Sunopta Inc (STKL) 2007 Q1 法說會逐字稿

Good day, everyone. Welcome to the SunOpta Inc. first quarter 2007 earnings results conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jeremy Kendall, Chairman. Please go ahead, sir.

Thank you very much. Good morning, ladies and gentlemen, and welcome to the first quarter 2007 investor call for SunOpta Inc. I'm joined on this call today by Steve Bromley, the Company's President and Chief Executive Officer; John Dietrich, the Company's Vice President and Chief Financial Officer; Joe Riz, the Company's Executive Vice President; and Ben Chhiba, the Company's Vice President and General Counsel.

Before I begin, I would like to remind listeners that except for historical information, the matters discussed during this conference call may include forward-looking statements, including statements relating to our 2007 and future operating results that may involve a number of risks and uncertainties that could cause actual results to differ materially. These risk factors are detailed in the Company's filings with the Securities and Exchange Commission. Please note that our financial results are reported in U.S. dollars and in accordance with U.S. GAAP. Our 10-Q for the period ending March 31, 2007 will be filed by no later than the close of business on Thursday, May 10, 2007.

I'm pleased to report the Company has had an excellent first quarter, realizing strong top and bottom line growth and in line with both our internal expectations and those of TheStreet. Steve will provide further details in a moment. On our last earnings call, I formally introduced Steve Bromley as the Company's new CEO, and also Joe Riz, who had joined the management of the Company after 20 years on the Board as the Company's new Executive Vice President with responsibility for operations. I am really pleased to report that the transition to date has gone very, very well, and I continue in a reduced capacity working in the areas of strategic planning, business development and providing ongoing support to the management team on key initiatives.

I'm now going to turn the call over to Steve.

Thanks very much, Jeremy. Good morning and welcome to the call. We are very pleased to report record quarterly revenues of $183.4 million for the quarter ending March 31, 2007, representing a 37.6% increase over 2006 quarterly revenues of $133.3 million. These revenues represent the highest quarterly revenues in the Company's history, and the 38th consecutive quarter of record revenue growth versus the same quarter in the previous year. The Company's revenue growth in the first quarter was led by a 39.4% increase within the Company's vertically integrated natural organic food operations, and a consolidated internal growth rate of 16.1% led by a 20.2% internal growth rate within the SunOpta Food Group.

We have previously provided our revenue guidance of $740 million to $760 million for fiscal year 2007, representing an increase of between 24% and 27% over 2006, excluding any acquisitions. We will update our revenue guidance midyear as we have traditionally done, but at this time we can certainly confirm that we are very comfortable with this guidance. We continue to target a revenue exit rate of $1 billion in 2007, which is subject to achieving a 15% internal growth rate, and completing acquisitions at a similar level as in recent years. This scale will drive significant economies and we expect to be able to reach this target through continued expansion within our existing operating segment by a combination of internal growth and accretive acquisitions.

Each of our food operating segments are focused on key components of today's healthy eating trends, and the USDA's dietary guidelines, which call for increased consumption of fruits, vegetables, whole grains, fiber and plant oils, soy, corn, and sunflower.

Operating income for the quarter increased by 32.3% to $7,976,000 as compared to $6,031,000 in 2006 driven by solid increases in segment operating income within the SunOpta Grains and Foods Group, the SunOpta Canadian Food Distribution Group and Opta Minerals Inc. Gross profit increased to $34.8 million, a 47.5% increase versus the first quarter of 2006. As a percentage of revenue, gross margin increased to 19% versus 17.7% in 2006. This reflects the impact of improved product mix, operating efficiencies and ongoing cost rationalization initiatives.

We intend to improve our margins as we focus on leveraging the operating platform that we have in place by a planned margin improvement program within each of our operations. Net earnings in the quarter were $3,850,000 or $0.063 per diluted common share as compared to $3,012,000 or $0.053 per diluted common share in the prior year. Based on our first quarter results, we are pleased to reconfirm our earnings guidance for the year of $0.35 to $0.40 per diluted common share. As with our revenue guidance, we will once again review our earnings guidance at the end of the second quarter.

The SunOpta Food Group reported increased revenues of $166,262,000 as compared to $119.3 million in 2006, a 39.4% increase. Segment operating income increased to $7,935,000 versus $6,829,000 in 2006. This increase includes additional corporate cost allocations of $1,169,000 related to the cost of implementing and managing our new Oracle operating platform plus increased corporate overheads required to support the growth of the operation, in hand with [Cox] planning strategies.

Excluding these allocations, segment operating income increased 33.3%. The improved segment operating income was driven by strong growth in packaged soy milk products, a rebound in sales in margins of sunflower products, revenue gains and improved margins within the SunOpta Canadian Food Distribution Group, growth and global sourcing of fruit based products, and increased sales of dried and frozen fruit products and fruit based ingredients.

During the quarter, the Company's Kettle Valley fruit bar operations realized growth in revenues of over 200% versus 2006 of experienced transitional inefficiencies as a result of this major increase of product demand which, in the end, limited earnings growth in this group versus the prior year. A series of steps have been taken to address these issues and a major capacity and equipment upgrade is in the process with new equipment and capacity scheduled to come online starting in the third quarter. This expansion will take Kettle Valley bar production capabilities from approximately 100 million bars per year to well over 200 million bars per year.

The SunOpta Ingredients Group experienced solid growth in fiber sales during the quarter, offsetting the impact of the termination of a significant soluble fiber manufacturing contract, which occurred early in the second quarter of 2006 and which contributed over $2.5 million in revenue in the first quarter of 2006.

Opta Minerals realized revenues of $16.4 million in the first quarter, an increase of 26.2% due primarily to the acquisitions of Magnesium Technologies Corporation and Bimac Corporation during 2006. Segment operating income for the first quarter increased to $1.447 million versus $988,000 in 2006, representing an increase of 46% due primarily to strong operating margins and growth in the companies acquired. Opta Minerals continues to pursue strategic transactions and new product development to complement its existing product portfolio.

There continues to be a high interest in the SunOpta BioProcess Group's technology and equipment for the pretreatment of biomass for the production of cellulosic ethanol. Results for the first quarter reflect percentage completion of contracts related to the provision of the Group's proprietary pretreatment and fiber preparation equipment, offset by an increase in personnel and development related costs as the Group expands and positions for future growth. The Group is actively assessing additional opportunities to further leverage its technology and overall leadership position in cellulosic ethanol.

As a result of the strong interest in cellulosic ethanol and in particular the SunOpta BioProcess technology and equipment, we decided in late 2006 to convert this vision to a wholly-owned subsidiary and then raise approximately $30 million by a share placement to finance our ownership in cellulosic ethanol facilities. In January and February of 2007, we met with potential investors, and over the past couple of months, have been involved in technical and financial due diligence plus legal documentation. We are currently working with a lead investor who is in the process of completing due diligence and documentation. We are working hard to realize the value we believe exists in this business and are confident that an acceptable transaction can be consummated.

Operating results in the combined SunOpta BioProcess and Corporate Group resulted in an expense to the Company of $1.4 million in the first quarter versus expenses of $1.796 million in the prior year. The improvement in these results was due in most part to increased allocations of internal costs such as information technology, and shared information -- administrative services to the operating groups of approximately $1.2 million as previously noted. We do not disclose the operating results for the SunOpta BioProcess Group separately since it represents less than 1% of our revenues. However, given the potential for this Group, we would expect this to change in the future.

The Company's balance sheet remains strong as of March 31, 2007, with net working capital of $129.4 million and total assets of $428.3 million. Proceeds of approximately $51 million from the underwritten placement of 5,175,000 common shares in February 2007 will be leveraged to fund growth in operations, invest in internal capital projects, and continue our expansion program. Shareholders equity increased to $234.2 million at March 31, 2007, translating into a book value of approximately $3.72 per common share, up from $3.06 as at December 31, 2006.

Our long-term debt-to-equity ratio at the end of the quarter was .31 to 1, still very much within our maximum targeted operating threshold. We have applied the funds recently raised to the repayment of certain long-term debt and short-term repayment of operating lines, which will gradually increase in the future as required for further expansions and expected accretive acquisitions.

The Company's working capital increased to $129.4 million during the quarter versus $80.4 million at December 31, 2006. A number of business factors drove this increase including the rapid growth in the Company's global sourcing program, which often requires payments for raw materials in advance of shipping to North America; the rapid increase in the cost of certain grains and fruits due to market pricing conditions; changes in the ship and release policies in the fruit group, which increased inventory carrying levels; and transition working capital issues through the systems conversions late in the quarter in three of our operations.

A number of actions have been taken to reduce these factors and we expect significant improvement in this regard over the balance of the year.

I will now turn the call over to Joe Riz, who will update you on operations. Joe?

Good morning. I want to talk about each of our operating groups individually. The SunOpta Grains and Foods Group had an excellent quarter, realizing a 34.3% increase in revenues and 51% increase in segment operating income. This increase was driven by a number of factors, including strong sales of organic soy milk resulting from a number of new contracts that were finalized in 2006; strong demand for organic grains and grains-based ingredients; and the expected return to profitability of the Group's sunflower operations after an extremely tough 2006.

The Group continues to pursue a number of large soy-based ingredients and packaged products opportunities. It's currently studying options to expand extraction and filling capabilities to meet expected future demands. The Group has recently finalized an agreement with Kibun, a large food manufacturer in Japan, to jointly promote the use of SunOpta soy ingredients in the large and fast-growing Japanese market.

We have all but finalized our 2007 crop plan and have met our targets for the contracting of soy and corn. We are somewhat behind in the Kansas region for the contracting of sunflower but expect to address the shortfall by a double planting, which should be realizable due to the high ground moisture content that currently exists in this area. Given the pressures exerted on planting due to the demand for corn to ethanol, we are satisfied with our current contracting status. We are also expanding our growing areas, both domestically and internationally, to address the continued pressure being exerted on growing regions to plant crops for utilization in ethanol.

Our sunflower operations, as expected, returned to profitability during the quarter and the prospects for this business look good. In hand with the Grains and Foods Group's roasting and packaging operations, the Group has developed a sunflower-based nut replacement ingredient to be used as a low-cost yet nutritious replacement for higher priced nut-based ingredients such as walnuts. Today's orders have been received for this product totaling about $4 million, and this product is expected to start shipping in the third quarter.

Demand for organic feed is very high and the Group is now selling all the dried okara that is available from the production of soy-base into organic feed market. A number of food-based applications for okara are also being pursued. You will recall we installed a special dryer in 2005 to handle this product, thus turning the waste product that had to be land spread into a valuable revenue stream.

During the quarter, the Group completed the first grind on new crushing equipment installed at our oil processing partner in Colorado, and the equipment is functioning as planned. Demand for organic vegetable oils is strong and we expect to further invest in vegetable oil refining technology later this year.

The SunOpta Ingredients Group realized strong growth in its base business during the quarter, enabling the Group to substantially offset the loss of a soluble fiber contract manufacturing relationship that generated revenues in the first quarter of 2006 in excess of $2.5 million, and operating earnings contribution of approximately $550,000. Excluding the year over year impact of the loss of this business and the increase in the allocation of corporate costs, revenues increased 15.5% and segment operating earnings increased 6.1%.

Segment operating earnings are expected to show significant improvement in future periods, as the Group implemented increased pricing on fiber products late in the first quarter. It is in the process of addressing wastewater limitations and resulting cost issues at two of its fiber processing facilities, and continues to implement a series of other cost reduction projects across its operations.

As previously noted, the internal expansions of our three fiber facilities are now complete, adding approximately 25% to our fiber capacity. The Group is now working to meet market demand on core products by utilizing these increased capacities to provide the same type of fibers for more than one manufacturing location. In hand with continued volume growth initiatives, the Group has implemented a margin improvement program based on improved operating efficiencies, a series of cost reduction programs focused on recycling and reuse of [fee inputs] in the production process, and improved pricing. When combined with continued demand for fiber and natural and organic ingredient systems, we are expecting an excellent final three quarters for the SunOpta Ingredients Group.

The SunOpta Fruit Group realized a strong quarter with year-over-year revenues up 33.2%. Excluding the incremental allocation of corporate management fees, operating income increased 13.3%. Operating results in the quarter were driven by strong demand and growth in natural and organic individually quick frozen fruits, specialty ingredients and high antioxidant fruit products.

These strong results were partially offset by production capacity constraints of Kettle Valley and a slow start to the year within the Group's berry operations due to limited supply of certain key commodities. The Group continues to expand supply sources around the world in order to meet increasing demand, and over the past number of months has completed a number of strategic initiatives. In March, the Group entered into a five-year exclusive supply agreement with Baby's Best Infant Food ingredients, a producer of organic and natural fruit purees and concentrate located in Mendoza, Argentina.

This agreement ensures SunOpta of a growing and dependable source of organic ingredients critical to our customers' expansion of their organic food offerings. Under the terms of the agreement, SunOpta provided a line of credit to enable Baby's Best to acquire a 45,000 square foot production facility in Mendoza, thereby ensuring SunOpta's supply chain and these key items for the foreseeable future.

In addition, SunOpta received the first right of refusal and an option to acquire all of the outstanding shares of Baby's Best and related companies based on a predetermined formula exercisable for a period of time after March 2009. Also in March, the Group entered into a three year exclusive organic supply agreement with the leading processor of organic and natural frozen foods in Chile. Under the terms of the agreement, SunOpta financed the capacity expansion to further develop growth in critical organic supply over the next three years from this important supply region; and in turn, received commitments for significantly increased supply.

In late April, we further expanded our global sourcing network by entering into an exclusive supply agreement with Zhejiang Yumberry Juice Company to market organic Yumberry juice concentrate in the United States and further in Canada after one year. Yumberry is great tasting, deep red fruit that is high in antioxidants and contains a wide range of vitamins, including vitamin C, thiamine, riboflavin, and carotene. We expect Yumberry to grow in popularity much like other high antioxidant fruits such as acai and pomegranate.

Just last week, the Group further expanded its international production capabilities with the acquisition of certain assets of Baja California Congelados of Rosarito, Baja California, Mexico. BCC is the leading frozen strawberry processor in Baja California, Mexico. Under the terms of the agreement, SunOpta purchased all of the physical assets of the production facility located in Rosarito and also assumed a long-term lease for the facility located 20 miles south of San Diego, California.

As part of this agreement, SunOpta entered into five-year strawberry supply agreements with Andrew & Williamson Sales Company, the San Diego-based former parent to BCC. As a result of this transaction, we expect to add an excess of 20 million pounds of strawberries to the Company's supply chain by 2008, giving SunOpta a total annual production of approximately 100 million pounds of frozen strawberry.

The former owners will provide operational and customer service support to assist SunOpta in transitioning the facility under SunOpta management. The incremental capacity and raw materials supply is critical [to leading] the growth and demand in the natural and organic fruit market. The transaction is highly synergistic with our existing berry operations and will significantly improve our ability to serve fast-growing markets.

As demand for healthy food products continues to grow, the Fruit Group is in the process of completing a number of internal expansion projects including the installation of a second [IQF] tunnel in Salinas, California. Increasing processing capacity by 50% at this facility, expanding the Buena Park berry processing facility capacity by 25% and a number of process automation projects also in Buena Park.

The Group is also completing a topping line expansion and an automation project at Pacific Group, the Group's custom R&D fruit-based ingredients facility. The Group's Kettle Valley Healthy Fruit Snack operations realized significant growth during the quarter, but struggled with capacity constraint issues that negatively impacted margins within the Group. In short, the significant increase in demand over the past six to 10 months outpaced the Company's infrastructure and ability to operate efficiently. Demand for Healthy Fruit Snacks continues to grow significantly as consumers seek healthy snack alternatives to replace less healthy options. While the Group processed considerably higher volumes during the quarter, it suffered from a series of processing setbacks as the operation struggled to transition to these new operating levels.

We have recently commenced construction installation of equipment and a facility to join to our currents fruit bar operations in Omak, Washington, that will increase our current fruit snack capacity and address the operating issues experienced in the quarter. This expansion will also enable us to expand our natural and organic fruit product line to innovative healthy products not currently available in the market today.

Initial production is scheduled to commence early in the third quarter with full commissioning scheduled for completion in the fourth quarter. Once complete, Kettle Valley's capacity will have more than doubled the production that we had in 2006.

During the first quarter, a freeze in the California and Mexico growing regions impacted our supply of organic citrus products utilized in the provision of organic orange juice. For the most part, we were able to secure alternate supply and our cost to cost of higher price supply to our customers, thus limiting the financial impact to the Company. While strawberries were also impacted by the freeze, processing season had not yet begun and then thus suffered minimal impact. We are currently in the frozen strawberry production season and the initial volume and quality are improved from the prior year.

The SunOpta Canadian Food Distribution Group had a very strong first quarter of 2007 as revenues increased 75.6% and segment operating earnings increased 50.4%. Excluding the impact of incremental corporate cost allocations, segmented operating earnings increased 68.7%. The Group has made significant progress on the integration of strategic acquisitions that were completed during 2006.

The Quest brand of vitamins and [herbal line] of all natural Echinacea-based throat products has been fully integrated with Purity Life health products. The operation focused on natural health supplements and natural and organic health and beauty aids. As a result of these initiatives, Purity Life has recently doubled their in-house natural health product packaging operations with the addition of a second filling line at their operation in Rockwood, Ontario.

In addition, significant progress has been made in integrating the grocery operations of Aux Mille et une Saisons with existing SunOpta operations in Ontario and Quebec. In this regard, the Quebec grocery sales force has been rationalized and product line synergized to maximize distribution of key products across the country. Late in the quarter, the Company rationalized its warehouse configuration in Quebec and closed the existing organic produce warehouse in Montreal, utilizing existing facility to more efficiently serve the market. As a result of this closure, we incurred onetime closure costs of approximately $200,000 in the quarter.

The Group is making good progress with the installation of new state-of-the-art food distribution software for its grocery operations. This software will be implemented in the Western grocery operations in July 2007 and Eastern grocery operations in September 2007. This will drive significant internal efficiencies, working capital improvement and customer service enhancements; all essential, as we maintain and grow our position as the dominant natural and organic food distributor in Canada.

Construction has commenced at the Group's new 95,000 square foot Western Canada distribution facility located in Richmond, British Columbia. This facility will come online in October 2007 and will result in the integration of three warehouses in the Vancouver area plus provide room for continued growth in this important market.

Opta Minerals had a good first quarter of 2007, realizing revenues of $16.4 million versus $13 million in the first quarter of 2006, an increase of 26.2%, due primarily to the acquisitions of Magnesium Technologies Corporation and Bimac Corporation during 2006.

Segment operating income for the first quarter increased to $1.5 million versus $980,000 in 2006, representing an increase of 45% due in most part to strong operating margins in the companies acquired. During the quarter, the Company acquired the production assets of an industrial minerals processing facility in Laval, Quebec. Located in a 39,000 square foot facility under lease, these assets are ideally suited to produce abrasive media for blasting purposes, as well as garnet for abrasive water jets and water filtration applications. The plant will begin commercial production in May, and the Group expects 2007 revenues from this operation to be in the range of $1 million with continued strong internal growth in the following years.

In March, the Group announced two significant developments with respect to its magnesium desulphurization business. First, Opta Minerals received a two-year order with a global integrated steel manufacturer to supply desulphurization products. Production is expected to commence during the second quarter, and revenues from this order are expected to exceed $8.4 million over the terms of this agreement.

In addition, the Group announced an expansion of its Waterdown, Ontario facility to include the production of magnesium desulphurization products. The Company continues to expect annual revenues from this expansion of $3.9 million with strong internal growth in future years. However, commercial production originally planned to commence in the second quarter of 2007 has been delayed, and will now commence upon completion of the final upgrades and certifications to the plant.

The SunOpta BioProcess Group continues to work on supplying equipment and services to the increased cellulosic ethanol projects contracted over the past 18 months in China, Spain, and the United States. The Group has entered into negotiations with its existing Chinese customer for the provision of its patented equipment and technology for the next phase of cellulosic ethanol development in China. The Group is completing shipment of equipment to Abengoa in Spain for the first plant in the world to process wheat straw to ethanol. This plant should commence production in the last half of 2007.

And finally, the Group is currently manufacturing equipment that will be delivered to Cellunol, for the first plant to process sugarcane to gas to ethanol. The Group's joint venture with GreenField Ethanol, Canada's largest corn to ethanol producer, continues to assess the suitability of a number of sites that may be utilized for the development of the commercial scale cellulosic ethanol facility from woodchips or similar feedstock, and is seeking government support for such ventures. Independent testing of SunOpta's process by GreenField's technical personnel has confirmed excellent yields of ethanol (inaudible).

Now I thank you very much. I will now turn the call back over to Steve.

Thanks very much, Joe. During the first quarter, we continued the rollout of our Oracle operating platform and converted three more operations to this system. Over 65% of our revenue generating operations are now on the base package of financial reporting and order management. We expect to substantially complete the implementation of the base package by the end of the year. In addition, we will commence the installation of advanced modules such as customer relationship management, manufacturing research planning and all -- and others, all of which are expected to drive operational efficiencies.

Operating margin improvement continues to be a key focus across the Company. All operating groups have implemented long-term improvement programs focused on facility utilization, cost reductions, pricing improvement, and product mix focused on high-value added products. In hand with our three year $10 million profit improvement project being driven by our supply chain teams, we expect to realize margin improvement as we leverage the base we have built over the last number of years.

Under the direction of our Vice President Global Supply Chain, approximately $2 million in annual profit improvements have been identified and implemented during the first quarter of this year. We recently updated our environmental and sustainability policies across the organization and launched SunOpta Earth, our website dedicated to detailing and monitoring our sustainability and environmental commitments.

There is no question in our minds that we must continue to focus on the triple P&L -- financial, environmental, and social. Environmental responsibility is a key platform for SunOpta, and one which we believe will contribute to improved profitability and social responsibility in the long-term.

As part of our sustainability message, we recently ran a program with local school boards in our corporate office in Norval, Ontario, sponsoring the screening of Al Gore's academy award-winning An Inconvenient Truth to high school students, supported by guest speakers onsite to discuss the relevance of the message, and steps each person can take to make a difference. In hand with this, we have provided over 60 copies of the film to local schools, and funded the development of teaching kids to assist teachers in educating students on sustainable principles and practices.

In March of this year, we added a seasoned Vice President of Human Resources and Organizational Development to the corporate team. Frank Syer comes to SunOpta with extensive experience in entrepreneurial food and beverage companies, and will play a key role in organizational development, talent management, and policy standardization as the Organization continues to evolve as a world-class leader.

In closing, fiscal 2007 is off to an excellent start. We are pleased to reconfirm both our revenue guidance of $740 million to $760 million, and earnings guidance of $0.35 to $0.40 per diluted common share. All of our business units are well-positioned in fast-growing markets and we remain focused on improving operating margins and, in turn, earnings, all in support of driving exceptional shareholder value.

With that, we'd like to open the call for questions.

(OPERATOR INSTRUCTIONS). Bob Gibson, Octagon Capital.

Could I just get a little more color on this corporate cost allocation? I'm specifically looking how much may or may not be one-time and how you might have allocated them among the four food groups?

Sure. So, Bob, these are corporate costs. You'll note that the combined corporate BioProcess Group shows a reduction in expense year-over-year. I don't mind telling you that our corporate costs have increased, given the size of the Company. What we did do, though, to really reflect a number of issues, including tax planning strategies, was to allocate those corporate stock costs to each one of the operating groups.

So, in total, we allocated [$1,169,000] to the food group. Essentially, it would be approximately -- did I say million? $1,169,000, yes -- was allocated. About $400,000 to the Grains and Foods Group; about $200,000 to ingredients; about $240,000 to fruit; and about $335,000 to distribution. And that's ongoing and that will continue throughout the year.

Bob, they were allocated based on revenues and headcounts.

It's an ongoing program as opposed to a one-time.

A one-time. Yes. I just wasn't sure about this Oracle platform if that might sort of end at the end of the year when everything was in place.

Probably not. There are some sort of one-time development costs that are in there, but you probably would not change the allocation to the Group.

Great. And you've done a great job of letting us know what's going on as far as plant and equipment. Can you just give us an idea of what you think your CapEx budget will be for this year?

Sure. We spent about $5 million, a little over $5 million in the first quarter. We've got a couple of large projects going on with the key project being the expansion of our Kettle Valley fruit bar operations and completion of some fiber projects. Depending on how projects line out, it could be in the $25 million to $30 million range.

That's it for me. Thank you.

[Aaron Penson, Rubin Enterprises].

Congratulations, guys, on a good quarter. First off, Joe, I just wanted to make sure I got that right. As far as the strawberry freeze in January, was there an impact whatsoever on earnings per share that was calculated through that?

There was a very minor impact to earnings, but essentially not material to talk about.

Then, in regards to the financing. You guys did a secondary offering on January 31. I went through the statement of cash flows and I realize that you did receive about $52 million or so net from the offering, but according to the statement when you issued it, you said that you were going to repay -- or the proceeds from that was going to be to repay the debt. And I saw that only about $15 million of net debt was repaid over the last quarter or so. Is that something which you're planning on extending going forward or is there a reason why there wasn't some more debt repurchased in the quarter?

That's a great question. I'm going to let John Dietrich, our CFO, answer that.

Yes, we did actually repay debt in the quarter and the [banking debt] went down about $10 million and the long-term debt about $3 million. Traditionally, the first quarter is our highest working capital usage quarter, so we did use more working capital in Q1; not unexpected on our part. Accounts Receivable has increased about $14 million, but our days sales outstanding is at 39 days; that's a couple days better than the average last year. And we think with Oracle and being able to consolidate our back office, we can drive that down to 37 days in the future.

Inventory, which generally stays flat or comes down in Q1 as the strawberry hits the low season before it goes up again in Q2, had some offsets; the grains and other commodities having increased in prices, soy is up, corn is up. So that's added about $6 million to our inventory as well as we have changed our quality (inaudible) in the fruit group, adding another [$3 million]. And then there's about [$3 million] for general internal growth within ingredients and within the distribution groups.

And within Accounts Payable, we have mandated [and are] taking very aggressive on taking all supplier discounts. That's probably added about $2 million. And then we have increased the internal sourcing that we do around the world as we bring in more product internationally. And that's added about $5 million because we need to pay for those essentially as a product to put on the [boat] so we don't get the Accounts Payable offset on that. So that [in gross] total is about $33 million.

So as we go through the rest of the year, we will see in Q2 that strawberries will increase on the working capital but all the other areas can come down. And by Q3, Q4, you will see a substantial amount of that working cost capital come back down (inaudible). That answer your question?

I'm sorry, go ahead?

I was just asking if that had answered the question for you.

Yes, that did. I was just looking for maybe a figure about how much would be repaid from the total that's left or if you could give some color in regards to which debt is going to be repaid as well.

We would expect to see short-term operating lines as we turn this working capital will come down. So long-term debt will stay pretty much where it is.

A lot of our long-term debt is [set].

But the operating line --

We just float them up and down.

Yes, they'll float down.

In regards to the BioProcess, I know last quarter, you were giving timetables, first off in regard to the time that you expected it to be completed. And I do understand in regard to due diligence and there's a lot of technical issues that have to be completed by not only the lead investor, but I'm sure the other investors. But I guess from maybe a shareholder perspective as well, there has to be a little bit more color given by you guys, either a press release or some real information about where you guys are standing in regards to the private placement. I mean not only timing, but size. It's going on for -- what is it, maybe five, six months already and we -- we're trying to get a real figure because the valuation of the ethanol business compared to the other businesses that you guys are dealing with are two total different valuations. And it will really be a lot easier for us to value you guys as a total company if we get a better picture about not only on a timetable, but obviously in regards to valuation of what that BioProcess division is really worth. So I mean, yes, I know you said that you should be finishing sometime soon, but as far as timing first off, you guys have a better handle about when it should be completed?

Well, first of all, we totally understand the issues that you're raising and as you well know, it's our policy only to announce projects, contracts, acquisitions, when they have been completed and done. And so this certainly applies in this particular case. We have been extensively involved in the due diligence with our lead investor and the completion of all of the documentation. That process is nearing completion now. At that point, we then are now going back to the field to collect up hopefully other commitments from other people, but securing the lead investor is a critical part of the process.

So we're satisfied with this process. We think that the timing is imminent, and we are very satisfied with the valuation. I wish I could be more specific, but I can assure you that you're going to hear from us pretty soon.

Okay, so as far as the range, you want to narrow the range you gave maybe last quarter? I know the last time you said it was between maybe 8%, as high as 20%. If you have a better color on that, could you maybe narrow that range for us?

I don't think I will. But I can assure you that's within that range. And so (multiple speakers) --

And in regards to -- I mean you said in the end of the first quarter you'd probably be able to at least give an announcement of who the lead investor is or something like that. Obviously that hasn't happened yet, so you are expecting that sometime the next week or a couple of weeks is what I'm understanding?

We hope so, yes. That's certainly our expectation but it's not completely, obviously, within our control. So yes, that's what we're looking for.

And lastly in regards to I guess long-term margins, both in profitability and operating margins, without getting to exact figures, obviously in the last several years we've seen the Company grow from a couple hundred million dollars in the topline to almost $600 million last year; but earnings weren't improved and I know you guys touched on it a little bit during your prepared remarks. But I guess to rephrase the question, when and how are really the profit margins going to be improving in regards to the same -- the revenues have tripled in the last couple of years but profits have already gone up.

Sure. As I'd indicated, we're seeing the gross margin leverage start, which we anticipated. The SG&A and warehouse costs are starting to be leveraged. We have margin improvement programs in each one of our business units, which are driven by a number of factors from facility utilization through pricing through leveraging our SG&A. We believe that you will see our operating margin increase substantially over the balance of this year, and continue forward into the future. So I guess the answer to the question is you're going to start to see that now and forward.

That's fair enough. Well, again, guys, congratulations on a good quarter and I wish you much success going forward.

Private investor [John Adam].

Since the government of the UK, a mega company VP and DuPont, [Billionaires, Costla and Branson] along with [XEIA head Woolsy] are all promoting the development of biobutanol, wouldn't it make sense for the BioProcess Group to be more vocal in their support for the development of cellulosic biobutanol for blending with ethanol gasoline and diesel fuels?

I'll talk to you a little bit about the issues with butanol and you may well know some of these, but the issue, primary issue with butanol lies with the bacterium, which is known as clostridium, and clostridium becomes inhibited at about 1.8 to 2% of butanol in the fermentation broth. For comparison purposes, starch get inhibited at 15 to 20%. So the significant of this is that it significantly increases the distillation energy, and distillation energy is the single biggest energy consumer in the process of producing either ethanol or butanol.

In the traditional ABE process, which is the acetyl and butanol ethanol process, only 20% gets converted to butanol, with the remainder becoming carbon dioxide acetone and ethanol; while starch is 51%. Also, the existing butanol process only converts to C6 or glucose sugars, not the C5 [resiloce] sugars. The [resiloce] represents a significant part of the substrate. In order to make this process economic, serious genetic engineering is going to be required and, indeed, as you have stated, DuPont and BP are working on that now.

Our view is that that's going to take until 2010 to 2015 to become economic. So the significant (inaudible), the [synoptis] process and equipment in ethanol plants can be easily converted to butanol once this technology is available. I could go through the pluses and minuses of ethanol and butanol versus gas, and there are many other issues around the fact that there's no -- there are currently no pumps that would -- that are available to supply butanol, et cetera. So there's a whole market system that also needs to get set up. But certainly there are significant advantages to butanol and we think butanol is going to be an important fuel in the future.

It was my understanding that that was -- the fact that you didn't have to convert vehicles or the fueling infrastructure was one of the big pluses to developing the butanol.

You're quite right. If you don't count the conversion to existing engines for butanol, but on the other hand, there is no currently automotive warranty that stands up if you're using butanol. So there's that whole process that also has to go ahead, nor is there any distribution system for butanol; whereas ethanol obviously has a system and already is being added into existing fuel.

So we think it's going to come and our process is perfectly adapted and can handle both the ethanol and butanol. So if that becomes the future fuel, it still will require our process for pretreatment.

[Steve Kreuger, Foresight Investing].

I wonder if you could give us a little bit more color on the Chinese ethanol operation. Last time you mentioned that the plant there was running 24/7.

That's right. This is a small plant that we supplied and it's been running around the clock producing ethanol. And now, the company or the customer there, it's a very, very large company, are working with the Chinese government to secure their funding, grants, and so forth I guess, for the next round. This is all part of a program that we've laid out over five years and the next stage, assuming this goes ahead will require two of our larger, much larger units than the small one which we provided.

What's the capacity of the one that's operating now?

It's quite small.

350,000.

350,000 gallons a year. The new one would take us up to 2.5 million -- excuse me, 3.5 million gallons. So we are in discussions right now with the customer on that next phase.

Now I understand that in terms of assessing the ultimate commercial feasibility, the 10 million gallons a year is sort of considered the benchmark for commercial viability. So you're talking about the next phase in China encompassing 2 units at 3.5 million gallons per year each, which still only gives you a 7 million gallon a year capacity. At what point do you see bringing up a plant that has -- that crosses that magic 10 million gallon a year (inaudible)?

In the case of Chinese, it would be in the third year. They have like a five year program that's laid out exactly how many units they're going to need each year that lead them up towards their total estimated capacity. So that is on schedule. In the meantime, of course, we're working in partnership with GreenField in North America to identify now a site for our first 10 million gallon facility.

So the GreenField project would contemplate an initial phase at 10 million plus gallons a year?

That's what we want to go to. Exactly. And of course, we're looking for government participation in that. And as Steve has said in his presentation, GreenField has been doing independent testing of our process using the substrate or the process materials, the steam exploded material, and are getting excellent results. We are really pleased with it. They are confirming what we have in a summary statement. I could put it this way. Their Chief Technical person called a week or so ago and said okay, you guys have got it.

Jeremy, are you able to translate that even rough estimate as to what kind of cost to production, total cost to production you might be able to achieve?

I think I'll make a general statement at this point in time that particularly with Cogen, which means that we're recovering the [lignants] and burning that to produce the electricity or the energy for the plant. We think that the capital cost per installed gallon of capacity will be slightly higher than corn to ethanol, but the operating cost is going to be significantly lower. And, of course, it's very, very much a function of the volume that you're talking about, the size of the plant itself.

But your thinking at this point contemplates being able to produce cellulosic ethanol in the GreenField project at a cost that would allow you to sell competitively with ethanol, corn-based ethanol?

Without question. And as you know, there are more and more governments and states and provinces that are mandating a percentage of ethanol and that's certainly true here in Canada as well as in the U.S. As we anticipated last year, the fuel, the food to fuel issue is becoming a major issue now in North America around the use of corn into ethanol. And so I think what we're seeing is significant continuing strong interest in cellulosic ethanol; lots of people working on this area. We probably have a list of -- God knows how many projects. There's people all over the world that are approaching us and we're just trying to be selective in dealing with these people. But I will say the interest remains very, very strong.

Keith Howlett, Desjardins Securities.

I just had a couple of questions on the food business. In terms of the private label component of your food business, can you just update us on the progress there?

Well, Keith, we indicated that we've had really solid growth on the soy milk side of our business. That's both aseptic soy milk and refrigerated soy milk. At the end of last year we started production on a very -- the largest private label refrigerated soy milk contract that we've had. That's gone well in the first quarter and we continue to see that business growing. So that's been very positive.

On the fruit bar side of our business, as we mentioned earlier, we can sell every fruit bar we can make times a lot. So that's been growing really nicely. On the fruit side of our business, on the frozen fruit side, demand is very strong on the labels that we're producing. We're continuing to drill our offshore global sourcing capabilities in order to meet the demands that we see in front of us.

On the grain-based snacks, we've been doing quite well and that business is growing. There's a lot of demand for roasted grain type products for both packaged product and as an ingredient in the finish packaged product. Our juice side has been going quite well. We're launching a number of new, innovative water-based products for some major retailers in the United States that we're using vitamin enrichment and sort of fruit-based enrichment and that's all going well. So we're really pleased.

I'd say that it's still -- as the Company grows, it's probably still in the 30% to 32% range of our total food revenues. So it's going well. The demand is there and there seems to be, from our opinion, there's not a slowing of the demand for private label products at the retail level.

And then just one last question on the sunflower business. Is that at this point in the year, pretty much look like it's returning to 2005 levels or where does that business look like it will come out?

Well, Keith, you know, last year we'd indicated that we lost about $3.9 million in the business. It was a horrible year and that this business would return to profitability. We are on schedule there and moving ahead quite nicely. Joe did mention that they've developed a new value added ingredient that will also help the business in hand with our -- its sister company that does the roasting and the packaging. So that's all positive. We won't be back entirely to 2005 levels, but we'll certainly be a long way there and we expect that in 2008 we will be back and above the 2005 levels.

It will be profitable business.

Yes, it will be profitable this year, that's for sure. Thanks, Joe.

Great. Thanks very much.

William Dittl, Gato Group.

The first question that we have regarding distribution group, are you guys able to expect offsetting some of those fuel costs in light of the fluctuating prices that we've been kind of seeing over the last few months?

Sure. What we do is we update our catalogs and pricing on a quarterly basis. Those types of factors are all accounted for on a quarterly basis. And on produce, that's on the grocery side. And on the produce side, you can literally -- those products price weekly, daily. So you can do that. It hasn't been a big issue for us.

We have also have some fuel surcharge supplied and William, one of the other factors on the distribution side is the fact that the U.S. dollar has fallen significantly. And so you can tend to pick up on margins as a result of that as well.

Next question, regarding the fiber contract with Tate and Lyle, can you guys explain that a little bit?

The fiber contract that went away?

Yes. And that's --

It wasn't with Tate and Lyle. It was with another company. Essentially what happened was this was a product that we had been contract manufacturing. So in other words, we weren't -- it wasn't our product, but we were producing this product for another food manufacturer who had an end customer.

And in late 2005, we were actually working on expanding our capabilities in that area because this customer felt that their business was going to continue to grow. In early 2006, our customer lost their customer. So what happened was their demand fell way off and they were able to maintain their volume using their own facility. So we as a contract manufacturer were left out in the cold, which, you know, at the end of the day is one of our strategies to move away from contract manufacturing relationships into our own value added products.

So it was a nice profitable piece of business we had. It's not like we -- you know, we managed our customer, but unfortunately, our customer's customer was in (inaudible) and lost the business.

And that does bring me to my next question. Do you guys see an expanding role in sourcing distribution and sales growth within Austra-Asia? I mean you've got all of New Zealand, Australia. We're seeing this global growth for organics and natural foods. Do you guys see a significant area for expansion in that region?

Absolutely. Interestingly enough, Australia has the largest acreage of organic growing in the world followed by China, but you have to be careful with the certification there, and then by North America. So we have been expanding our global presence, obviously. You're aware of the transactions that we did over the past couple of months in South America. We have people on the ground in those areas. We have people on the ground in Europe today. And one of our next strategic moves is to put people on the ground and establish an office in Austra-Asia.

So we agree and you're absolutely right. We do bring products from those areas today, but we think that there's a substantial more -- substantial higher amount of business that we can do from that area.

And then the last question I have, in recent publications, SunOpta BioProcess mentioned equipment contract with Royal Nedalco for 2007. Are you guys still on line for delivery of one of the patented units? Can you give us any updates on the joint development agreement with Royal Nedalco?

I don't know that I can talk a lot about what their plans are, other than to say that they're continuing on the development of their very large project at Royal Nedalco. And that we're going to be a part of that project once it gets initiated. But I think they, as everywhere in the world, they're working with their local government to secure funding for that project and that. But we're very much a part of that. We're very much in communication with them on a regular basis. And I don't -- there's really no change there at all.

Great. Thanks a lot, gentlemen.

[Ron Rubin, Rubin Enterprise].

Good quarter. Just have a few questions. Most of them were actually already answered. In regards to the deal you had with China Resource and Alcohol last year, the last time you actually had a conference, you mentioned something about their long-term objective is to get to about 330 million gallons per year, which would obviously require about $500 million worth of equipment from you guys. Is this a long-term contract that you're planning on signing with them or is it going to be on a case-by-case basis, meaning on a year-to-year basis type of a deal?

I think that we'll be signing annual contracts. We know, though, and they provided us with the exact details of how many units that they would need in order to reach that 330 million gallons. And the two units that we're talking about supplying with them now is right in line with that forecast.

And are you expecting to get those two units signed as far as the contract is concerned within this quarter or sometime within -- by the end of the year?

Yes, I would expect it would be in this quarter. We hope, anyway. Our guys will be going over there shortly on (multiple speakers) --

Any color that you could give us --

(multiple speakers) -- their confirmation of their funding from the government. They are a big company, a huge company in its own right, but nevertheless they're wanting to access the part of that $5 million -- $5 billion of funding that was committed by the Chinese government.

Now any idea as far as -- or any color that you could actually give us in regards to what kind of revenues that would bring into the BioProcess Group those two specific plans?

I think that's a confidentiality issue at the moment with them and so I wouldn't want to comment on that yet. But we'll let you know as soon as it occurs.

In regards to BioProcess Group, you've had several different contracts -- about a handful of contracts with different companies plus you've mentioned you had numerous other companies that are interested in working with you guys. Any particular reason why you are being more selective with ones over others?

Well, it's just a matter of resources, and we've had a -- this has been a pretty small group historically. We have added and are continuing to add significantly to our personnel. We've just recently added two Ph.D.'s on the technical side. We're in the process of preparing 12 new patent applications. A couple of those are ready to go. So with that, of course, also goes all kinds of documentation and testing and confirmation for the patent -- patented work. We are, of course, in the process of continuing to build and supply the equipment.

So it's a matter of do you work on a project in Georgia or do you work on a project in India? And the answer is you'd probably work on the Georgia one first because it's accessible and easy and much, much more closer. So it's that -- those -- that sort of reasoning. It's simply resources. Once we've completed our financing, we will staff up a little further and we'll be -- particularly, we're going to be focused on that first 10 million gallons plant.

And I guess in regards to the private placement, I know that my colleague asked you a few questions about it earlier. I know that you mentioned in the past that it's going to -- originally was a $30 million deal you were contemplating since there was so much demand, possibly increasing the deal to a -- maybe a $60 million deal. Has that changed or is that still the same? And you're looking for $60 million at this point?

Never talked 60. I think, but we did say that if we were oversubscribing, we might take over 30, possibly up as high as 50 I think is what we've said. At this point in time, we only want or need to get 30 and if we are oversubscribed, then we probably will take some more. But at this point in time, as we said right at the beginning, we needed and wanted to raise $30 million.

And I guess my last question is in regards to your projection of $1 billion worth of revenue run rate by the end of the year, obviously you're projecting about 3/4 of $1 billion. Are you expecting most of that additional $250 million to come from a large acquisition or similar to what you've done in the past, a range of smaller acquisitions?

There will be both. If you take the $750 million and you add 15% internal growth and then acquisitions, you're looking at between $125 million and $150 million in acquisitions. I would expect that you'll see a number -- not a large number, but you'll see a number. Some will be smaller and there will probably be a decent size one in there as well, similar to what we've done in prior years.

Thank you very much and we're looking forward to hearing some more from you guys.

Ed Aaron, RBC Capital Markets.

Great quarter, guys. It's actually Ed Einboden for Ed Aaron.

I was going to say, Ed's returned.

No, I think he's still on the beach. I just wanted to follow up with you. I know that our expectations for the mineral business is a little bit higher than what occurred. Is there something that just occurred in the first quarter? Kind of will be recouped in the back half of the year or are we just modeling a little bit high there?

Essentially there was a little bit of a slowdown in the first quarter in the Group's foundry and fuel business, which is cyclical and seasonal and happens and we don't see it as a long-term problem here at all. But the growth was a little bit slower. You will note that our internal growth rate overall for the Company was 16% and the Food Group was over 20. So it gives you an indication that their growth wasn't as high. But we've previously announced a number of desulphurization -- new desulphurization contracts and we spoke about those in the release. So those certainly will help. And then we're bringing on new equipment in Laval that we purchased out of bankruptcy, and we've set up an operation in the Montreal area to do abrasive and garnets. And that's all good internal growth.

So we expect the growth rate to accelerate as the year goes on, but it was a weaker first quarter than we might have anticipated, but it's not like we've lost customers. We've just -- some of the customers aren't quite as busy in the first quarter.

Great.

Well, let me just put it quickly into perspective that Opta Minerals earned $0.12 in 2005. They earned $0.24 per share in 2006. They earned $0.03 in the first quarter of 2006 and $0.05 in the first quarter of -- sorry, of 2006 and $0.05 in the first quarter of 2007. So, a nice increase in EPS on an annual basis and also on the first quarter. So doing nicely. They didn't expect to be on budget for the year. Ed, those numbers are all for Opta Minerals as a stand-alone public company.

And in Canadian dollars.

Sure. I just want to make we were modeling correctly.

Things are going really well in the Minerals Group, in Opta Minerals.

I think the tax rate was a little bit lower than expected. Should we model a little bit less than that? 32, 34?

(multiple speakers) [we're at] 31 and we had thought we would be around 32. So I think in the 31 to 32 range is a good spot to model.

(inaudible) the Canadian dollar a little bit into that, Ed. As long as the dollars stays where it is (inaudible).

And then lastly, the ingredients business, it looks like there was a little bit of operating margin pressure there. Is that just sort of an event that occurred in the first quarter or is it something to look forward for the rest of the year?

No, you shouldn't look forward to that for the rest of the year. As we indicated, the Group have taken -- implemented a number of pricing programs and they have a number of margin improvement and cost rationalization initiatives that are ongoing. In the quarter, as we ramp up volumes and completed a number of the plant expansions, we did have some wastewater and waste treatment issues that increased our costs in the quarter. But they have been addressed or are in the process of being addressed, and you will see sequential margin improvement in the Group.

Okay, great. Great quarter, guys.

[Mitchell Hessenbain], Oppenheimer.

Just want to congratulate you on just moving the bottom-line a little bit, even though the needle was moving in the right direction and it's very good to see. So I wanted to say great job there. Also, I guess with the new software platform and I know you guys mentioned with a number of acquisitions starting to consolidate factories and computer systems, what have you, could we expect to see more of this towards maybe the third and fourth quarter really coming to fruition? I know we have a lot of good news ahead of us and the other things that we spoke about on the call, but in regards to just cost-cutting, which I think Steve has been very adamant about, should we expect to see more of this?

Yes, first you have to get the platform in place and then you can leverage it. And so we're -- matter of fact, when you're putting the platform in place, it only costs you money. So we're in that stage and we have been in that stage and we need to carry on. As I indicated, over 65% of our applicable revenue is now on to the new system. Once you get the new system in place, then you can leverage customer relationship management and MRP and all of those sort of applications, which then you start to drive some value out of the business rather than -- right now it's a financial management system and order management system. You take it to the next level and that's when you'll see some efficiencies come out. So it's going to be in the back half of the year when you can start to see those types of efficiencies. You'll really start to see it much more next year.

And then in regards to like the factories, the number of -- I think you reduced some of the count based on the acquisitions. Should that help run the bottom line a little better?

Yes, as we move forward, we can consolidate and rationalize. You've heard us talk about consolidating one of our warehouse this quarter. We'll continue to do that. We have our supply chain groups that are working on not only rationalizing our facilities and our distribution mechanisms, but working with our suppliers to get better pricing and leveraging what we have in place. So that's an ongoing daily focus around here.

Well, great job and looking forward to hearing you guys soon.

Renee Reynolds, Gilder, Gagnon, Howe.

I missed it during the comment. Can you kind of walk through what you're expecting to save this year from your cost-saving initiatives in aggregate?

In aggregate? Let me tell you what we did in the first quarter. We have a $10 million target and in the first quarter we realized and put in programs through our supply chain initiatives of about $2 million. And the $10 million target is over three years. We realized $2 million in the first quarter, so that will -- we'll pick that up over the balance of the year, but the programs are in place. On top of just what our supply chain is doing, we have margin improvement and cost rationalization efforts ongoing in each one of our groups. Keeping in mind that we want to move our operating margins to 8% by the end of 2008. So in the last day of 2008, we want to be at 8.

So there's a lot of pricing and facility rationalization and realization and SG&A leverage, et cetera that needs to happen over that period of time. We're really focused on doing that, but we did make good progress in the first quarter.

Wait, so you did $2 million in Q1 and you're expecting $10 million over the course of --

Of three years.

Three years.

$2 million annualized.

So that's $2 million annualized that we've already realized over the course of this year.

Got it. Okay, great. Thank you.

[Peter Bosch], Canaccord Adams.

Great quarter. Just one quick question. Last quarter, you talked about rolling out the fruit smoothie at a Quick Service operator. I was wondering if you can just maybe update us on how the rollout is progressing. Is it going as planned? What regions is it in and how many restaurants, perhaps?

They are continuing to move forward, but they are running into some headwinds with equipment availability. Because they have to redo a lot of their stores and our take at this stage of the game is that that rollout will slow down, just based on equipment. We're still working with them, but it's not going to happen as fast they would like or we would like, but we can't dispense this stuff without the equipment, and you need to build 13,000 pieces of this equipment. Sometimes people think that that can happen overnight. Well, the manufacture indicated that it can't quite happen overnight. So it's slowing down but we're still very positive that it will be a great future project for us.

And they are committed to the program.

[Ron Rubin, Rubin Enterprise].

Just a quick follow-up. Approximately how long does it take to or are you estimating for it to take to build a 10 million gallon plant?

How long would it take? From when you decide that you're going to move forward, 12 to 18 months.

And what about the smaller ones, like the 3.5 million gallon ones?

Six to 10 months. Maybe 10 to 12. Sorry, my functional expert said 10 to 12.

10 to 12. And then on the other one, up to 18 months?

Yes. That's just him being slow. Thanks.

(OPERATOR INSTRUCTIONS).

Well, that's great. Thank you very much and we appreciate everyone's interest. And as always, please feel free to call if you wish to discuss anything further. Have a great day.

That does conclude today's presentation. Thank you all for your participation. Have a great day.