ARYZTA AG (ARYN) Earnings Call Transcript & Summary

Welcome to the ARYZTA AG's H1 2020 Results Call, hosted by Kevin Toland, CEO; and Frédéric Pflanz, CFO. [Operator Instructions] I'll now hand you over to Gerard Wichers, Head of Investor Relations.

Good morning, ladies and gentlemen. Thank you for taking the time to join our call this morning. I'll just now briefly draw your attention to the safe harbor statement on Slide 2, which applies to today's announcement and discussion. I will also like to draw your attention to Slide 3 regarding the impact of the adoption of IFRS 16 leases. Comparatives have not been restated in accordance with transitional guidelines. To enable analysis versus prior year, the H1 20 percentage growth is presented before and after the effects of IFRS 16 in this presentation. Present on the call are Kevin Toland and Frédéric Pflanz, CEO and CFO, for ARYZTA, respectively. Before taking your questions, they will provide a summary overview of our first half 2020 performance. I will now turn it over to Kevin.

Thank you, Gerard. Good morning, everybody. Thank you for joining our call. Before I start, maybe just to give a very brief overview of half one. We are focused on implementing our transformation plan. Clearly, we have challenges in North America, and we'll get into those in little bit of detail. We've made very good progress on our other 5 key priorities, which are achieving transformation where 85% of our disposal target of $450 million has been delivered, particularly with the Picard sale closing and the cash coming in, in the first half, which enables us both to delever and focus on our B2B bakery strategy. Secondly, we're on track in Europe. Thirdly, we're on track, Rest of World. Fourthly, we're making good progress and on track on Renew with EUR 31 million of savings in the first half. And fifthly and very importantly, we've a much stronger balance sheet with our net debt to EBITDA now below 2 at 1.96 at the end of half 1, with good tenure to maturity and with reduced interest costs. We're also reaffirming our guidance for the full year. And clearly, COVID-19 is a factor that we'll talk about later, and we're assuming no material nor prolonged impact there at this point, but that's evolving. Turning to Slide 4. You can see the strategic and financial progress we've delivered. The portfolio has been refocused, and we're now primarily frozen B2B bakery. We've disposed the vast majority of our noncore or loss-making assets together with the recently completed disposal of 44% -- 43.5% (sic) [ 43.1% ] of the Picard stake and the U.K. foodservice business in half 1. Therefore, we've achieved in excess of 85% of our disposal target with the proceeds in excess of EUR 385 million applied to debt reduction. The consolidation of our manufacturing capacity is ongoing, and the real margin benefits will follow. We've also significantly improved our capital structure. The net debt level, as I said, have been further reduced following the Picard disposal, with operating free cash flow of EUR 55.7 million, substantial leverage covenant headroom, no near-term maturity and a reduction in our senior net leverage to 1.96x net debt to EBITDA. Excluding the effects of the IFRS restatement, which is a noncash item, group net debt would be EUR 567 million at the end of January 2020. Project Renew is delivering and gathering momentum. It's delivered EUR 31.4 million in savings in H1. And we reduced the risk of cost base by more than EUR 200 million cumulatively over the 3 years. Due to the current North American profitability challenges, the financial benefits have been diluted in the first half. This will normalize as we complete the North America turnaround and performance improvement. We also have an EUR 898 million noncash impairment, EUR 461 million of which relates to our disposals program and EUR 437 million related to North America, arising from our performance and the lowering of our near- to midterm margin expectations. Moving to Slide 5 for an overview of our operational progress. Here, you can see that 2 of our 3 regions are making good operational progress, while North America EBITDA is significantly behind. We'll get into the issues and actions taken later in the presentation. Frédéric and I are spending a lot of time in and on North America, and we firmly believe we're on the right track to turn our North America business around. We also reaffirm our previous guidance of the group underlying EBITDA to improve in FY 2020. This, of course, is based on the assumption that there will be no material or prolonged impact from COVID-19. I'll now hand you over to Frédéric, our CFO, for the financial review.

Thank you, Kevin, and good morning, everybody, on the phone, and thank you for following our half year results presentation. In this financial review, I will go through financial overview, present our income statement under IFRS and the underlying, detail our revenue performance per channel and per quarter, speak about the regional EBITDA performance and cash flow and close with net debt and covenant ratios. But before starting to go into the numbers, like Gerard said at the beginning, allow me to point to the new normal leases. IFRS 16, we started to apply since the beginning of this reporting period. There are important changes that this brings about in our financial indicators. We apply the new norm using the modified retrospective approach, whereby we do not restate a full pro forma for 2019. But we know that the numbers change and to enable good comparison, we supply detailed bridges of the changes throughout the presentation. I will always refer them and saying whether they are before or after IFRS 16 effects when appropriate, and we have also added comments or footnotes in the pages to show these. And we've also added a detailed bridge of the IFRS 16 effects in a special appendix from Pages 32 to 35. And you can find much more information in those 2 and especially, Note 8 of our interim financial document that you can consult on our website. And in the following, I will always refer specifically to the new norm calling out before IFRS 16 effects when appropriate. Now after these opening remarks, let's move to the numbers on Page 7, our financial review. Group revenue of EUR 1.656 million is down 3.2% and organically down by 2.5%, which is kind of in line with what we expected. The underlying EBITDA as published including IFRS 16 effect is up 12%, but this naturally does not reflect our true like-for-like performance. EBITDA came in at minus 6.3% before IFRS 16 effect, largely driven down by the negative North American performance. Kevin will go into much more detail on North America in the regional review in the next portion. Thanks to the Picard disposals, we have a significant reduction in our senior net debt coming in at 1.96x. We have a headroom then -- of more than 1.5 turns. We have no significant maturities ahead for 18 months. We are now in a financially much stronger position than in the last years. Following the Picard and the U.K. foodservice business sales, we have 85-plus percent of our disposal target realized in 2 years. Now coming to the noncash write-downs that the group has to take in H1 for EUR 900 million, a big number, I confirm. We had to register the write-down of the Picard joint venture value in our accounts and the U.K. foodservice in H1 for about EUR 360 million as we had already announced in October '19 through our full year results. These write-downs have now crystallized as we sold the business in H1. We also took a goodwill and asset depreciations in North America. They were linked to the financial underperformance of the region in H1 and the consequentially revised margin expectations in the midterm there. We also now classify businesses there as assets held for sale. The total of the noncash depreciation reached EUR 540 million. Finally, and I think that's important. We ended the half with a very good cash flow from activities of EUR 23 million, which is better than prior year by about EUR 60 million and is positive for the first time in H1 for some time. Let's move to Page 8, where we see the underlying income statement presented versus 2019. The variation columns are presented as published on the left, called percentage change and on the right, changes before effect of IFRS 16 on the right. The effect of IFRS 16 adds EUR 28 million to the group EBITDA because of higher depreciations, but we're down in EBITDA by EUR 9.5 million on a comparable basis, the minus 6.3% I referred to before, all are linked to the decrease in North America. The now [indiscernible] JV Picard contribute slightly less joint venture benefits. One should note the much reduced finance costs reached half in comparable figures, thanks to the strongly reduced net debt levels, important point to note. Hybrid dividends increased by EUR 4 million. Income taxes is down by EUR 1.7 million and underlying net profit is down by EUR 5 million in published, but only EUR 1.7 million before IFRS figures, comparably. So basically almost stable. Let's move to Page 9, where I will comment on the movements from the underlying income statement to the IFRS presentation. Underlying EBITDA depreciation and EBITA are [ reckoned ] on Page 8. Amortization of other intangibles is lower by EUR 2 million versus prior year. And the loss on disposals and assets held for sale is EUR 164 million, the assets I referred to in Europe and in North America. Goodwill impairments and restructuring costs are minus EUR 437 million and minus EUR 4.2 million, respectively. In restructuring costs, we only registered the cost of the Renew Program. Picard represents a net loss under IFRS of minus EUR 283 million, driven by the depreciation loss compensated by the positive net result I referred to in H1. After better financing costs and lower IFRS taxes, ARYZTA AG shows an IFRS loss before taxes of minus EUR 900 million, again, a big number linked to the noncash depreciation charges. The loss is thus almost exclusively attributable to the write-downs. Let's move to Page 10 on the revenue analysis. Total revenue, as I said before, is down at minus 3.2%. 72% are linked to the U.K. foodservice disposals that happened in October of this year. Foreign exchange bridge brings about 1.6% of growth, thanks to the reevaluation of the U.S. dollar, the Swiss francs and other currencies versus the euro. Organically, the group is down by 2.5%, as was expected, mostly behind negative North American region, which improved sequentially. So in Q2, it is better by 1.5% then in Q1, which was slightly better by 2% than Q4 of last year. Regional repetition of revenue versus prior year is mostly unchanged. But Rest of World now weighs 9% of our group sales, and the region's growth, Rest of the World, is at plus 8.6%. Channel and category repetition are almost unchanged as well. But let's note on the bottom right-hand corner, that our top 20 customers are now 54% of our revenue, and that all the top 20 customers taken together worldwide and adjusting through the German in-sourcing effect for that matter, they're all growing. All customers taken together are growing. In H1, again, ARYZTA continues also to grow the business with our world's biggest customers. Moving on to Page 11. The organic revenue evolution per quarter can be found on that page. I will be here commenting the half year numbers, which is H1 2019 to the left and H1 2020 to the right. Price and mix reached 1.1% growth for this half year. It's another figure about -- around the plus 1% as was H1 2019 as well. Volumes differ per region. They're still very positive in Rest of the World, at plus 4.2%. They are negative in Europe as the in-sourcing in Germany completes. So we will no longer talk about in-sourcing effects in the future, and we will be lapping that in 1 year. And we expect it to be completely finished in this month, but it will not have major effects. The region in Europe concentrates on more profitable volumes. And you can see that evidenced on the following page by the steady margin improvement. As guided, we remain negative in North America, but we see slight sequential revenue improvement after a minus 8% in Q4 of last year and the minus 6.1% in Q1 and is now at minus 4.5% in Q2, still negative. We still expect stabilization and the slight progression to happen in H2 or to be more precise that will be rather in Q4. Let's move on to the next page, Page 12, where we show the EBITDA margins. Again, they are shown before and after IFRS 16's effects in the columns to the right. Europe progresses in profitability on both counts, 290 basis points, including the IFRS 16 effect, but really 90 bps to reach a 10.5% profitability, and that is a double-digit figure for the first time in some time. Rest of the World, EBITDA remains broadly stable in value but loses margin before IFRS effect due to the capacity challenge we have in the region that constrained our margin generation and also, to a lesser extent to the bushfires in Australia that weighed down the last 2 periods of this half year. The capacity build-up in Brazil is now underway and that should alleviate pressures in time. North American EBITDA is strongly down before IFRS effects by 150 basis points. Again, Kevin will detail the reasons for this later. On Page 13, we will analyze the cash generation in H1. In order to make our segmental free cash generation comparable under IFRS 16, we have adapted and now include payments on leases, net of the sublease receipts so that cash generation remains comparable to the prior year presentation. The extra EBITDA generation on line 1 that you can see is now compensated by line 5 in the chart on that page. In H1, we see a sequential operating cash flow of EUR 55 million, thanks to reduced losses in working capital that were only EUR 35 million this year. We were down EUR 80 million last year, as you may remember. Thanks to the reduced cash interest and the income taxes, again, both of them halving versus prior year, our net cash stands at EUR 23 million versus last year's cash out of EUR 36 million, it's a EUR 60 million improvement. Moving on to Page 14, where we can find the changes to our net debt evolution. Following the capital increase, and again, thank you to our shareholders for helping us generating EUR 740 million proceeds, hence, the other nonstrategic asset disposals of about EUR 385 million, hence, [ saw net debt ] limited, but still net cash generation from activities, net debt on a comparable basis has reduced by about EUR 950 million from EUR 1.510 billion at the beginning of 2019 to EUR 567 million, comparably. The adaptation of IFRS 16 at circa EUR 300 million of net debt to the number has no cash effect naturally. They are represented in line 2 and 5 of the chart on Page 14. The proceeds received from the Picard sales right at the end of H1 are applied against net debt reduction. Let's move to Page 15, where you can see the variation over time of our senior net leverage and other covenant ratios. Our net leverage has now received less than 2 turns now. And it's the lowest that it has been for years since 2013. It gives a headroom of more than 1.5 turns and sufficient liquidity for the months to come. None of the covenant ratios that we have in our financing documents are influenced by IFRS 16 effect. They're excluded from the covenant calculations. We have included a plan following clause in the financial documentation already in 2017. On the graph, on the lower left, you can see that the Schuldschein debt has been reduced strongly as we paid back in December EUR 206 million of Schuldschein, while using existing facilities for that. I also want to point you on Page 39 in the appendix that shows the detail of the EUR 906 million hybrid financing, which includes now a total of EUR 105 million hybrid dividends and to Page 40, which shows the total capital stack of the company of H1. The hybrid financing still remains at relatively attractive average cost of 5.35%, and it allows for a financial flexibility at the moment. Let's move on to Page 16, where we see the regional split of the impairment and restructuring charges. You can see U.K. foodservice, EUR 61 billion charge in Europe as announced as we disposed off that in October. Minus EUR 543 million North America, essentially linked to the goodwill impairment of EUR 437 million and EUR 297 million negative in joint ventures with the Picard sale. All restructuring charges are linked to Project Renew. They were at EUR 4.2 million at the end of H1. And unfortunately, altogether, that shows a charge of EUR 902 million. Moving on to the segment review, I naturally hand back to Kevin.

Thank you, Frédéric. Slide 18 outlines the profile and future of ARYZTA North America, once we've completed the process of stabilizing the business and improving performance. We benefit from being a market leader in the attractive frozen B2B bakery sector with a well optimized asset base with unique scale, quality and capabilities in our core categories. Delivery and turnaround will result in high single-digit EBITDA margins in North America in the near- and mid-term as the turnaround clearly is taking longer and is more difficult than you or I would like. It will provide a key source of benefit to the broader group in global customer relationship, marketing, and manufacturing excellence, innovation and operational synergies. Already, the regions are working much closer together as you see increased collaboration on a number of new areas. We've a clear strategy in North America that needs to be fully implemented. We're convinced that we're taking the necessary steps to build a strong, successful business that would be a core contributor to the improvement in the overall group performance and its future growth prospects. Now turning to Slide 19. Our North American business accounted for 42% of ARYZTA's group revenue and 32% of group EBITDA in the period. The region reported sequential, quarterly improvements in organic revenue as guided. And we continue to expect Q4 '20 organic revenue growth to be positive. However, EBITDA performance was disappointing, declining minus 22.8% on a like-for-like basis. While 80% of Project Renew automation projects are now complete and cumulative savings of EUR 15.9 million were achieved, the benefit impact has been reduced due to one-off startup and logistics costs during the announced bakery closures and line transfers. Slide 20 provides an analysis of our revenue by channel and the issues and actions we've taken. The organic revenue decline overall was $44 million. First, in QSR, there was a $24 million loss in the channel, due largely to 1 customer where sales were down $15 million. We held our overall position with all key customers and lost no business in the half, but we're clearly lapping some losses from last year and suffering from impacts and softness with some customers within the channel. It's important to remember that in QSR, our performance is totally aligned with the underlying sales from our customers. We, therefore, collaborate closely with our key QSR customers and have strong innovation programs in place with each of our top 3 customers with the launches either underway or well advanced. In large retail, the majority of the revenue loss was associated with 1 large customer where we exited low-margin business in 1 category to improve the overall category profitability. A strategic review of this specific, noncore category is ongoing. Our underlying sales, excluding this category were positive and the rest of our large retail business is much improved. Foodservice continues to be difficult. However, we are focused on turning around this situation. We strengthened the overall management team and put in place a strong program of remedial steps. We're implementing a new promotional strategy and are focused on improving service levels to better support our customers. We also suffered from a number of temporary issues as we reconfigured our manufacturing and supply chain. These issues are now largely behind us. For deeper understanding of our North American H1 EBITDA performance initiatives, we turn to Slide 21. Total EBITDA on a pre-IFRS 16 basis declined EUR 12 million. The most significant impact of the EBITDA decline was reduced revenue in the period. It had a negative impact of minus EUR 11 million, completely offsetting the EUR 11 million project Renew benefits in H1 year-on-year. Operational margins hit by EUR 4 million of cost in the first half as some negative operational impacts of the new projects were implemented. These impacts are temporary and have been eliminated. We also incurred additional supply chain costs of EUR 3 million in H1 as we worked our way through plants closures. 3 plants were closed from the end of July until last week, moving line with stock buildups to serve our customers at the same time as implementing a large number of efficiency, automation and network reconfiguration projects. These costs are reducing over H2. With a negative margin impact of EUR 5 million from margin challenges in foodservice, which are ongoing, an increased retail trade investment, which has peaked and is now reducing. Renew benefits are fully on track with FY '20 annualized run rate savings of EUR 70 million. This will benefit EBITDA as a temporary negative impact all the way. On Slide 22, we outlined the key actions we've taken to deliver improvement in H2. Firstly, our key challenge is revenue stabilization. Our key action is on the conversion of the pipeline of new business opportunities in large retail, which is well advanced; new foodservice leadership; implementing a sales drive to customer focused pricing programs, which is in place and continued focus on innovation in QSR to better drive volumes. And as I noted, we have strong innovation programs in place with each of our top 3 customers in QSR. Project Renew will further drive increased savings to the business in H2. Recent bakery closures are starting to provide savings. The completion of the network optimization and the balance of automation projects will be delivered in H2. So we've improved operations and supply chain performance as the various changes are completed and the efficiency is harvested. North American leadership and promotional teams have been strengthened to accelerate delivery of the turnaround plan. And the business has been further restructured to give a deeper, commercial focus and better innovation factors. Turning to Slide 23 and 24, Europe reported a revenue decline of minus 6.1%, largely due to the [ 30.5 ] disposals, which were minus 4.5%, and the final impact from the planned in-sourcing. There is no material impact of in-sourcing expected in H2. European leadership team continues to focus on profitable revenue, having withdrawn from some businesses and some business which did not meet Europe's profitability goals and delivered, as you can see, 90 basis points EBITDA margin progression in the business in H1 like-for-like before the impact of IFRS 16. The region benefited from solid progress on Project Renew, which delivered cumulative savings of EUR 15.5 million in the period. The German manufacturing footprint consolidation is on track for completion in quarter 4 fiscal 2020. And the ongoing footprint optimization will be margin accretive in and [ on prove ] the overall utilization rate. We saw a solid, strong performance overall in Europe, with continued strong performances in Switzerland, France and Poland and ongoing improvements in the German performance, taking into account the impact of in-sourcing in H1. Turning to Slide 25, Rest of World has seen continued organic growth of 38.6%, while EBITDA before the impact of IFRS 16 declined minus 3.5%, and margins declined 180 basis points. As a bulk market, organic revenue growth was offset by capacity constraints. Our new bakery in Brazil is underway to address these capacity constraints. Frédéric will now provide you with a detailed overview of Project Renew.

Thank you, Kevin. I'm on Page 27 now, where we show that for Project Renew, it's key to deliver an improvement of performance for our organization as it continues to deliver savings. And we have now achieved cumulative savings, if you take each half together, of EUR 57.4 million in 3 semesters. And we're on track to achieve our EUR 70 million run rate that we have planned since quite some time. We're also planning to achieve our EUR 90 million run rate savings at the end of 2021. We still look to spend about EUR 145 million until the end of the program, very close to the EUR 150 million we announced in May 2018. We're spending money on automation projects. We're spending money on reinvestments in our lines, and we're also spending money moving up lines after bakery closures. This continues to pay and produce effects with all programs having paid back less than 2 years, now fully producing benefits. Others are still to come. We can see the highlights for work stream on Page 28. And that's very important because on top of the page, you can see that the manufacturing work stream in H1 now represents 33%, whereas it was only 13% in H1 '19 and for full year '19, 19%. We need to ramp that up quickly so that we can reach the target, that we set ourselves, of 40% of savings behind manufacturing automation savings. We have now sold 2 bakeries in Europe in FY 2019, and we're still continuing the manufacturing optimization in Germany that will be also finished at the end of the year. We have now closed 3 bakeries in North America. We have invested in a total of more than 100 automation projects in the last 18 months there. That may sound like a lot, but in fact, we have quite a few number of lines in North America. But we still need to go further. And we still need to continue the efforts to continue to save process and progress to ensure that the benefits dropped down into our EBITDA and are not eaten up partially in the operating profit, as we saw in North America in H1 by start-up and extra logistics cost. This is a fight that we believe we're winning in H2, and we shouldn't expect any of these. We're advancing at the right speed and make sure that the projects are performing. We continue to pressure naturally our regions to improve now on the supply chain and procurement savings, which is the last one that needs to ramp up. The ramping up of H2 savings is key to deliver our EBITDA for FY '20, but we're quite confident that we're on track to improve and to deliver that target and we confirm the EUR 70 million run rate savings. Now I'll hand back the microphone to Kevin for the summary and conclusion.

Thank you, Frédéric. On Slide 29, I would like to address briefly COVID-19. The main impact to date in Asia has been on the eating-out-of-home sector. We've activated our full business continuity communication teams, both in Asia and across the different regions and at the group level. We continue to assess contingency steps and the impact on the broader business. We provided our customers and our staff with the necessary support and clarity they need as we monitor this rapidly evolving situation and actively assess and adapt to its consequences. Turning to Slide 30. Our absolute focus for H2 is on improving and turning around the North America performance. We've delivered on our refocus into pure frozen B2B bakery business. We have significantly improved capital structure and are at lowest debt levels since 2013, with net debt-to-EBITDA of 1.96x, no maturities in the next 18 months and much reduced interest costs. On an operational basis, we see continued progress in both Europe and Rest of World. And Project Renew, as Frédéric mentioned, is fully on track for further delivery this year and on -- into next year. Turning to Slide 31 and the reiteration of our guidance. There are 4 key pillars to our guidance: one, Project Renew benefits will accelerate in H2; two, we will see continued ongoing progress in both Europe and Rest of World; three, we will see the continuation of revenue stabilization in North America; and four, we will implement a reversal of the one-off issues in ARYZTA North America. Therefore, we expect to see underlying EBITDA to improve in FY '20. This guidance assumes that there will be no material or prolonged impact from COVID-19. Clearly, it presents the risk given the nature of our business, and we'll be better placed to assess that risk at the time of our Q3 '20 update. As for now, our best current estimate is that we will deliver group underlying EBITDA growth in FY '20, and we're fully focused on delivering that. Thank you for your time. We're very happy to take any questions.

[Operator Instructions] And your first question comes from Jon Cox from Kepler Cheuvreux.

Jon Cox, Kepler Cheuvreux. A couple of questions for you. On the first one -- just on the guidance. Obviously, you're now saying that the North America margin will be high single digit. And historically, you've been talking about group getting to minimum 12% over the next couple of years. What does it mean for that guidance? Sort of linked to that -- not so much is really -- I want you to just give us an EBITDA figure, IFRS 16 on 2019, so we can just work out what the gap would be? Obviously, it's going to be tricky modeling if you're keeping one set of figures where we don't have the comparables. And then just the last question on the coronavirus. Obviously, over half of your business is either quick-serve restaurants or foodservice in some way, you've seen a collapse in Asia in those sort of channels as a result of the coronavirus. Just wondering what your thoughts are as this sweeps through parts of Europe, Italy now, obviously the most impacted, but this is probably going to be the same for the rest of us in Europe in the next couple of weeks and then spreading into North America. And what your thoughts are about that and your exposure into quick-serve restaurants and out-of-home given the [ current situation ].

Okay. Maybe first start with the first one. Thanks, Jon. On the guidance, what we're reflecting is that it is longer and more difficult in North America. So therefore, we think it's more prudent to actually indicate that we see high-single digits in the mid-, sort of, the near-term as our first goal, and then we work on from there. I think, clearly, if you look at the rest of the group, we've made good progress in Europe. As Frédéric called out. We have strong margins, which are temporarily, if you like, compressed in Rest of World as we bring on new capacity. So I think if you take it in the mix, it means that our mix will be slightly lower, clearly because of North America until we get there. And then we look at how we improve beyond that, but short to midterm slightly lower. I think the second question on the IFRS 2019, I'll just hand to Frédéric to make a comment. But before I do that, I'll just touch on the coronavirus. I think the key thing, we haven't seen a sales collapse so far, I think, it's the first thing that's important to say. Clearly, eating-out-of-home in those countries that are most impacted, which up until now have been South Korea and China, in particularly, have been impacted, but they're not material markets for the group in terms of our sales revenue. I think as the situation expands into other countries, it depends on which countries? How long? How deep? Because clearly, there will be impact, but it's impossible to assess materiality of that at this point. But I think what we have seen is with the exception of foodservice, a degree of resilience so far in other channels.

Jon, the detail -- just to answer the question on IFRS 16. In October, when we published our results -- on Page 91, you will find a detailed comment on IFRS 16, and you will find -- for example, find that we expected at that point of time, the IFRS 16 EBITDA impact to be about EUR 60 million. We have just now said that the effect in H1 is EUR 27.7 million. I think that will allow anybody to make a good calculation until the end of the year. If the annual effect is expected to be EUR 60 million, and we have EUR 27.7 million at the end of H1. And you could find the detail on Page 32 and following of our report, and you can find it on Page 4 of the news release. We've also guided the market how many leases we have, how much information is available. What we wanted to show in H1 is what was the underlying effect before IFRS 16, and you can see that we're down by 6.3%. If you take our last year's numbers of EUR 307.5 million, and you would add the EUR 60 million on that base estimation, I'm sure you're not going to be far away. We have not given guidance with IFRS 16 effects because that's the way the transitional guidelines are applied but we have clearly given guidance that we want to improve our underlying -- before IFRS effect, EBITDA, whereas the current benefits of Project Renew follow through. I hope that helps.

Yes, it does. Obviously, just in terms of guidance going forward in the next couple of years, it would probably be better to get the guidance before the IFRS 16 because otherwise it just seems impossible to model.

Very clearly. And Jon, you're perfectly right, we're changing now. We're applying. You will have at the end of 2020, the new norm IFRS fully applied. And as we have done, we have given detailed bridges at the end of H1 and for the full year. And we will do the same thing for FY '21 and moving forward to also take care of the new changed EBITDA margin, yes, that we will do naturally.

And your next question comes from Jörn Iffert from UBS.

The first one is, please, on North America. I mean, this year volumes down 6% in the first half. Can you help us a little bit who exactly is taking these volumes from you? Are these smaller players? Are these larger players? So when you do your benchmark analysis, maybe it could help us to share your thoughts so that we better understand what is happening. And second question is on your cost leadership. I mean, with all our automatization progress you are doing, let's assume your revenue line is flattish for the next 2, 3 years, would you think after renew you are cost leader in the industry? Or would you need significantly higher utilization? And then the last question is on cash flows. I mean, can you give us a rough guidance what you expect for the second half on the equity free cash flow? So it should be positive also in the second half, like in the first half? And yes, that's it.

Okay. Thank you, Jörn. I'll take the first 2 questions, and I'll let Frédéric take the third one on the cash flow. Maybe just taking the North America performance and where the volume is going. If you turn to Slide 20. If you look on QSR, I think, clearly, as I called out, we're lapping some losses from last year. And that went through a variety of people, but nobody in particular that I would call out. I would just confirm that we have lost no business whatsoever this year. We're in a strong position with all our key customers. But we do depend on their sales outtake. So clearly, if some of our customers' sales are down, you all know, our sales will be done with them. So that's on QSR, not losing any share. In fact, it's actually tried to gain share, if you look at our innovation. On large retail, I'm very happy with our progress through the first half on our core categories with our large customers, where they called out a little earlier, we're in positive territory. If you take out 1 specific category that's subject to a category review. And even that negative sales, what we did is we took a decision over the last year, we've implemented a number of steps to improve an unsatisfactory category level of profitability, and we were quite happy to have less revenue as that happened. And I'm not even sure who picked it up, but we stepped away from business, and are happy to be away from it. And in foodservice, generally, it's a competitive market. We've lost some share to smaller competitors. We're focused on reorganizing, rebuilding the team and winning that back, but it will take us a period of time. I think moving to the second question in terms of cost leadership, I think if you -- let's take it in 2 pieces. If you take in Europe, I think we're moving to the right place with Project Renew. We have the right steps, we have the right footprint consolidation. You're seeing some of the benefits of the simplification flowing through into the P&L with the increased margin. I think in North America, clearly, we implemented a massive amount of change through the first half with 3 plants closing, 4 new lines starting, up and over 75 automation projects being completed. But I would call out that those benefits, once we have settled that down, which is now well advanced, or permanent. I think, that takes us back to having a strong position in terms of being flexible, efficient. Clearly, as we've been losing volume for a number of years and are focused on stabilizing that, that gives us a very strong opportunity as we've slowly rebuild those volumes to improve our operating leverage in the medium term. So I think we have the right pace. We have the right level of efficiency and flexibility, but we need to execute to actually convert that into the P&L. And on the cash flow, I'll just turn it over to Frédéric.

Yes. As you have seen in H1, we have gotten a positive cash flow of EUR 23 million. And it was driven by good working capital performance, which we already had at the end of H2 2019 and at very good financing cost performance because we are much less in debt at the end of H1 this year as we were last year. In the second half of last year, we made good progress on the working capital. So we will be still okay at the end of the year, but no longer excluding comparison. And on the financing cost, last year, we were already much better in the second half than we were in the first half. So what I would expect is to be the cash flow to continue to be positive, to continue to improve slightly, but not as much as it was positive in H1, so you can't just multiply it by 2, but it would be seeing, probably, a slight improvement on the basis of our current guidance and naturally, no ongoing effects or staying effect of coronavirus.

And if I have -- if I may, one follow-up question on North America. From your point of view, does it make sense to consolidate with other peers to strengthen your position in negotiating power versus larger customers? Is this something you're considering?

No. I think what we've done is we've focused on channel by channel over the last 2.5 years on sort of, really, our customers and our performance. And you can see in QSR, we have a very strong position with our key customers. I think in retail, we've had some setbacks, and we've dealt with them and are now working through the last piece. And in foodservice, which is smaller customers, more desperate. We're now in the middle of that. So I think we have all that we need, and we have to strengthen capability for the future.

And your next question comes from Jason Molins from Goodbody.

Just on your EBITDA starting point for this year. Can you maybe just give us a bridge in terms of FX impact disposals? So how we should be looking at your growth year-on-year, given what you've said? And second question is around working capital. I just missed that, Frédéric, given the H2 impact we saw last year. Are you -- can you just clarify your comments for the second half of this year in terms of working capital performance? And then final question really is around your input costs, whether that's labor, raw materials and logistics, et cetera. Can you maybe give some color on what you're seeing? What you're expecting from those?

Maybe I'll let Frédéric take all 3 of those, Jason, in one stream?

Yes. So the first one on FX. Yes, we have a positive effect at the end of H1, as you have seen, and that positive effect with the current exchange rates will continue. I expect it to be about EUR 2.7 million positive on EBITDA. I don't know what it will be in terms of variation on the sales, but we don't guide to that. We guide to what we want to do organically. On the disposals, it is not that much. It's a slightly negative effect because we did both of a winning business at the end of this -- at the end of October. That was the U.K. foodservice, but it was low margin. It is not that important. And then on the working capital, you're perfectly right. We did a very good improvement of the working capital between the end of January of last year and the end of the year. Now I don't think we can repeat the totality of the performance but I think we can still improve slightly on the levels that we were at the moment. But I wouldn't expect a good benefit on that. This is why I said that the H1 results of the cash flow can improve slightly but would not improve by that much. And last but not least, the input cost, a very good question. There is still -- let's take the regions because it's exactly per region. In North American region, there is still a pressure on the labor cost, especially among blue-collar workers in North America. It has alleviated a little bit in the pressure of increases, but the pressures are still there. And we don't believe that they're going away, the unemployment rates are at the lowest level since a very long time. We still see a good growth rate of the employment levels. And this is a tough market for people who want to employ that. So labor cost is going up. How that will move out for the next month? We don't know. And nobody knows. Logistics cost have stabilized, but we've also done the work for ourselves to adapt to the new -- newer normal coming out of 2018 and in 2019. Raw materials in North America, there are all -- they used to be, at the beginning of the year, a little bit inflationary. That has recently been changed in the new year, and there was less pressure, especially the wheat side, which is a big part for us. Where there is still strong pressure with the protein, and especially, the meat and pork and the dairy cheese side because of the particular lease on the cheese in the North American market and on protein and on pork, which are slow ingredients -- low ingredients for us because of the Asian swine flu. In Europe, well, I'm not commenting on the last 2 days because the energy prices have come down very, very, very strongly over the weekend. So how, or whether that is here to stay, how that will work out? It was a major change, but the deflationary pressure on the 2 main ingredients, which were flour and butter, has been seen on the market for a few months now. We've seen good planting on the wheat, the moisture levels of the soil are there. So we should be expecting good season that depends on the summer and prices have alleviated. More importantly, on that side for us, we have our coverage till the end of H2. We take, as you know, a rolling 6-month forward cover. We do that in accordance with our customers, with our needs. And that's the way we do it. And as you know, in some of the cost situations, we have to pass through. Labor in Europe, it's still complicated, especially on the logistics and trucking side, it is still difficult to find and there is pressure. The more you're in the east of Europe, the more there is pressure. But globally, we have good cover. We look correctly till the end of the year, and we're looking into FY '21 now in a stable environment with the exception of labor cost.

I think the only comment I'd add is that's also, Jason, why the automation projects in North America, in particular, are so important. Anything we can do to remove labor cost in the business helps us to the earlier question on cost leadership, efficiency and capability.

Okay. Very good. And just, sorry, for a clarification then in terms of your guidance statement, in terms of EBITDA growth. Are you assuming that disposal of that North America business doesn't happen between now and the end of the year or having any material impact on that number?

So it is -- we -- when you have an asset held for sale, it usually happens in the next 12 months. Naturally, we cannot give any information to the -- on that process, where we are in the process, but it does not have a major impact on our disposal side in terms of EBITDA.

And your next question comes from Alain Oberhuber from MainFirst.

2 questions from my side. First, just coming back to U.S. Could you tell us a little bit about what your current market position is in these 3 sub segments, QSR, large retail and the other foodservice? And specifically, if it's below average, if there could be an improvement via acquisitions or just organic growth to improve that market position? Second is regarding North America as well. When do you expect to see a positive organic growth? Will that be more '21 second half? And if so, this guidance you gave on EBITDA margin on North America, would you see that already in 2021? The other question is regarding Rest of the World. As I heard you speaking, do you expect already an improvement on organic growth in that area in Q3 or Q4?

Thank you, Alain. Let me just take those questions one at a time. Firstly, in terms of our current market position in the key channels, it depends on the category. Clearly, there's a large number of categories in each of the channels. But we're a clear market leader in our core categories with our core QSR customers. The relationships are strong. We haven't lost any business. And I think we have a strong innovation program in place with the top 3, just to give you a sense. So I think a strong market position, well positioned. Clearly, will go up and down with our customers, but well positioned to go with them and support them and do a good job for them. I think if you look into large retail, I think I called out one specific category. And the actions we've taken to improve a low profitability and the action that's underway in terms of strategic category review. But I think in our core large retail business in artisan breads. I've also pointed to that. We're now back in growth. We have taken action. The steps that we talked about in Q4, in Q1 are converting through. And we're in positive revenue growth with large retail. We now need to see how we keep that momentum going. I think in foodservice, we're a leader, but we've lost some relevance. And we've reorganized, we're refocused, and we're concentrating on winning back our position. I think we still are the leader in key subsegments within foodservice. We've got to just do a better job, and that's what the new leadership team within the foodservice side and the various steps they're putting in place are designed to do. I think in terms of your second question in terms of acquisitions, not on our radar. For us, very much, it's around taking advantage of our strong capability, our asset base, our leading customer position and our capabilities in those core categories, and bit for bit, we're just grinding it out and dealing with it category by category, channel by channel. I think in terms of organic growth, we've called out, that we expect to be in positive territory in Q4. I think, if you take what I said earlier about the -- we haven't had in QSR, we haven't had, except where we've taken decisions in large retail, any loss of position in the first half. I think, clearly, that will set us up with a stable and a stronger position as we go into next year. We've had a number of one-off costs as we push through a lot of change in Project Renew. They're either eliminated or being worked down pretty quickly through the second half. Renew itself is continuing to ramp up further. So I think we will, as stated at the full year, intend exiting this year with Renew substantially complete. With our revenues stabilized, double down on our position in the customer side and in the position to actually move forward more confidently next year, but it is going to take a period of time, there'd be no overnight change. But we would anticipate EBITDA improvement in North America next year. Though, it's too early, clearly, we're not giving any guidance at this point. I think I -- sorry, the last question, which I didn't hear. It was in terms of Rest of World. I think we just would be prudent as we go through bringing on more capacity in Rest of World over the next year, Alain, yes. So more of the same and no particular acceleration.

And your next question comes from Andreas von Arx from Baader.

First question is on the margin difference between North America and Europe. I mean, this is quite significant, even if I adjust for some one-off effects. I mean, what gives you certainty that in the midterm, or what structural reasons do you see that in the midterm that margin difference between North America, high single-digit and Europe, double-digit can continue? Or is there any risk that the European margin due to higher competition levels will go down also towards the U.S. in the medium term? Question number one. Question number two on Brazil. Could you please provide an update there on the cash spending for your new factory in Brazil? When is that happening? And when the factory will be operational? And then number three, and I'm sorry, it's a bit tricky one. I mean, in North America, the profitability has been quite disappointing. But if I look at the reasons that you are giving today in the presentation, I mean, a lot of them have been known for quite some time, like the volumes that you have lost was announced third quarter last year, Project Renew was also announced quite some time ago. I mean, the factory closures are all not -- also nothing new. I mean, you have leadership changes, which are also some month way back and there has been -- I think, everybody knows the rumors that the profitability impact from your volumes lost last year would be quite severe, which we now see in the numbers. So why hasn't this North America issue not been communicated more actively or earlier? I think -- because I think if I look at the share price also today, are down significantly ahead of the results and now slightly up. I think it was also not that fixed price.

Thank you, Andreas. I guess the first thing in terms of the margin between North America and Europe. What we called out is that our near to mid-term margin expectation is that North America will be lower, and we're talking of getting to high single digits. Clearly, Europe is ahead of that. And clearly, we've plans to progress further beyond that. So I think we're not saying that the actual margins will harmonize in the mid-term or the short term. I think the European margins and the Rest of World margins, we're comfortable with. I think the North American ones, we've still work to go, and we see no reason -- there's different market structures, there's different routes to market, there's different pricing structures, as you know, in Europe and North America, both on the cost base and on the revenue base. So we see no reasons for harmonization in the negative. And we just need to focus on delivering in North America and getting the step-up, putting the one-off items behind us and moving forward. I think in terms of the question on the Brazilian cash flow, do you want to take that one, Frédéric? And then I'll come back in on the last question.

Yes, as we've said, it is now underway, but just barely so. So it will take some time. The spendings we expect to be a cash out of around -- well, that depends on the euro on the foreign exchange. But as the foreign exchange rate at the end of H1, we estimate it to be around EUR 50 million, and it will be happening over from now over the next 15 to 18 months, depending on the speed of construction. And there will be, in this year, a lower number because you will start out with filling the bakery and buying the machinery in the next fiscal. And when it will be live -- frankly, I don't want to give a date because a construction of a bakery always takes time. But naturally, we do it at the right speed and as early as we can because the capacity is naturally good for us to come on stream.

I think, just moving to your last question and taking it to the entirety, Andreas. Clearly, as we've said, we're disappointed in the H1 performance in North America. As you correctly pointed out and as we pointed out at the end of last year, it was going to be bumpy on the revenue stabilization through quarter 1 and quarter 2. It has been, but we're broadly on track with our expectation in terms of the revenue. And that clearly does lead to a reduction in profitability. Revenue is absolutely on track in delivering the benefits. And we've been hit by 3 other factors between the operational margins and the supply chain and a net margin reduction in food service and the reboot actions we took in retail. In terms of the -- this is -- it's a live business, unfortunately, in sense we have to just deal with what we're dealing with in the foodservice side. And we took steps to actually accelerate our turnaround in retail, which is paying off, and that investment is tapering off into the second half of the year, as we called out. To the fundamentally of your question, which is, why did we not update on that before. One, we reconfirmed of our guidance today, two, the North American performance has been considered and assessed within the scope of our guidance. At quarter 3, we had a revenue update and that's what it was, a revenue update, and we were on track. And today, we're on track, and we expect to the end of the years to be on track in terms of that stabilization, but it does take a period of time to come through. And there will be negative impact as you've seen as we go through that stabilization. In terms of the management changes in North America, that was a planned organizational evolution. We've strengthened the management team. We've restructured to be able to accelerate our delivery of the turnaround. And it wasn't that simple.

[Operator Instructions] And your next question comes from Roland French from Davy.

So my 2 questions are both related to North America. I guess, sticking with the medium-term margin guidance. I know there's lots of moving parts. Would you be able to give a kind of a conceptual bridge? So clearly Renew and automation are margin accretive but how would you -- if you stepped back, how would you isolate the revision? Is there structural changes in labor costs and recovering labor costs? Is it mix? Is this competition? Is it utilization? Are you able to give a little bit of color around, even conceptual color around that bridge? And then secondly, sticking with North American volumes, you previously called out that there were volume losses earlier in the year that you've won back, but that there's a phased recovery into H2 and beyond, are you able to quantify the impact in H1 in absolute terms is what that revenue pool was? And then your expectation around the timing of recovery and the quantum of recovery in H2 and into next year?

I'll take the second question, Roland, and I'll get Frédéric, maybe just to make a remark to -- on the first one. In terms of volumes loss, I didn't say that we've won those volumes back. We had volume losses through last year that we're now lapping. What was clear is that in QSR, we've had no volume losses this year. We have a very solid position with our top customers and with innovation programs underway, or in markets with each of the top 3. Secondly, on large retail, we stepped away from volume in one specific category. And we did have a distribution and a volume loss in another category with another customer that we called out at the end of last year. But I think we also called out at that time that we had won that business back. We also had lost some items with another large customer, and we said that we had new products coming through. And in both those cases, that's exactly what's now starting to flow through, where in large retail, if you take this specific category away, we're actually back in growth and continuing growth for the second half of the year. In foodservice, we still have more work to do. We've had some share loss. We've done things to stabilize, improve that and win it back, where it will take a period of time. We're not calling out specifically guidance by quarter, but we've called out that we expect to be back in positive revenue growth by quarter 4 of this year. Clearly, that also then has an implication as we go into next year that we've stabilized. And they're, in fact, back into slightly positive territory. Frédéric, do you want to make a comment on the midterm?

Yes. Yes. So we have, indeed, revised our mid -- near to midterm margin expectations in North America. And this has happened over the last few months and has comparative size sales now in H1. It's very clear that Renew is the project to get us efficiencies throughout the automation through a restructuring of our organization that cost benefits are behind us, and we're much more flexible now and the point of equilibrium is better. Renew is still ongoing, and our objective was to get automation benefits, and we are getting them. But naturally, at the same time, once you have automation benefits and once you're creating your operational leverage, and you have a lower point, particularly, in your overhead, you need to get the volumes and realize the operating leverage throughput performance in the bakeries. Now we have some one-off costs in this H1. Once they go away, that should be there. And the difference then will be the usage of our capacities, the usage of the optimized streams and lines through a stabilization of volumes and not having negative volumes effect all the time. And I think that is the biggest effect. There is probably also a smaller effect behind labor cost. This is, again, why we push so much strongly on the automation? There is no negative effect over the longer period of time linked to raw materials or other costs. There was a small effect on logistics cost 2 years ago, that is still the case. It has defined, but it has not come down. But the biggest part is creating operating leverage through the fact that we have now more efficient capacities, reduced number of bakeries and towards the capacity to fill that up with volumes which are more profitable. And that would improve then the EBITDA margin to reach our midterm guidance.

And your next question comes from Patrik Schwendimann.

What is your best guess for the organic sales development in Europe for quarter 3 and quarter 4? And for North America, you were mentioning a positive growth in -- for quarter 4. What do -- do you already have as contracts as QSRs and large retail customers to give you this confidence for North America? And maybe last question, I guess, investors are asking themselves, if there is a risk for a capital increase? What is your answer to this question.

Sorry, let me take the -- in the reverse order. Patrik, no, is the simple answer to any risk of a capital increase. I think as Frédéric called out, our balance sheet is in a better position. We've actually very, very good momentum in Europe. We've good momentum in the Rest of the World. We've good momentum in Renew. And we're making slow grind out progress through our challenges in North America. So absolutely no to that question. In terms of quarter 4 in North America, I think our visibility is continuing to improve. Clearly, we've got to keep working on that. We have some contracted business, some business that's not contracted. But what we have to do is look customer by customer, item by item and work very closely with our customers to try to best incorporate their supply chain demand, and I think, it's just an ongoing process. That's what gives us confidence. Also, we're very clear on the new business that's coming in over the next while because we've got a -- one of the things in B2B is, you have to plan for it. You've got to have commitments on the customer when they're needed. You have to have the line trials, et cetera. So particularly around things like the innovation that's very clear. It's either in the market or go-to-market over the coming months. In areas like retail, where we've got good momentum. It's continuing to assess that, continue to give the support and see how it goes. But clearly, visibility has been a challenge. It's still not finished. We've more visibility, but with more work to go in it. But we're confident that we'll get in quarter 4 back into positive territory. I think in terms of the European guidance by quarter, we haven't given that and I don't think we will. Frédéric, unless you care to. And we did, in North America, give a sense of this year for very particular reasons is we want to give people a good understanding of the dynamics, a good understanding of the challenges, what we were doing and how long it would take.

Yes, I was -- the only thing one could add is, you know, in the past, we've had the German insourcing ongoing. We don't expect that negative effect in H2. So that should be a positive. And we've always explained what that was in volume between 1% and 1.5% on the European number. And other than that, we are privileging, as we have said, more profitable volumes. And if that means that our volumes are slightly down per quarter, we're not worried about that because what we need to do is to get the -- once -- now we have the efficiency to get the profitable volume through our bakeries, and the German in-sourcing has now completed and will lap in the next 12 months. So you should not have that in Q3 and Q4 anymore.

And your last question comes from Faham Baig from Crédit Suisse.

I'll try stick and to 2 questions. One simple one. Could you help us with the CapEx guidance for the full year? And one thing I note, since the announcement of the Project Renew and the associated CapEx guidance, it just seems to be lower than you've historically guided for. Why is that? And secondly, could I come back to the outlook for the current year, which expects an improvement in underlying EBITDA growth? If we assume the basis EUR 307 million, and the underlying EBITDA in H1 was EUR 142 million, then it implies an acceleration to EUR 166 million in H2, just to get to a EUR 308 million figure, for example. Could you help us with the building blocks?

Yes. Let me take -- what I'll do is I'll take the last couple of questions, Faham, and then I'll hand over to Frédéric to maybe take the first one on the CapEx. But I think starting off with the EBITDA, the key building blocks are: One, continued performance from Europe and Rest of World, as we've seen so far continuing out. Secondly is Renew accelerating in the second half. And you'll have seen the acceleration already. If you look half-on-half over the last 1.5 years, we see that continuing. It's on track, anticipated to continue for half 2 in all regions. The work through of the U.S. revenue stabilization and the elimination and leaving behind U.S. one-offs are the core building blocks of the -- if you had sort of second half and the overall coherence of the guidance, which we reaffirm. I think moving to the Project Renew CapEx question, it's a fair question. One, we had a late start. We had the money, we couldn't start deploying it. Secondly, we've been trying to spend as quickly as we effectively can. I pointed to the level of projects that went through in the first half, particularly in North America, but there is a -- as was a lag in the cash outside of that just naturally in terms of by the time things are paid for. And when you're pulling through a lot of projects, it just tends to be a lag effect coming through. But overall, we think there's no material change in the endpoint and what we will have spent. It's just sort of a delay fees from the start, and we're pushing it on through. We are getting the benefits because we've prioritized operating model changes at the front. We're getting through the plant closures. You'll see the plant closures and catch-up as on the rationalization and CapEx taking place in Europe in the second half of this year. I don't know, Frédéric, if you want to add anything more on that or any comment maybe on the overall CapEx guidance?

Well, yes, the only thing, if you can see in the numbers at the end of H1, there is EUR 18 million more spend compared to January 2019, EUR 35 million becoming EUR 53 million. We accelerated last year in spending in the second half. As you remember, the EUR 35 million, way much higher number and dropped the EUR 100 million, including Renew, there was EUR 20 million of Renew in there. It is always one likes to spend the money quicker than one does in the end because it always takes time and the engineers are adamant that in the end, you always -- you take a month longer here and 2 weeks longer there, and at the end of the year, you spend a little bit less. But we are adamant about our spending. We want to spend the EUR 100 million over the course of the 3 years. We started late. But you've seen that acceleration effect, which is also one of the reasons why our cash flow is not that positive guided for at the end of the full year. But still, we're doing the right things. We're taking it step by step. The most important is to get the automation benefits. Once they're through correctly and not just simply push for spending. That's basically it.

Okay. Thank you, Faham. And maybe if I just wrap up then. I think we're out of questions, but thank you for your time this morning and your questions, your interest in ARYZTA. We're very focused on implementing our plan. Clearly, as we've talked through, we have some challenges, and we're addressing them and working our way through them in North America. And we're making good progress on our other 5 priorities; the transformation in Europe, Rest of World, Renew, a stronger balance sheet. We've reaffirmed our guidance. And clearly, we have to monitor the COVID-19 situation and the materiality of that and the prolongation of it has yet to be worked through. So thank you very much, and look forward to speaking with you over the coming weeks.