarter up nearly 23% operating companies income growth, primarily through improved premium mix.

In the first quarter, equity earnings from our SABMiller investment were negatively affected by SABMiller's special items and unfavorable currency impacts from a stronger dollar.

The investment continues to support our strong balance sheet and provides cash flow through its dividends.

So, we came into 2015 with momentum, and our first-quarter results reflect another quarter of strong execution against our well-defined strategies.

We believe our businesses are positioned to help us deliver against our full year of guidance.

Billy Gifford will now discuss our business results in more detail.

Thank you, Marty.

Good morning, everyone.

Our smokeable products segment helped drive adjusted diluted EPS growth of 10.5% in the first quarter.

The smokeless products segment and fewer shares outstanding also contributed to that growth.

The smokeable products segment delivered strong adjusted operating companies income growth of 12.6%, primarily driven by higher pricing, higher shipment volume, and lower resolution expenses, due primarily to the end of the federal tobacco quota buy-out payments.

Despite costs being higher in the quarter, due primarily to higher pension and benefit costs and timing of SG&A spending, the smokeable segment expanded its adjusted OCI margins by 2.3 percentage points.

Volume was also strong.

After adjusting for trade inventory changes and other factors, PM USA estimates that its first-quarter cigarette shipment volume was essentially unchanged, and that total industry volumes declined approximately 0.5 percent.

For the quarter, PM USA grew Marlboro's retail share by 3/10 of a share point, to 44%, and grew its total cigarette category retail share by 4/10 of a share point.

L&M share gains also contributed to PM USA's first-quarter performance, as the brand continued to grow its share, while the overall industry discount category declined in the quarter.

In the total machine-made large cigars category, Black & Mild's retail share declined 6/10 of a share point in the first quarter.

As Marty mentioned, Middleton continued to concentrate on the more profitable tipped-cigar segment where Black & Mild gained share.

In the smokeless products segment, operating companies income increased 5% in the first quarter, as higher pricing was partially offset by higher promotional investments.

After adjusting for trade inventory changes and other factors, USSTC estimates that its domestic smokeless product shipment volume grew approximately 4% in the quarter, while the industry grew approximately 2% over the past 12 months.

Copenhagen and Skoal's combined retail share grew 5/10 of a share point in the quarter, to 51.2%.

Copenhagen's retail share grew 1 share point, while Skoal's retail share declined 5/10 of a share point.

The wine segment delivered very strong results in the first quarter.

Ste.

Michelle grew operating companies income by 22.7% in the first quarter, primarily driven by improved premium mix.

Shipments increased by 0.5% in the quarter.

That wraps up our operating results.

Marty and I will now take your questions.

While the calls are being compiled, let's cover a few housekeeping items.

As a reminder, comparisons, when made, are against the first quarter of 2014, unless we note otherwise.

Marlboro's price gap versus the lowest effective priced cigarette was 31% in the first quarter, down 2 percentage points.

For the first quarter, Marlboro's net pack price was $6.06, up $0.15, and the lowest effective priced cigarette was $4.62, up $0.17.

The estimated weighted-average cigarette state excise tax was $1.49 per pack for the first quarter, up $0.01.

Wholesale inventory changes are one factor PM USA uses to estimate adjusted PM USA and industry volumes.

PM USA estimates that its wholesale inventories were approximately 2.6 billion units at the end of the first quarter of 2015, and 2.4 billion units at the end of the fourth quarter of 2014.

At the end of the first quarter of 2014, PM USA's wholesale inventories were estimated to be approximately 2.5 billion units.

PM USA estimates that cigarette industry wholesale inventory levels were 5.5 billion units at the end of the first quarter of 2015 and 5.4 billion units at the end of the fourth quarter of 2014.

PM USA estimates that first quarter of 2014 wholesale inventory levels were 5.5 billion units.

Copenhagen's price gap versus the leading discount brand was 29% in the first quarter, down 3 percentage points.

Copenhagen's retail price was $4.22 in the first quarter, up $0.13.

The price of the leading discount brand was $3.26 in the first quarter, up $0.17.

CapEx was $48 million for the first quarter.

Ongoing depreciation and amortization was $49 million for the quarter.

Operator, do we have any questions?

(Operator Instructions)

Owen Bennett, Nomura.

Good morning, guys.

Hello, Owen.

A couple of questions, please.

Firstly, any commentary on Marlboro Black?

Is that still taking share?

If you could say, how much of Marlboro share growth is being driven by Black?

And then, secondly, any update on recent market share trends for MarkTen?

I notice how you no longer have a statement about being amongst the top e-vapor brands nationally like you did at year-end.

Should we read anything into that?

Thanks very much.

Sure.

Let's start with Marlboro Black.

It continues to do a terrific job.

In fact, it's grown for 17 consecutive quarters.

We don't break the shares out by SKUs, as you know, Owen, but Marlboro Black is doing a terrific job, particularly in the important segment of adult smokers 21 to 29.

I hope you had a chance to see our remarks at CAGNY about our vapor business.

Our aspiration there is to succeed in the long term.

What that means is we are moving with appropriate dispatch, but with financial discipline, always learning from the consumer.

Frankly, what we are working on principally right now, in addition to our distribution and brand building, is product development.

Consumers are telling e-vapor manufacturers that the products are not yet there.

That's why you see us improving our product development pipeline.

To be sure, share is important, but it will be important as soon as the products are established with the consumer.

So, we're not unduly focused on share -- we are focused on getting the right products in the consumer's hands.

Okay.

Thanks very much.

Thanks for calling.

Bonnie Herzog, Wells Fargo.

Good morning.

Hi, Bonnie.

Hi.

My first question is on consumption.

Given the strong industry cigarette volume and the decelerating smokeless industry volume, do you have a sense of underlying total tobacco consumption, when considering both of these categories?

And then, do you believe it's rising, and if so, why?

And then maybe touch on your outlook for the cigarette decline rates.

Is the 3% to 4% decline rate realistic going forward?

Okay.

Great.

Thanks for those questions.

Let me start with cigarette volume.

We don't forecast volume going forward, as you know.

It's been 3% to 4% over the last several years and we think that you have to look at that over time.

To be sure, this quarter is a break, but it's only a quarter, so we will have to see.

Probably, the best answer to your question about consumption is the total consumption rate over the last several years as measured by government sources, which has been declining at about, call it, 1% to 1.5% total pounds.

So that takes into account, Bonnie, all of the products that adult tobacco consumers are trying.

And, of course, it's a dynamic time.

We've seen more movement among the categories.

That's probably the best marker.

Right.

That was the basis for my question, because of how smokeless industry volume has been performing not as well, so I think there's been a lot of interplay between the two categories.

So you would agree with that?

Yes.

There is still growth there, of course.

Right, true, it's just been decelerating slightly.

And then, I did want to touch on MarkTen and to hear from you just any updates you have about recent consumer behavior for MarkTen.

And then, could you talk about the revenue for the business, given it was down quite a bit sequentially, but was up year over year -- but I'm trying to also understand how much of a drag potentially was in those numbers from your financial service business?

So, if you could help me understand that, that would be helpful.

I'll try to give you a little help (laughter).

It's in the all other category, as you know, so we don't -- going to break it out too much under that.

But we're in investment mode -- that's the best way to understand it.

And, in response to Owen's question, I pointed out that we have a lot of work underway to make sure that we have a robust portfolio of products.

Because that's what the consumer is saying to everyone, which is, I'm willing to try these products, but they are not quite there yet.

So, we are continually working to improve our offerings.

That's why we've come out with MarkTen XL -- twice the battery size, and so forth.

I think that's the way to understand it.

And we're going to be in investment mode here, but we do it in a financially disciplined way, always cognizant of our long-term financial goal of 7% to 9% growth in our EPS.

And we've been able to pull that off, and I'm confident that we will over time.

Okay, thank you.

Speaking of MarkTen XL, when do you expect that to be a nationwide expansion?

I think you mentioned you're rolling out into lead markets.

And then, how incremental do you anticipate this is going to be and how concerned are you with cannibalization for that extension?

We'll talk about national once we get in lead markets and we see how it does.

That's our innovation system, which is to put products in consumers' hands, conducting experiments about whether the offering is interesting to them, find out how we can improve it, and then we roll forward.

You saw that's how we did MarkTen.

That's what you should expect with MarkTen XL.

Okay.

Then my final last question is, your discount volume has been strong especially, L&M.

I'd like to hear what's been driving that, especially given the stronger consumer.

And, maybe here, have you touch on how you are balancing the growth of this segment with margin expansion and what your strategy is in this space.

Good questions, both.

Our focus is on the premium end of the business.

More than 90% of PM USA's cigarette shipments are premium, and that's where the action is for us.

But, of course, there is a discount segment out there; it's declining over time.

The real reason that we are growing our discount business there is because of L&M.

It's a terrific product that's priced competitively in the marketplace and it's doing great.

So it's not our principal focus, but it does help the business, albeit small.

All right.

Thank you.

Thanks for your questions, Bonnie.

Chris Growe, Stifel.

Hi.

Good morning.

Hi, Chris.

I just had a question for you.

This is several quarters in a row where the price gap between Marlboro and the lowest-priced product in the market has been down and you have been taking very strong pricing there.

So, I have two questions around that.

One would be, as you look at your promotional [setting] overall in the quarter, did you say that was up or down, and I mean for the cigarette business overall?

And then, is there any -- are you pulling back on promotions, say, on the premium side versus discount to help widen that gap?

You seem to be in a little better economic position today, and perhaps that gap could widen a bit from this level.

Thanks for your questions.

Let me go at it this way.

We had net pricing realization in the cigarette -- in the smokeless segment of more than 5%.

So you can see that, despite the fact that the price gap is narrowed, we're, as you point out, taking strong pricing, which is great.

The reason the price gap has narrowed in the quarter is because some discount brands increased their pricing faster than the premium brands did, and that's what accounts for the math, including some rounding, frankly, when you do the math in the price gaps.

So, price gaps are an important metric, as we have spoken about, and we keep an eye on them.

But, boy, to have a quarter where we can grow our volume, grow our margin, get strong pricing realization -- you can see the result of that, Chris, with nearly 13% operating company income growth.

That's a pretty good algorithm for us, price gaps narrowing or not.

Billy, you want to say a word about promotional spend?

If you think about it, Chris, you'll recall, last year, we actually had started dialing back promotional spend around Marlboro and so we are lapping that as we go through the first quarter.

Okay, great.

Thanks for your time today.

Thanks for calling in, Chris.

Judy Hong, Goldman Sachs.

Thank you.

Good morning.

Good morning, Judy.

I wanted to just go back to the cigarette consumption question.

I hear you -- this is one quarter, we really have to look at it on a longer-term basis; but I don't recall a quarter where you've had this kind of volume performance with the price growth that you're seeing across all the players.

So, I'm just wondering if you could give us a little bit more color, just in terms of the sustainability of this kind of performance within the current macro and competitive backdrop.

If there's anything in terms of the investments that a lot of the players have made, and perhaps brand equity-building initiatives are driving some of that as well, because it seems to imply that, historically, when you saw the volume performance really come through, typically, it was associated with lower pricing and certainly that's not what we're seeing today.

Yes.

Let me see if I can give you a bit more color, try to help you with it.

You're right.

It has been some time since we've seen numbers like this.

Part of it is the comp versus a year ago.

The volume was down pretty significantly in the first quarter of 2014, as you remember, but there's no denying that several factors are at play here.

The economy is improving: it is improving for our consumer set -- finally, happily -- after this very difficult time during the recession; we have the phenomenon of dropping gas prices; and it occurs for us at a time after we've made very significant investments in Marlboro -- we implement the Marlboro architecture, we launch Marlboro Black.

I would say all of those factors came together to contribute to what's a very strong quarter for PM USA.

That's our analysis for our business at least.

Okay.

And then, Billy, just thinking about the SABMiller contribution, clearly the FX and some of the headwind, from a macro perspective, is depressing SAB contribution right now.

It's a business that, obviously, you don't necessarily have a control over in terms of the operating performance.

How do you think about your 7% to 9% earnings growth algorithm, to the extent that if SABMiller the currency continues to weaken, do you have levers, either buyback or at the operating line, that you can offset the weakness, or because it's outside of your control, do you look at that as more of a transient factor?

Judy, when you think about the SABMiller asset, it's been a great asset for us.

It's performed very well.

We're talking about one quarter and you mentioned the negative drivers on that equity income year over year -- one being the special items, which were primarily related to asset impairment, and then the negative currency drag.

We don't provide down to that level for the total year.

But know, at the beginning of the year, when we provide that guidance, we incorporate a number of factors, and SAB was incorporated in that.

Okay.

So, basically, you have a view of how SABMiller would perform throughout the year and that gets baked into your guidance.

But, to the extent that SABMiller piece gets worse than your anticipation, the question is, really, do you have other levers to drive the offset?

Judy, overall, you heard us reiterate guidance today.

We feel good about that and we feel good about where the business is.

I do think, Judy -- it's Marty -- that your reference to levers is exactly correct.

That's what differentiates the Altria offering.

We have numerous levers that we can use to try to meet our long-term goal of 7% to 9%.

And if you look over the last several years, we have been able to do that, as various businesses have been up or down.

Understood.

Okay.

Thank you.

Thanks for your question.

Matthew Grainger, Morgan Stanley.

Hi, good morning.

Hi, Matt.

Two questions.

One, first, I wanted to ask you about the performance in the smokeless products segment -- specifically, the acceleration in consumption for your products during the quarter, the improvement to 4%.

Marty, I just wanted your assessment of what actions you've taken, or what factors during the quarter would have driven that acceleration?

Is that a function of, perhaps, addressing the value proposition around some of the brands and the degree of pricing that you have taken, or would you attribute some of that to tactical efforts that you've made on Skoal, or whether you are seeing any impact there?

Sure.

You've identified the two drivers.

One is Copenhagen continues to grow strongly; you see it grew 1 share point in the quarter.

And I do think the actions we are taking on Skoal are improving.

In fact, if you look at the quarterly results for Skoal, it's down a 0.5 share point, but it's the fourth consecutive quarter where it's narrowed those share losses year over year.

We gave it a new equity campaign; we have terrific equity-based promotions that are improving its relationship with its consumer set; and then, as you know, we've been working on the price gaps on Skoal Classic.

All of that is helping to steady up Skoal and that's spot-on strategy for us.

It's the combination of Copenhagen's continued growth and our work on the value equation on Skoal.

Okay.

And, I think we saw more improvement in UST volumes than we did for the category overall, but would you say there's any change in the level of interaction between smokeless and other alternatives -- or other smokeable alternatives?

Yes, I know.

It's just hard to tease that out right now.

It's been a couple of quarters.

We do know that some of the growth previously in smokeless was due to cigarette smokers coming into the category; we now know that there are vapor alternatives; we now have a recovering economy -- it's just really hard to tease out, Matt, what exactly those factors are, but we will be able to do it over time, I would expect

Okay, thanks.

And, just one question on the cigar performance, as well.

If you could help me better understand the mismatch between the volume growth and the market share trend.

I know you are focused on untipped, but with volumes up 10% and share down roughly 50 basis points, does that imply that growth is up 15%, 20% in untipped, or is that just noise in the data?

It's probably short-term noise, although untipped does continue to grow.

What we're trying to do, as you know, is to balance the share question with profitability.

And, in this segment, we always try to maximize income first.

So, Black & Mild, happily, has a very strong share position in the segment that is providing, frankly, most of the profitability.

And we think that's the better course at this time.

Okay, great.

Thank you both.

Thanks for calling in.

Vivien Azer, Cowen and Company.

Hi, good morning.

Good morning, Vivien.

Not to belabor the point, but I do also have a question on smokeless tobacco.

Marty, we've talked a lot about price elasticities in cigarettes, and, clearly, they are holding up quite well.

Can you just remind us how you guys think about or calc out price elasticities in the smokeless segment?

Yes.

We have some proprietary models for that, that allow us to try to get some sense.

They are not as highly developed as you might expect in a category that's been around as long as cigarettes.

But that's really a proprietary view of it, which I'm not prepared to talk about on the phone, candidly.

Okay, fair enough.

As we look ahead to the mix shift that is ongoing in the cigarettes segment, suffice it to say, if the consumer continues to hold up, can you point back to another time where we've seen this much trade-up or resumption in trade-up and how we should think about that trajectory continuing, all else being equal from a macro perspective?

Well, we do know that when adult tobacco consumers are feeling better about their economic situation, they want to be in premium brands.

And, in this category, the premium brand they want to be in is Marlboro.

We've seen that several times.

If you go back in history, for example, and you look at the infamous Marlboro Friday, price gaps got out of line, the consumer was not feeling good about that.

You're much too young to remember, Vivien, but people predicted that it was going be the end of brands, and so forth -- and, in fact, it wasn't.

It was that when the consumers thought that the price gap was appropriate, they came right back roaring into Marlboro.

Marlboro has that kind of equity.

And we would expect that, as consumers continue to consolidate around premium brands, that Marlboro will do just fine.

Terrific.

Thank you very much.

Thanks for calling.

Michael Lavery, CLSA.

Good morning.

Hi, Michael.

Back on Marlboro, obviously it had a strong share performance in the quarter.

Can you just highlight any of maybe what the key drivers were there and how much Rich Blue may have contributed?

It's early for Rich Blue.

It's having a nice little effect.

In a phrase, I would say Marlboro architecture, Marlboro Black, strong Marlboro equity -- those continue to be the drivers of Marlboro's growth.

Okay, that's helpful.

And then, just looking at it on a longer view, going back five, six years, it's up a little over 2 share points.

Your discount share is up slightly, as well.

But it is partly offset by about 1.5 point share loss for the other premium.

You just said, obviously, you are a premium-focused company, and clearly, Marlboro is the focus and the star, but is there anything you can do with the other premium brands that would make sense to invest there?

Or is there any way -- how do you think about those as a piece of the puzzle, and is there any way to hold or gain share in those that make sense?

Yes, that's really a terrific question.

We do have these other terrific premium brands that we offer for adult smokers.

They don't get a lot of support because, frankly, they have their franchise pretty well settled and they are very profitable, but Parliament is probably the best example.

We gave some limited support to Parliament last year and it really paid back very well.

Our focus is Marlboro.

The other premium brands produce nice profitability contribution, and if we can do some modest things for them that help them stabilize their share while producing that profitability, we're open to that.

Okay, that's helpful.

Thanks.

And then, just lastly on -- maybe a little bit just broader view, where do you see risk, either near term or long term, and what do you see as where the watch-outs are, maybe specifically for this year, in terms of what could put you at the lower end of the guidance, or just longer term in terms of strategically?

Well, there's always risks in every business, and we look at that at the beginning of the year.

In a category like this you always are watching volume, you are watching your pricing power, you are watching regulation, you are watching excise tax, and then you are watching competitive activity.

Now, those have all been well handled over time and we have good plans in place for all of them.

But if you're trying to identify factors in this industry that present risk as well as opportunity, those are probably some of them.

Okay.

Thank you very much.

Thanks for calling.

(Operator Instructions)

Bill Marshall, Barclays.

Hi.

Thank you.

Good morning.

Hi, Bill.

Building off of Judy's question from earlier, in your comments, Marty, obviously, there's a lot of top-line momentum here, and even underlying -- the consumer seems to be doing better, and you pointed out the levers you have across the P&L.

Just want to put into context your strong first quarter, into context with your full-year outlook of the 7% to 9% earnings growth.

Is there anything specific we should be looking out for?

Does spending ramp up?

Is it just a matter of a tougher 4Q comparison?

Anything specifically in there, and as you launch your new MarkTen product, anything that we should be looking out for?

No.

I don't think in particular.

Billy said it best earlier, which is, when we put the year together for our guidance, there are always puts and takes, and we look at the operating company performance, we look at SAB contribution.

You always look at excise taxes, and so forth and so on.

So the guidance that we put together, which we reaffirmed today, just reflects our view, particularly early in the year, about how we can do.

We've pointed out previously, when we gave the guidance, that we've got some pension and benefit expense, which is flowing in; we're winding up the Philip Morris Capital Corp business, so it's not contributing at the same rate it used to contribute at; and we're making disciplined investments in the innovative space.

That's probably the best way to look at that, Bill

Okay, thank you.

And then, just a quick question.

I'm just curious on your thoughts, as you see one of your competitors go through the MRTP, modified risk tobacco product, process with the FDA, just want to get your thoughts about prospects for the PM technology iQOS and if you had any idea of a timeline when you think that could be commercialized, and the process that you are looking at going through to get that into market?

That's an interesting area to ask about.

Thank you.

Listen, one of the reasons we supported FDA was because this process now allows manufacturers to bring products to the FDA to try to see if we can get them qualified as modified risk or reduced risk.

The Swedish Match hearing was the first hearing, and there was quite a lot of buzz about that, but, gee, it was just the first hearing in what's expected to be a long-term project to bring these projects to market.

So I wouldn't be over-reading that too much.

We continue to work with PMI on our own process regarding heat-not-burn.

The first milestone to watch for will be the filing of the application, and then, hopefully, the one after that will be its approval.

We continue to work in the meantime on our branding and marketing and go-to-market strategies, as we are very hopeful about that product being brought.

As you know, we'll have the exclusive on that product in the United States.

So we continue to pursue that.

Thank you.

Thanks for calling.

Thank you.

There are no further questions.

At this time, I would like to turn the call back over to Ms. Sarah Knakmuhs for any closing comments.

Thank you, everyone, for joining our call this morning.

If you have any follow-up questions, please contact us at Investor Relations.

Thank you.

This does conclude today's conference call.

You may now disconnect.