Rain Industries Limited (500339) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. On behalf of Rain, we welcome all the participants to the third quarter 2020 earnings conference call of Rain Industries Limited. Speakers on today's call are Mr. Jagan Reddy Nellore, Vice President of Rain Industries Limited; Mr. Gerard Sweeney, President of Rain Carbon Inc.; and Mr. T. Srinivasa Rao, Chief Financial Officer of Rain Industries Limited. [Operator Instructions] Please note that this conference is being recorded. During the conference call, management will be referencing and discussing a slide show presentation, which is available for viewing on our website at www.rain-industries.com in the Investor Relations section. It is recommended during this presentation while listening to management's discussion. Before we begin, management would like to mention that some of the statements made in today's discussion may be forward-looking in nature that could be affected by certain risks and uncertainties. The company's actual results could differ materially from such forward-looking statements. Now if you could turn to Slide 3, I would request Mr. Jagan Reddy to provide an update on key developments within the Rain Group. Thank you, and over to you, sir.

Thank you. Good evening to everyone. I hope everyone is staying healthy and safe. Many parts of the world are entering a second and even third wave of coronavirus. This resurgence serves as a stark reminder to all of us that we cannot let our guard down or become complacent. To ensure the health and safety of our personnel and to safeguard the operation of our facilities, we reinstituted some of the strict measures that were in place at the height of the pandemic, including mandating that Rain personnel work from home to the extent possible, limiting travel between Rain locations and a continued ban on travel, except in connection with essential business. A shutdown of any production lines or facilities due to COVID-19 could have a significant impact on our earnings, our ability to meet customer requirements and our reputation as a company. The safety of our employees will continue to be our top priority as we continue operations during the pandemic. Turning to Slide 4 of the presentation. When we entered third quarter of our company -- third quarter, our company and much of the world were hoping for a V-shaped recovery as the global economy began to rebound from the initial outbreak of COVID-19. While we did see some recovery, it quickly flattened. Our third quarter was characterized by an increase in volumes, offset by tightening margins. This in part was the result of a change in product mix due to the sell-off of certain inventories accumulated in Q2. Revenues of INR 25.66 billion for the quarter was an increase of approximately 9% compared to INR 23.61 billion during Q2. And our adjusted EBITDA of INR 5.2 billion during the quarter was an increase of approximately 19% compared to INR 4.3 billion during the second quarter of 2020. Performance improved as the global economy began to return to normal after the near worldwide shutdown during second quarter. Proactive measures taken in second quarter to increase finished product, storage capabilities allowed us to wait out the adverse commodity price movements and meet customer demand during third quarter as they restock inventories. However, during third quarter and even now in fourth quarter, multiple hurricanes have significantly impacted our U.S. Gulf Coast calciners as the seemingly endless hurricane season continues to assault the Louisiana Coast. Hurricane Laura made a direct hit on our Lake Charles facility in late August. The Category 4 hurricane and its 150 mile per hour winds left much of the region without electricity, sewage treatment or clean water. This was the strongest hurricane to hit Louisiana in the past 150 years, and our Lake Charles calcination and energy facility suffered a significant damage and has been undergoing restoration after the event. For the past 8 weeks, it has been an all-hands deck -- all hands on deck at Lake Charles, making immediate repairs, and I am pleased to report that we have restarted one kiln as of October 22 and expect to restart the second kiln as well as production by end of this week. To date, we have lost over 60 days of operating time and approximately 32,000 metric tons of CPC sales, which we could not fulfill from our other locations to the quality of production constraints. Looking ahead to the fourth quarter. The prospects for near-term economic improvement are challenging as demand remains flat, and low crude oil prices continue to have a negative impact on our margins. The fourth quarter is also one where our seasonal products see reduced demand as customers manage year-end inventory levels. Finally, during the fourth quarter, we will have an unusual number of plant turnarounds occurring due to delays related to coronavirus, which will impact total plant throughput. That said, on the horizon, there are some bright spots and reasons for optimism once we get to 2021. China's economy is recovering back after being virtually shut down at the beginning of the year due to the COVID outbreak. Outside of China, improved pricing in aluminum is having a stabilizing effect on smelters in North and South America, which should secure volumes for our carbon products. In addition, we are seeing increasing demand for titanium dioxide producers [ turn around ]. In our Cement business, there was an increase in volumes and revenue by approximately 26% and 38% respectively compared with second quarter. The sales volumes have improved across all regions where we operate. The EBITDA has improved by INR 518 million compared to second quarter, mainly driven by high margins and lower costs. With good monsoons in South India, the rural economy should provide strong impetus to the construction activity and thereby the cement demand over the next several quarters. With this business update, I will now turn over the call to Gerry to take you through the industry and other business updates on Slide 5. Gerry?

Thank you, Jagan, and good morning, everyone. It is a pleasure to speak with you all again. Turning to Slide 5. In the top left corner, we have our carbon segment sales prices and volume. While our CPC volumes were up due to the timing of shipments compared to Q2, CPC prices remained relatively flat. Simultaneously, Q3 saw GPC prices increase due to further reduced availability as refiners cut run rates in the face of continued weakness in transportation fuel demand. Also, as previously mentioned, the busy hurricane season in the Gulf of Mexico intermittently closed many refineries. We believe that as a result, GPC production decreased by approximately 600,000 tons in a relatively short period of time. At the same time, in an effort to economize during a period of reduced throughput, U.S. refineries have increasingly switched to lower quality crudes, which results in higher sulfur GPC availability. The resulting increased tightness in the anode grade GPC market is expected to continue, but we are already seeing an uptick in CPC prices in Q4, which indicates we should see a normal adjustment period as prices reset in Q1 of 2021. Looking at coal tar pitch sales. Volumes were down due to curtailed aluminum smelting capacity as an aluminum major adjusted its global smelting portfolio to match market demand, and we also saw weakness in the graphite industry. The weakness in demand not only reduced our volumes but was also the primary driver of reduced CPP prices and margins as well. In terms of other carbon products. This subsegment benefited quarter-over-quarter from resumed global automotive industry production, following a near halt in manufacturing between mid-March and mid-May. Similarly, demand for tires improved as stay-at-home orders were lifted and people around the world began driving again. From a raw materials perspective, we expect continued recovery in the steel industry to improve availability and secure our ability to maintain raw material supplies at an appropriate price. Moving to the Advanced Materials segment. We saw strong demand for our seasonal products, continued strength in electric vehicle sales, increased demand from the automotive industry and some strength in the construction industry. A significant performance improvement we have seen this year was from the closure of our Uithoorn facility in the Netherlands. We are benefiting from the consolidation of resins production into our Duisburg facility in Germany, which has increased margins and improved our utilization rates. As a reminder to all, this initiative reduced over $8 million of operating expenses from this business and eliminated some low-margin products from our portfolio. In terms of the aluminum market, LME prices are at their highest level in the past 1.5 years. In conjunction with that, LME inventories are lower due to strong demand from China as smelters returned to producing value-added aluminum for customers versus standard P1020 for sale of the LME inventories. While we saw the announcement of one smelter closing, the threatened closing of another and a 40% reduction in production at a large anode plant during Q3. We believe these will be, to some extent, offset by plans to ramp up production at other smelters in the European and Latin American regions. Barring another prolonged COVID shutdown, we believe that aluminum demand and pricing will continue to be strong in 2021. Turning to Slide 6 regarding our major projects. As we said in our previous call, our Hydrogenated Hydrocarbon Resins plant in Germany is producing our NOVARES pure water white resins, and we are working with our customers to fine-tune and qualify the resins for their various applications and formulations. We are comfortable with where we are during this early stage of plant operation. During Q4, we expect to resume construction at our facilities in the United States and India that will produce our engineered and value-added anhydrous carbon pellets, or ACP. A comparative study demonstrating the differences in performance characteristics of both calcine ACP and CPC, which was recently undertaken by an internationally recognized carbon laboratory, has been completed and its findings are in the process of publication. Once production begins at those plants next year, ACP will enable us to turn otherwise inferior GPC into a marketable material that offers energy and emissions benefits to anode producers and aluminum smelters. In addition, the fact that the composition of ACP allows us to utilize fine sized pet coke particles as a raw material rather than incinerating them during calcination will serve to both improve our carbon productivity and lower our plant emissions even further. Finally, at our new vertical-shaft calcination plant in India, we are nearing the end of construction after what has likely been the most challenging era ever in which to build a new plant in India due to the COVID related impact on the nation's entire workforce. Our aim in designing the plant with its high carbon recovery rate, emissions cleaning technology, fertilizer byproduct and electricity generation through waste heat recovery was to create the most environmentally friendly calcination plant in the world. Further enhanced by the flexibility of the integrated CPC production, our state-of-the-art site will benefit from the ability to convert raw material streams that are normally not suitable for calcination, including those readily available in India into high-quality products for our global customers. While we complete the final stages of construction and in parallel, await further clarity from the Indian authorities on the shaft calciners raw material feedstock, we look forward to the operation of the site, which will be ready to commence production within a few months of mechanical completion. With that, I'll now turn the call over to Srinivas, who will take you through the consolidated financial performance of Rain. Srinivas, over to you.

Thank you, Gerry, and good evening, everyone. It is a pleasure to speak with you today. In the third quarter of 2020, Rain achieved consolidated net revenue of INR 25.52 billion compared to INR 29.78 billion in the third quarter of 2019, a decrease of INR 4.26 billion or 14.3%. This resulted from a decrease in revenue of INR 3.69 billion or 19.2% decrease from our carbon segment and INR 1.06 billion or 13% decrease from our Advanced Material business segment, offset by an increase of INR 0.49 billion or 20.8% increase from our Cement business segment. Rain's consolidated adjusted EBITDA increased by INR 446 million compared to the prior year. This resulted from an increase in the Advanced Materials segment by INR 349 million and an increase in the Cement segment by INR 569 million, offset by a decrease in Carbon segment by INR 472 million. Now turning to the next slide on Carbon segment performance, Slide #8. Revenue from Carbon segment was INR 15.55 billion for the quarter ended September 30, 2020 compared to INR 19.24 billion for the same period last year. This is a quarter that sales volume declined by 1.1% and the average blended realization decreased by 18.2% due to the changes in the demand and supply situation in North American markets and competition in the Asian markets, coupled with the changes in the fuel oil quotation and lower demand from aluminum, carbon black construction in the graphite industries, which was offset to some extent by the appreciation of U.S. dollar and euro against Indian rupee by 5.6% and 11.1%, respectively. Overall, due to the aforesaid reasons, revenues from the Carbon segment decreased by 19.2% in third quarter of 2020 as compared to third quarter of 2019. Adjusted EBITDA of the Carbon segment decreased by about INR 472 million due to the margin pressure. Turning to the next slide on the performance of Advanced Materials. Revenue from our Advanced Materials segment was INR 7.12 billion for the quarter ended September 30, 2020, as compared to INR 8.18 billion for the same period last year. During the quarter, there was a 15.3% decrease in volumes, driven by reduced demand due to the temporary shutdown of few of customer facilities due to COVID-19 and lower demand from rubber adhesive on construction industries. Volumes were [ affected ] by the closure of our Uithoorn facility in the Netherlands. During the Q3 of 2020, the average blended realization increased by about 2.8%, driven by changes in the customer mix, and there was an appreciation of euro against Indian rupee by 11.1%. Due to the aforesaid reasons, revenue from Advanced Materials segment decreased by about 13% during third quarter of CY 2020 as compared to third quarter of CY 2019. Adjusted EBITDA for the Advanced Materials segment increased by INR 349 million due to the higher realization in engineered products and resins compared to the third quarter of 2019, coupled with the appreciation of euro against Indian rupee. Moving on the slide on Cement business. During the third quarter of CY 2020, Cement revenue increased by about 20.8% compared to third quarter 2019 due to an increase in realizations by 21.8%, which was partially offset by a decrease in volumes by about 0.9% or about 1% as compared to third quarter of 2019. Cement EBITDA increased by INR 569 million due to higher margins and lower costs. Moving to the next slide on debt. We ended the third quarter with total debt of $1,224 billion, including working capital and other loans worth USD 94 million. Net debt was $1,004 million and based on LTM EBITDA, $267 million. We ended the quarter with a net debt-to-EBITDA ratio of 3.8x. Despite that ratio being above our target level, we are still comfortable as our average borrowing cost stood at about 5% and we expect it to be remained stable since the floating rate portion of our long-term debt is tied to the EURIBOR, which is still negative. Cash outflow on our capital expenditure and planned turnaround costs for the 9 months ended September 2020 totaled USD 122 million, of which USD 60 million was for our 2 major expansion projects, Hydrogenated Hydrocarbon Resin plant in Germany and Vertical-Shaft kiln project in Visakhapatnam, India. Referring to the earlier comments about the resumption of activity and our deferred expansion projects and compliant projects that could not be delayed, we expect cash flows -- cash outflows on a full year basis to improve versus previous guidance. Regarding liquidity. We ended the quarter with USD 208 of cash in hand and undrawn revolver credit facilities of USD 111 million. As evidenced by our cash balance, we are preserving cash proactively to be prepared for any unforeseen event. We continue to watch our liquidity position closely to ensure that our ability to access credit line is not hindered by our performance. With that, I will now turn the call over to the operator for Q&A session. Operator?

[Operator Instructions] First question is from the line of [ Gunjan Kabra ], individual investor.

Sir, just one basic question from my side with respect to aluminum industry and the Carbon segment of the company. Sir, we are seeing huge demand from China. One country is going to face lockdown and there's pickup in the demand in another country. So with such different market environment right now, what are the positives that you see in the industry that will continue to drive the profitability and help in maintaining margins going forward, say, for next 2 quarters? And what are the problems or the concerns that you see going forward in this environment that you all are taking care of? Like I expected the CPC volumes to be a little on the higher side quarter-on-quarter but on the contrary, decreased. So what are your views on the industry?

Gerry?

Yes. Thanks for the question. From a macro sense, there's been -- our business on both -- in the Carbon segment, both the calcined petroleum coke and the coal tar pitch is not necessarily one that's focused on price needing to be at a certain level. We can make money on our products at a high price point, at a low price point. It's all our ability to buy the raw materials at an effective price. The turbulence that we've seen in the market this year with COVID and the resulting lockdowns has left essentially the disruption for the last 2 quarters and then also into the fourth quarter, the disruption of price versus supply -- price of our finished products versus supply of our raw materials. We foresee that correcting and stabilizing, as we just mentioned in our comments. So specific to your question on the Carbon segment is that we are already seeing the CPC price. While we had less demand, that demand is now stabilized. We are already seeing the demand picking up a little bit and the price of CPC picking up in concert with the raw material price hikes that we've seen. So that's really the only thing that we are seeing. Likewise, in the coal tar pitch side of it, we saw some of the closures caused by the disruption in market take demand off so that we were pushing product into -- we were pushing volumes into a market that didn't want them. We see those volumes now stabilizing going into next year and we have the opportunity to reset our raw material prices with higher production from the steel industry. And as a result, we can reestablish our margins. So that's where we see the confidence moving forward in 2021, that we'll have more stable supply and demand and therefore, we'll have more stable margins than more traditional margins.

[Operator Instructions] Next participant is Viraj Mehta from Equirus Securities.

Congratulations for a good set of numbers in a testing time. I have 2 questions. First, if I look at the broader picture of the company, next year, with our expansion coming in and also world probably normalizing, would it be fair to say, and our -- no new big CapEx coming in, would it be fair to say that potentially next year, it will be one of the best cash flow years for the company, free cash flow year for the company?

I cannot comment on -- go ahead, Gerry.

Sorry, go ahead, Jagan. I guess, I would say, sir, thank you for your question. And I would like to hope that, that goes from your lips from God here. But we can't really comment on forward-looking type of situations. We are seeking to reduce our CapEx, and we're hoping for more positive market conditions for 2021 and -- which could help us. But at this point, in a world that's shown us virus and record U.S. Gulf hurricane activity, for now, we're looking forward to the end of hurricane season. We just, hopefully, finished our last hurricane in Louisiana yesterday. We're hoping for the end of this and just, let's call it, calmer waters and calmer operating environment for 2021.

And I wanted to ask this to Mr. Reddy. Sir, if we look at last few years, we have always come up with CapEx of north of $100 million, $150 million every year. I understand you have $60 million, $70 million of recurring CapEx. But post this expansion, are there any big CapEx in line for us for the next 18 months?

No, there is nothing in pipeline for us. Once we compare the [ latency ] of projects, if they're completed. And also the shaft calciner project, we have no major capacity expansions.

Sir, whatever cash flow we will make, is it fair to assume that we will use that in debt reduction?

Yes. And because we have no other use for cash, we can actually use it for debt reduction. And starting 2022 March, we will not have any prepayment penalty also on our bonds. So we can actually start prepaying them.

Question is, because our stock today trades at multiyear lows of last few years, has the Board considered a proposition for a buyback, please?

See, we are actually -- we are a holding company, so basically, our cash has to come in the form of dividend as a holding company. So we have certain restrictions. But once the cash comes in, we can evaluate several things, and we will look forward to it.

Next question is from the line of Rohith Potti from Marshmallow Capital.

I would request the management to give, please, more clarity on when the 3 new CapEx projects so far, which is the HHCR, the vertical-shaft and the ACP project. When do you expect them to start generating revenues for the business?

We expect the HHCR project to -- it's already commenced operations, so HHCR projects should commence operations. And revenue should -- actually, you can see from Q1 2021. And the shaft calciner project, you will see, hopefully, from -- depending on -- we are hoping that there's a lot of changes in government, including the new environmental regulations coming in. We are hoping -- and calciner being the world's most environmental-friendly or lowest emissions project in the world. We are hoping that we should get clearance. And once we get that, within this first quarter of -- we're getting the permission, we'll start seeing revenues because we have actually a lot of demand actually because of the projects that is coming in. There are a lot of customers that are approaching this product. And we can actually simply import replacement because India imports over 500,000 tons, and we can actually import replacement also. So we see projects and that, see, the ACP projects are basically for cost reductions. They are not -- we don't sell that product to anyone, but we'll actually be using the raw materials, but they're -- it will reduce the cost of our production substantially because it enables us to use a low-density and the nontraditional materials for which there is not that much demand or there's good availability for that products in the market. So that is the reason why we think the ACP will help us reduce the raw material costs.

Two follow-up questions for you, sir. So the first one, you mentioned about the environmental clearance for the vertical-shaft calciner project. So just a clarification. Is it -- I mean, to operate the facility, we need an environmental clearance, which is not there yet? Or do you -- is it related to the Supreme Court issue where you expect approval to get -- to be able to import raw materials because there's an APC, and it is an environmentally advanced plant that you're referring to?

It is -- we already have all the permissions to import -- sorry, we already have all the permissions to operate the plant. All the environmental clearance have already been received. We're just awaiting the Supreme Court clearance for import of raw materials.

Okay. Understood. Understood. That was helpful. My last question is broadly -- it's a long-term question, sir. If I see from -- I mean, in 2009-'10, we -- the company had a market cap of around INR 1,500 crores. Cut to today, we are at a market cap of INR 3,500 crores. Barring a brief period of around 2 years, we have -- I mean, while the management -- I'm a long-term shareholder in the company and I believe that you have created exceptional value inside the business through your acquisition and CapEx. But the recognition -- given a publicly-listed entity, the recognition in the market is not yet there. I just wanted to know your thoughts on -- if you have any thoughts on why that is the case? And is there any plans to unlock the value that is in the company that you have built over the last decade in the future?

Unfortunately, I cannot talk about the stock price because it's something -- all we can do is run the company as well as we can, but -- to the best of our ability. But I cannot comment on the investor perception for the company. But we always try to do the right thing for the company. That's all I can say. Thank you.

The next question is from Rahul Jain from Systematix Group.

Sir, one is, I want to understand your Carbon business better. So we've seen a good decline in the inputs for, for example, fuel oil and other things. And we have -- but we have -- and also price has corrected. Going forward, what is your view over the next 6 months in terms of how aluminum is shaping up? And what do you think on your margin front? Do we have any linkage to aluminum price on the way we price our product?

Gerry?

Yes. As our comments indicated, the real positive that we have out there, and something we're all very pleased with, we just need the -- our other circumstances to catch up to is that the aluminum price globally is at an 18-month high. And so we really think that with that macro umbrella of positivity over the aluminum industry, that it will continue to firm up the positives and even the reductions that we've seen will be overcome by capacity increases, essentially ramp-up of production in existing smelters. As far as our products are concerned, we are not indexed in any way to the aluminum price. The aluminum price moves off of its own supply and demand factors. But certainly, the level of the aluminum price and the health of the aluminum price affects over the long term, the amount of production in the world. And it's that amount of production that we rely on to provide demand for really the vast majority of our Carbon Products segment.

Right. And sir, what kind of market share do we have in this business? And in a sense, would you also give some color on margins? So do you think these kind of margins are maintainable in the future? I mean, do you have any view on that?

The percent of market share is not easy to express when you consider China because you can't quite understand exactly what's going on in China. But if we exclude China, for the sake of the dark area that it is, at current -- outside of China, we're currently at roughly a 10% market share globally of the freely traded coal tar pitch and calcined petroleum coke products.

Right. Right. And sir, just if I may squeeze in, one, is that do you sell your products on a contract basis or is it like a spot market?

No. The overwhelming majority of our carbon products, I assume that's what we're talking about, are on long-term contracts.

With the price participation?

Mostly on a quarterly basis.

You have a quarterly range? Okay.

Yes.

Next question is from [ Akhilesh Kumar ] from [ AdPro Technologies ].

I have one question. On your last call, we were discussing about like we have in hand to avail any facilities relief packages announced in the Europe or any other country. Have we heard anything or we are planning anything?

Only we did actually take 1 PPP loan from the U.S. at about $6.2 million. So that is the only thing we have taken because otherwise, since we are operating and our cash flow is comfortable, we did not seek any other loans from the governments, any government supported loans. This PPP loan actually is for forgivable loan. We are expecting that the $6.2 million we have taken is a forgivable loan. And the U.S. government, we expect them to open up the -- our request for forgiveness for all those loans in the next 1 to 2 months. So then hopefully, that should not be payable.

Okay. And I have another query. I think for the quarter after quarter, we are still getting a, I think, an issue of getting the permission for our raw material GPC. This year also, we got, like say, from last year, the reduced amount of pollution for GPC. Would that be sufficient enough for running out the existing plant itself for the entire year?

See, our existing plant, there is no problem. We have sufficient raw materials for running our existing plant. Only for the SEZ plant where we have difficulty getting material, but we are hoping that the issues should get resolved within the quarter.

Okay. And the last thing, what I have been asking every quarter but getting the same reply. With the cement company evaluations and the demand/supply better, do we have any -- like how long we have to wait to get that cement tower business to be moved again or listed again?

No, we have no plans. At this time, if you see this quarter, actually, cement is the one that actually really helped us. So when -- so global markets are a little turbulent. And we expect the cement business to do well going forward because of the rural economy is going to improve considerably. And we are -- our presence, mostly is in rural India. So at this point in time, we have no plans.

But it would, let's say, help the shareholders getting the -- unlocking the value, like market cap if it will cement itself, we will have around INR 2,000 market cap.

We'll have no further comments on that, please. thank you.

Next question is from the line of Arvind Kothari from Nivesh India.

Congratulations on a very stable performance, sir. I had a question related to the lag impact of the prices of GPC and CPC that you were alluding to in the opening commentary. So our channel checks has led us to believe that in China, actually, the CPC price is because of high operating rates in aluminum have gone up. But at the same time, the GPC prices have also gone up. So are we believing that the next quarter, maybe we will have higher GPC prices? The CPC prices will be able to increase only after the next quarter?

Yes, we normally have a 1 quarter lag. At most 2, but mostly it's 1 quarter lag. So we expect Q1 2021, the increased prices can be passed on to the customers.

So the margin that we experienced this quarter might suffer in the coming quarter? Is that what -- the correct assessment made?

Excuse me?

The margin that we experienced close to 22% -- 20% this quarter, that might get affected in the next quarter and might again recover in Q1. Is that the correct assessment?

See, again, our business is a little different because we cannot just go by the margins or percentages because -- see, our raw materials fluctuate so will our finished product. The highest the raw material price and the highest CPC price. But as the numbers keep increasing, the margin actually, technically -- see our number, your -- let's assume in this market, you may make $50 and $200, it may actually look like you make [ 25% ]. And let us say, $600, you may make $100, the percentage will look very small. But actually, in absolute terms, you make more money. So the percentage is not the right way to look at it. But we think Q1 going forward, I think the number should be better actually.

Got it. Another question was regarding the post COVID, we look at various industries. A very strong emerging trend is that the smaller operating guys are actually facing the heat and larger players are actually increasing their market share as well as margins. So with respect to our industry, I know China is a gray factor. But leaving aside China, what do we see in our other geographies? Is the competition lagging and smaller players maybe can give way to us in terms of gaining more market share and maybe more -- higher margins going forward?

We expect to sell -- whatever we produce going forward, we expect to sell all our products.

Okay. Okay. And my last question would be...