M.P. Evans Group PLC (MPE.L) Earnings Call Transcript & Summary

Good morning, and welcome to the M.P. Evans Group PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. How the company will review all questions today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand over to Chandra Sekaran, Executive Director; Matthew Coulson, Chief Executive; and Peter Hadsley-Chaplin, Chairman. Good morning to you all.

Thank you very much, Alessandro. Good morning to you all. Thank you very much for taking time out on this beautifully sunny morning to hear our presentation following our results, which we announced yesterday, a record trading profit as a number of you will have read out, noted. We do want to restrict the total time to 1 hour, not least as you may be aware, there's an admitted silence at 12 noon. So we're trying that -- in memory of victims of COVID in the U.K. So we'll wrap up by then. We're trying to speak for not much more than the half an hour on the presentation and then invite questions after that. And sadly, you see the first slide that is a drone picture. It's not just a design phase, it's a real photo on the top of one of our plantations. If we can move to the next slide. It's actually also one of our plantations at Bumi Mas, one of the newer housing areas that have been developed. Sam, Can we make that any bigger? I'll resort to my -- if that's fine. As long as everybody can see it, okay. Who we are, for those of you who are not so familiar with us, because I know there are people who are attending who are not so familiar with our story and equally there are shareholders. So we'll focus largely on the results but also expand a little bit about who we are and most importantly, what we're doing now and where we're going. We've been around a long time. We're a 150-year-old plantation company, U.K. listed, focusing, in the last number of years, on sustainable Indonesian palm oil. And importantly, we still have an ambitious vision for the future. So we're still growing and we still plan to grow further over the coming years. We've grown significantly, whereby we have now over 10,000 employees. And of course, they live on the plantation as many of them with their families. So we're effectively responsible for looking after large numbers of people. We've grown now to just under 53,000 hectares, some 40,000 of which are our own. And the balance are those which we developed on behalf of the scheme smallholders, those smallholder farmers that were attached to some of our newer projects. We've invested over $0.5 billion into Indonesian sustainable palm oil in the last 15 or 16 years or so, and we will continue to invest more in the future. We've been members of the RSPO, the Roundtable on Sustainable Palm Oil, which is the independent body, who audit and certify our production. There are several thousand members comprising different stakeholders in the palm oil industry, whether producers, constitutes consumers, retailers, banks, NGOs. And it's increasingly recognized as the body that the independent body that certifies the production of the mill -- back -- we talked a little bit about this. And for those companies who are certified, palm oil is certified for the RSPO premia are able to be obtained and our premia that we secured last year was higher than any previous year, which is good news. We are committed to operational excellence. At this ties, and if we go to the next slide, with our 4 core pillars, responsibility, which, of course, comprises sustainability, environmental responsibilities. Clearly, there's a strict policy of no deforestation, zero burning, zero waste, which Chandra might talk a little bit about when we come to the picture of the mill, just how efficiently we manage the mill operations, nothing is wasted. But in addition, in terms of our responsibilities that we mustn't forget our social responsibilities, particularly towards our staff and the local communities. And the fact that we are able to provide good quality housing and indeed schooling, where appropriate on some of the more remote plantations, where there isn't good quality schooling, encourages staff and managers to remain with us. And that, in turn, feeds into the next, if you like, pillar, that of excellence and encourages the good people to stay and to ensure an excellent quality of our operations. And by having excellent staff that feeds into the next pillar, that of helping to grow by improved agronomic practices with the excellent management that we have. But apart from improving yields through better agronomic practices, production is increasing because crops are growing, because our palms are still quite young. So as the palms grow older, the trees become more productive and the crops grow, so the amount of oil also grows. So that is still coming through the pipeline. But in addition to that, there's a third source of growth, which is probably potential acquisition of new areas, with the first target being areas immediately around our existing plantations where we a have spare milling capacity. And second, perhaps a little further down the line, we would look at bigger, new acquisitions of the sort of Bumi Mas size or Musi Rawas size, 10,000 hectare acquisitions. So that is the sort of medium-term plan, so 2 to 3 years ahead. And with the further growth comes growing shareholder returns, higher dividends, and we very much plan on maintaining our record, which Matthew will demonstrate later of our historic achievement in terms of dividend, returns and the pursuit of a continuing progressive dividend policy. Well, last year, of course, was excellent and the 2 fundamental drivers were the increase in crop, which was expected. Therefore, the increase in CPO production, which was expected. But of course, what helped to make the results really, really good was the significant increase in the palm oil price, and we're talking a bit more about that in a moment. But I've also alluded to the increase in the sustainability premium that we achieved, which is very pleasing as well. And the final point to note on this slide, I think, is the increase in the dividend, which I've touched on. The only box, which is not there, which if you like, has gone down. But again, which is good news, is the gear and the debt level, which has come down very substantially. And again, Matthew will talk about that shortly. Moving on to the palm oil market itself, even before these dreadful awful events in Ukraine unfolded, the palm oil market was very strong, following -- partly as a result of the effects of the pandemic, which, for instance, impacted quite severely on Malaysian production. Malaysia has 1/10 of the population of Indonesia, but it produces a little more than half of Indonesia's palm oil production. So it's a huge industry still in Malaysia, but more or less entirely manned by immigrant, foreign labor. So with restrictions, lockdown restrictions, quarantine measures, it made it very difficult for the Malaysian palm oil industry, which was already struggling with its labor to operate efficiently and effectively. And as a result, there was a lot of labor, which could not be deployed. So harvesting rounds got missed, fertilizer applications didn't get put down. And that, in turn, impacted on supply, on the amount produced. And that will continue. That's an ongoing issue, even with the lifting of some of the restrictions in Malaysia, labor -- I'm sure Chandra could talk more about that with his time. Labor remains a serious issue. So that was one of the factors. Also the poor soybean crops in both North and South America impacted on total vegetable oil production. And of course, all the vegetable oils are interlinked to supply, demand and price. So that kept up with pressure on the price. And then, of course, since the end of the year, the impact of COVID continued to be applicable. But then, of course, we had the events in Ukraine, and that's just put further pressure on supply. Maybe we don't know that the Ukraine is a huge producer of sunflower seed and sunflower there for sunflower seed oil. Supply is likely to be restricted. Sunflowers is one of the biggest of the vegetable oils along with palm, soy and rape. There's 3 other big ones. So that's only likely to impact further on supply and in turn, on price. And so we've seen CIF Rotterdam prices go even higher, touching $2,000 a tonne at one point. But this had a real impact on domestic consumption in Indonesia. I mean, palm oil is a staple part of the average Indonesian person's diet. And therefore, the Indonesian government sought to take measures to mitigate against this, they first introduced a so-called domestic market obligation, but then that really was badly understood and not properly implemented, and they scrapped that after 3 or 4 weeks. And in its place, they simply increased the levy, which was already in place, but they've added an additional levy at the top band. And there's -- we actually put out an announcement last Friday, following the Indonesian government's announcement of the change of the levy structure. But because the market had already taken account of the likely restriction in exports and the likely impact on domestic prices brought about by domestic market obligation, the differential between the CIF Rotterdam price and the state mill-gate price, which is the price we get in our pockets for the oil we sell, had already widened out by an additional $200. So the additional levy was $200. So when this additional levy was announced on Friday, there was actually no impact whatsoever on the mill-gate prices that we've received. And indeed as announced the other day on Friday, we got the same price on that day, $1,080 net. And we've actually since received today $1,100 net for another consignment. So these prices compare with the average net price of $800 per tonne that we received for the whole of last year. So we're still well ahead in terms of the average prices that are being traded now compared with the whole of last year. Just now a bit on the sustainable palm oil market. And clearly, the demand for vegetable oil generally and palm oil specifically is going to continue to grow. Sustainable palm oil we think, is a very good way of supplying that need. In fact, nearly 20% of palm oil is currently certified and sustainable. We would love to see that percentage increase and would only encourage our peers to become RSPO-certified, and, of course, to encourage buyers to be willing to pay a premium to buy sustainable palm oil. One point which sometimes is not entirely understood is it's the mill itself, which is certified sustainable. So we develop and operate our plantations, absolutely fully 100% to RSPO sustainable standards. But at this point, 55% of our production, which is what is certified by the RSPO is RSPO certified, so we get a premium for that element of our production. And that's only because 2 of our mills are still pending certification. It is quite a lengthy rigorous process to become certified, and quite rightly that, that will soon come through. And then, of course, we have a further mill being built and our production from that will, in turn, become certified. But until that becomes the case, we sell our FFB, our fresh fruit bunches outside of external mills. And similarly, impacting on this percentage is the fact that we buy in fruit from independent smallholders, who are not themselves certified, but we are actually helping independent smallholders to become as certified under a new scheme initiated by the RSPO, but one in which we are intimately involved. So there is a chance that in due course, independent production will be certified, which will increase our percentage of certified production as well. I think we'll move on to the next slide now, and I'll ask Matthew to take over our talking -- no, sorry, it's Chandra, to take over, sorry about our operations and specifically, our crops to start with.

Thank you, Peter. Good morning to everybody. I'll be taking over the next 3 slides, which basically touches on operation. I'm based in Jakarta right now. I'm speaking from Jakarta. First of all, we'll talk about crop growth, a comparison between 2021 and 2020. The total crop process by our 5 mills was 1,366,200 tonnes in 2021, a 13% increase when compared to 2020. We processed 1,207,000 tonnes in 2020. This is because of more fields coming to harvesting; palms from the young stage getting into the prime stage, a more aggressive approach on purchase of outside crop. So what is total crop process? What is it made out of? Number one, it's our own crops that crop from M.P. Evans' estates; number two, smallholder crop that is the cooperative crops that we manage and which we manage totally, so there is feasibility total feasibility here; and independent crop purchase, this is where our marketing team aggressively try to purchase crop from farmers, small holdings in the vicinity to give them an opportunity to sell their crop to us. So for all crops, we also had a 12% increase. We had 809,700 tonnes in 2021 versus 724,300 tonnes. Cooperative growth, we had 229,300 tonnes processed versus 193,000 tonnes processed in 2020, a 19% increase. This is clearly because of more fields from immature coming into maturity and also more from the young category moving to the prime category. And then we have the independent crops purchase, our marketing team this year -- or last year rather, in 2021, was more aggressive to basically increase our mill utilization. We managed to purchase 327,200 tonnes all over our 5 mills in all the provinces compared to only 289,700 tonnes in 2020. So this slide clearly shows our growth from 2020 to 2021 in terms of crop process in our 5 mills. Next slide, please. This slide is about our increasing billing capacity. If you look at the graph, the linear graph shows our milling capacity over the years. In 2'10, we had only 140-tonne mill in Pakatan, Sumatra. And over the years, we have built 5 mills. As at 2021, we have 140-tonne mill in Pakatan, 145-tonne mill in Kalimantan, 360-tonne mills spread out between Bangka and Kalimantan. So we have a total of 5 mills right now. And in 2022, as you can see in my next slide, we intend or we are targeting to complete our sixth mill in Musi Rawas. The dark green charts clearly show crop from M.P. Evans' estates. This is actual crop. The lighter green shows crop from the cooperative. The orange bars show crop that has been purchased from outside vendors. So if you look at the graph very clearly, this is the progress of M.P. Evans. It tells us the whole M.P. Evans story over the last 15 years in Indonesia. CPO production in 2021, we produced 312,900 tonnes versus 271,700 tonnes. Mill output was totally unaffected by COVID-19 in the pandemic year. Production cost is lowest, especially when milling own crop in group mills. To basically show you this production cost for our own crop is only $350 per tonne, whereas total production costs in our group mills is $465 per tonne. Why? Why the difference? It's because we purchased the cooperative crop and the outside crop at a price which is very much related to the CPO market. There were 2 new mills commissioned in 2020 and 2021, both in Kalimantan, one is the Rahayu mill in PMM, TJA, and the other one is the Bumi Mas bim 1 mill in the Bumi Mas project. One is a 45-tonne mill, the other is a 60-tonne mill. Development of our group's sixth mill, as I said earlier, at Musi Rawas is on track and for completion at the end of 2022. Margin, of course, increases as more of our own crop is milled in our own mills. We expect to process 96% of our own crop once our sixth mill is open. That is expected to be ready December 2022. Next slide, please. Continuing our investment. Funding as we started at Musi Rawas, we expect a total of 10,000 hectares to be planted this year. We had already planted about 9,000 until last year. And we are hoping to achieve approximately 12,000 hectares in this Musi Rawas project. As I said earlier, mill #6 at Musi Rawas construction will be completed in 2022. Work is in progress here. If you look at this beautiful picture of a mill, this is an example of our mill, this is in Bangka, you can see the mill, the ones -- the building with a green roof, the orange structures are the storage strength for CPO. The balloon-like cover is our biogas plant. And if you see carefully on the left-hand side is our compost plant, the water body is our catchment area. Basically, all our mills go through this zero waste system, where biogas is used for electricity and sold to the grid also, all our villages are wired to the grid. We don't use fossil fuel at all for our villages. The compost, the M.P. fruit bunches are used as a fertilizer resource and put back into the field. We continue to invest in our group estates, biogas plants, bulking facilities, infrastructure and regional offices. To move -- to give you an example, we just completed our biogas plant for the bim 1 mill in Bumi Mas. We completed 2 bulking facilities last year, one in Bangka, in Pangkalpinang and the other in Ara, that's a Bumi Mas project. The bulking facilities is where we store our oil and where our oil is shipped out through a river. We continuously improve our infrastructure, that's housing grains, [indiscernible], et cetera. I'm very glad to inform you that we just moved into our brand-new regional office in Samarinda. Acquisition opportunities for sustainable new land around existing estates has been our priority. We are looking at 3 parcels, 2 in Kalimantan and 1 in Sumatra. This will really help in improving our mill utilization. So that is our #1 priority. And at present, negotiations are on the way. Of course, our medium-term objective is to acquire or develop a new 10,000 hectare property. We only look at brownfield studies. And right now, the human resource aspect is being attended to before we move into this seriously. That means there are lots of parcels coming to us. We believe that we have to be very, very equipped with our human capital before we take over a project. Of course, we have to look at the sustainability aspect and various other issues before we purchase a new 10,000-hectare project. Matthew, maybe you like to carry on from here? Thank you.

Thank you very much, Chandra. I think at this stage, we will move on and just spend a short amount of time looking at the 2021 results themselves. You've already seen the highlights slide that Peter shared with you. But hopefully, you've already taken from that, the main theme for 2021 results, which is all about increases across the board and a little bit more on that in terms of this slide. So you can see revenue up substantially, revenue up by more than 50% and revenue just over $275 million when we look at 2021. Of course, that's a factor of our increased production that you've seen already and in the price environment within which we've operated over the course of 2021. So our mill-gate price that we achieved, up by 37%, our average mill-gate price over the course of the year, was up to $800 per tonne, $810. And some of that Peter already touched on, the increase that we've been able to reach in our sustainability income during the course of 2021. Similarly, a big increase in gross profit. It's great to be able to report to you that for the first time, we have gross profit of over $100 million in 2021, and a big step up in terms of margin. So margin of 37% in the year compared to 20% in the previous year. We talked about production costs, how our production costs are at their lowest when we met our own crop in now own many facilities, but our total production costs in the year of $465 and the $350 being related to their own crops through our milling facilities. Yes, we do see some anticipated inflationary pressure coming through in '22. But of course, we expect that to be more than offset by the high price environment we find ourselves in right now. And then you can see earnings per share more than GBP 1 of earnings per share, 115.6p of earnings per share, absolutely supporting our step-up in terms of normal dividends for 2021. And then looking at cash on the balance sheet. So another $100 million milestone here on operating cash. So when we look at operating cash before interest and tax, $109 million of operating cash generated in the year, supporting the remaining capital investment we're working through. So that supported the operating. These are the capital investment in our Bumi Mas mill and other things that we were doing in 2021, and we'll continue to support what we're doing in 2022. And a big step up in cash used for shareholder returns in the year there, as you can see. As Peter said, the only thing that's gone down in the year, it is net debt. Net debt was very nearly eliminated during the year. We started with $78 million of net debt, and we closed the year with $5 million of net debt. So a real change in terms of our balance sheet in the year. When we look at the balance sheet, net assets up to $445 million. Net gearing essentially gone, nothing, 1% and then a very strong balance sheet to put us in a great position to pursue our strategic goals. And when we think about the outlook and we think about, first of all, stepping into 2022, a very strong start to 2022. Just to highlight, we actually, when we look at the very early part of '22, we see a slightly lower crop in the first couple of months of '22 compared to 2021. That's really a seasonal issue just in terms of being in a high cropping period versus the lower cropping period in the early part of this year, but we absolutely expect the long-term trend of crop increases to reassert itself as we move through the year. And as I'm sure has become really clear as we've been talking to you, the CPO price environment within which we find ourselves means that the average mill-gate price for the early part of this year is significantly ahead of the outlook which we saw for 2021. So as I said, just over $800 per tonne throughout 2021. First 2 months of '22 over $1,000, so $1,050 as the average for the first 2 months of '22. And that means we continue to be very cash generative. So as I said, we opened the year with a small net debt position. We now, by the middle of March, find ourselves as very much a net cash position, $27 million of net cash by the middle of March, a significant further step forward from a balance sheet perspective. We continue to work hard on potential sustainable acquisition opportunities. We continue to invest in Musi Rawas in terms of ongoing planting. The mill development program remains very much on track. So we expect that to be ready to go around the end of this year. And important to note that group plantings overall remain pretty young by industry standards. So that gives us very much that promising growth profile for several years still to come. We expect the spend in palm oil -- pricing in the palm oil market to continue for some time still to come. And finally, to observe and to reassure we continue throughout our operations, unimpacted by COVID-19. A final word on returns, on dividends. So you can see in the chart there, our long-term track record over 30 years, so all the way back to 1992. And you can see that our long-term track record of dividend only goes in one direction. It's an ever-increasing track record of returns. And you can see the big step-up in the last few years, so going back for 3 years, we've moved from 17p to 22p and now to 35p in terms of normal dividends to shareholders. And of course, we would be extremely reluctant to turn back on this long-term track record, and that's very much our expectation for the future that we continue to work on progressive returns to shareholders. And so finally, [indiscernible] perhaps just leave the summary there. I think that we need to go over the points again. Hopefully, the points we've made have been clear. And perhaps at this stage, this would be a good point at which to turn to the questions that I know a number of people have been asking whilst we've been talking to you.

[Operator Instructions] I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. As you can see and as you just mentioned, we've received a number of questions throughout today's presentation, and thank you to all the investors for submitting those. Could I ask you to read out the questions and give response to what it's appropriate to do so, and then I'll pick up from you at the end.

Thank you very much, Alessandro. We thank you so much all -- there are a lot of questions, and thank you so much for taking so much interest. We may not be able to get through all of them and I suspect we won't. So we're trying to lump some of them together as it were. We might just kick off with 3 of the questions or the themes anyway. The first one, perhaps I'll tackle on selling forward. There's a question on that as to whether at these high prices, whether we're planning to sell forward, and perhaps Matthew might answer a number of questions about the levy duty, whether this is a kind of one-off windfall, whether they have further levies, questions relating to that, if that's okay, Matthew. And Chandra, there's been a question regarding whether we can improve our yields as good as they are already, whether there is the capacity to improve our FFB yields and our oil extraction rate yield. So those two. So we might start with these 3 questions as it were. So on the question of selling forward, the way the question is freeze is actually on hedging forward. I mean, I would say sort of controversially say, well, do you mean speculating that forward? Because in a sense, the natural hedge is by selling as we produce. Palm oil is unlike most other crops, whereby we are confidently harvesting and we're constantly selling every day, week, month of the year. Unlike an annual crop, so many crops are just harvested once a year, and there is a good reason in those instances, arguably, to hedge forward, to sell forward as you see the prices rise. But I mean, we were asked when the price was at $800, indeed then again at $1,000 and $1,200 Rotterdam, whether we should be selling forward. And we feel strongly that we do best by accepting the price on the day by maximizing the productivity, maximizing the price we achieved through the sustainability premia. But there are risks involved and practicalities involved in selling forward, not least that refiners often don't actually want to take on board the risk themselves in accepting forward purchases on the physical market. Otherwise, you have to look for alternatives of selling forward on the futures markets, which are already trading at a discount, you get brokerage commissions for the rest of it. And you get the prospect of additional taxes being charged, levied, say the market goes up substantially, you sold forward at a lower price, you get taxed at the higher range. It's a sort of double whammy. Why go to all that potential risk where you can just quietly achieve the average day by day, week by week. So we -- that tends to be our policy. I mean we do sell and I'm little bit of [indiscernible] we might sell forward. We [indiscernible] anything up to the next month or 2 or even arguably 3, but really not beyond that. And I think we generally do better by that strategy. So Matt, do you want to talk about levies, et cetera?

So we've had a number of people who've introduced the question connected to the change in the export levy structure in Indonesia, which is a relatively recent change. And indeed, we've highlighted it in an announcement that we made last week, reflecting the fact that it was indeed a change that was only formalized in the last week or so. And essentially, what's happened is up to last week, the way in which the export tax and the export levy was charged in Indonesia, there was -- for both the tax and the levy, there was a graduated scale of charges, but the graduated scale stopped at prices above $1,250 a tonne. Now with the increase in prices that we had observed in recent weeks and recent months, the Indonesian government have sought to introduce a new measure in order to support the domestic market. And the new measure that we introduced was called a domestic market obligation, which was designed to make sure that prices for the local market, for local consumers, remained at what they considered to be at a reasonable level. This new measure that was introduced called domestic market obligation, I don't think worked entirely as planned, shall we say, as a result of which after several weeks of seeking to introduce this new measure, this domestic market obligation, the Indonesian government took the decision within the last week or so to remove that, to take away the domestic market obligation and far more simply, to update the existing export levy structure. And because up to now, the export levy stopped its graduated scales at $1,250 a tonne to update that graduated scaling and update it from the $1,200 up to $1,500, so that for prices between $1,200 and $1,500, there was an extra amount of graduated increase. And for prices above $1,500 a tonne, essentially, there was an extra $200 of export levy. And that's where we now find ourselves, so the price plan is about $1,500 a tonne and therefore, an extra $200 per tonne is charged. Now we don't pay the export levy because we're not exporters. However, what happens is the amount that we then are offered in tenders for selling our oil where we sell it from our mill gate, the vast majority of that finds its way back to us. So we end up with unwinding gap between what's the greater price and knockdown price that you can see on the screen and what everyone understand and what we received mill gate. So there's a widening. Now -- sorry, this is a long explanation. There already has been some widening as people try to work out what's going on with this domestic market obligation. And actually, what we found is because there's already been some of that widening going on with the domestic market obligation, what happened when the export levy was introduced. Firstly, people were pleased because it gave clarity, it's an existing measure that everyone already understood. And secondly, the prices just before we just asked for the introduction of the change to the levy were pretty much the same. And to give you a flavor of that, we tried to make that clear in our announcement last week to say that our first tender, just after the export levy was updated, was still at well over $1,000 a tonne. I think we announced it was $1,080 a tonne. As you can see from what we were just talking about, our average in the first 2 months of the year is $1,050. So we're still getting very, very strong prices in terms of mill-gate pricing, even after the introduction of the updated levy. Sorry if that was a long explanation, but notably these things tend to be a number of different moving parts. But the key takeaway is that the export levy has been updated, but we continue to receive very strong ex mill-gate prices for our oil.

And just briefly sort of ancillary questions to that regarding whether this is just a windfall tax or whether it really will go towards subsidizing consumers. I think it is felt that, yes, it will subsidize because I think it's a real burden on domestic buyers of palm oil. And I think it's unlikely to be stepped up further because we're a very efficient producer, other companies, not least some of the Indonesian government-owned plantation is not so efficient. So they would really start to hurt if the taxes were even higher than what have been imposed. So I would doubt that they will go hard, but I mean I can't say anything for sure as taxes are involved. Chandra, on the point about the capacity to improve yields of our -- in the field and in the middle, what would you say about that?

Yes. Thank you, Peter. We are doing our best to touch industry standard. And most of the time we do. Usually, when seeds are being sold by -- the seeds, meaning that planting material is being sold by vendors, they give us a standard mill curve. There are certain times when we have surpassed those mills, certain times, we could not because you see the piece of land is very varied. It has got physical features, moisture is a very, very important factor in oil palm yields. But I will assure you that we are achieving very good yields when compared to our competitors or our colleagues, both in Indonesia and Malaysia. Even in the mill, all of our mills are above 23% oil extraction rates. I think only 1 operator in Malaysia achieves that, that also not in every mill. Whereas in Indonesia because of the labor, ample labor supplies, there are a number of conditions that achieve above 23%. So we are there on the top. We are there amongst the top. We also employ one of the best agricultural agronomists to give us fertilizer recommendations. We are also fully going into our compost applications to improve the sulfur in all our plantation we use. Thank you.