Q1 2009 Results Conference Call
Mark Davis
Good morning, ladies and gentlemen. Thank you for joining us for our conference call and webcast today.
Joining me today is Rohit Bhardwaj, our Chief Financial Officer.
Before I commence the review, I would remind you that our presentation contains forward-looking statements that are based on current expectations, and are subject to a number of uncertainties and risks, and actual results may differ materially. Further information identifying risks, uncertainties and assumptions, and additional information on certain non-GAAP measures referred to in this call can be found in the disclosure documents filed by the Fund with the securities regulatory authorities, available at www.sedar.com.
We reported 31 cents per unit of distributable cash for the first quarter. We are all painfully aware of the poor state of the economy, but Chemtrade had the ability to deliver very sound results in the first quarter.
Due primarily to issues relating to our Beaumont plant, we missed this opportunity to demonstrate through our financial results the strength and durability of the company we have built. Of course, we have also been affected by reduced demand and pricing pressure. However, had Beaumont been operating at the rates it is today and avoided the extra costs incurred as a result of the product disruption caused by the lengthy shutdown, we would have done a much better job of delivering good results even during the economic climate encountered in the first quarter.
Let me start by recapping where we stood at the time of our last call. We had just come off our most successful financial year ever, driven by high acid and sulphur prices. However, demand fell dramatically in December. The future demand outlook was uncertain, and we didn’t foresee any increase in demand compared to the fourth quarter of 2008 until at least the second half of 2009. Despite that outlook, our business model gave us comfort that we would generate more distributable cash this year than we paid out, and we are still of that belief.
Our first quarter can really be summarized under two general themes:
- Weak product demand; and
- Plant operations.
First, demand. As we expected, demand in the first quarter remained weaker than what we had enjoyed in 2008. Most of our products suffered from lower demand than last year. As a general statement, demand was down about 20%. We executed a number of initiatives as a result of the markets to minimize the effects of the downturn and to properly position ourselves for when demand returns. As most of you know, one of our key products is by-product sulphuric acid. Many of the actions we took permitted our key by-product producer, Vale Inco, to continue operating as usual throughout the first quarter.
These actions also positioned us for the recent Vale Inco announcement that they intended to extend their turnaround by two months. Although we did not know that they intended to extend in this manner, their collective bargaining agreement was also up for negotiation this year, so we ensured that we were prepared for some form of work stoppage. Our ability to secure additional storage and access new customers was essential during the quarter.
We also took advantage of the lower demand in the quarter to advance the turnaround of our Tulsa acid plant from Q2 into Q1. This turnaround increased our Q1 costs by about $500,000 but positioned that plant to run hard especially now that Vale Inco has announced a longer than usual turnaround.
While lower demand certainly affected our results, when compared to Q1 last year our Beaumont operations and related costs were of much greater impact.
As you know, our largest regen plant, Beaumont, was offline from late August last year. Following extensive repairs, we restarted the plant in January. Not surprisingly, after not running for over five months we encountered a number of issues that needed to be resolved before the plant was operating smoothly at full rates. In addition to the costs of not operating at full rates until late in the first quarter, there were numerous other costs that are attributable to Beaumont being offline for this time period. These costs are also reflected in the quarter as we worked our way through the product and supply chain disruptions resulting from the downtime back to the normal mode of Beaumont operating.
So, the quarter’s results reflect the lost margin on product not produced during the quarter at Beaumont. Additionally, the quarter’s results also include third party costs incurred to process, store and redirect our customers’ product and other costs to ensure our customers’ operations were not disrupted during the time the plant was offline.
We estimate that if Beaumont had been operating for the full quarter, the extraordinary costs associated with alternative product handling that would have been avoided amounts to about $6 million in Q1, or about 19 cents per unit.
The other general note on the first quarter concerns capital costs. As we’ve indicated for some time, we intend to spend more capex in 2009 than we did in 2008. Our spending was essentially as planned for the quarter, however, when compared to Q1 last year we spent another $3.7 million or almost 12 cents per unit. We will continue improving our asset base which is key for long term sustainable earnings.
In summary, the first quarter was disappointing, since the strength of our business and business model was not as visible as it should have been mainly because of operating issues at Beaumont. The plant is now fully operational and we’re confident it will perform well from this point on.
It’s more difficult to predict how the markets will perform, but I will have a little more to say on this after Rohit reviews the financial results in more detail.
Rohit Bhardwaj
Thank you, Mark and good morning everyone. As Mark noted, the first quarter is really a story of reduced product demand and costs associated with Beaumont being offline since August 2008 and restarted during the quarter.
For the three months ended March 31, 2009, distributable cash after maintenance capital expenditures was $9.6 million, or 31 cents per unit compared with $17.9 million, or 53 cents per unit in 2008. The biggest portion of this decline is attributable to the SPPC segment which I will talk about in a minute.
EBITDA for the first quarter of 2009 was $18.3 million compared with $22.8 million in the first quarter of 2008. Revenue was $161.8 million, a decline of $56 million over 2008. Most of the revenue decline, $54 million, was attributable to International, which last year was a huge beneficiary of the strong prices and demand for sulphuric acid and sulphur on international markets.
There was a significant decrease in corporate costs relative to 2008. This was mainly due to lower LTIP expenses.
Turning to the segmented results for the quarter, SPPC generated revenue of $99.7 million and EBITDA of $9.1 million compared with $98.9 million and $19.9 million, respectively, in 2008. The main issues affecting EBITDA were lower demand and Beaumont related issues. Volumes were down for most SPPC products. However, higher per unit sales prices for sulphuric acid and liquid SHS offset the effect of the volume declines and resulted in steady revenue for the quarter. While pricing was down from that realized in the fourth quarter, as a general statement, pricing was higher than that realized in Q1 2008.
The lower EBITDA was due primarily to the issues at Beaumont, both lower production and the extra costs caused by the disruption of Beaumont being offline for a significant time period. Finally, we incurred higher turnaround costs in the quarter as we decided to advance one of our plant’s turnarounds. We have now finished with the major turnarounds for our acid plants.
Pulp Chemicals reported first quarter revenue of $11.9 million compared with $14.8 million in 2008, reflecting lower volumes of sodium chlorate. EBITDA was $4.8 million compared with $5.2 million. Lower electricity costs partially offset the lower volumes.
International reported revenue of $50.2 million for the first quarter, compared with $104.1 million in 2008. This reflected the significantly different global demand conditions for sulphur and sulphuric acid this year, partially offset by the positive effect of the lower Canadian dollar on U.S. dollar denominated revenue. EBITDA for the quarter of $3.8 million compared with $6.2 million last year.
Maintenance capital expenditures in the first quarter were $5.8 million compared with $2.1 million in 2008.
As we noted, we incurred additional costs at Beaumont during the quarter, and also brought forward the Tulsa turnaround from later in the year. As we have previously mentioned, we continue to expect to invest in our plants at higher levels and anticipate 2009 maintenance capex to be higher than total 2008 capex. We expect these expenditures will continue to improve our plants’ reliability.
Ignoring unrealized foreign exchange losses, Corporate costs during the first quarter of 2009 were $9.2 million lower than the first quarter of 2008. $7.5 million of this was due to LTIP as in 2009 we reversed accruals, whereas in 2008 we had built up accruals. Relative to the first quarter of 2008, we also benefited by $1.7 million with respect to unrealized gains on our natural gas swaps.
I’ll now hand the call back to Mark.
Mark Davis
Thank you, Rohit.
As I said at the beginning, we're disappointed that we missed an opportunity to demonstrate the financial strength of our business. Certainly, the current economy is challenging for everyone including Chemtrade, but we are well positioned to deal with the downturn and post solid performances.
Ignoring the Beaumont related issues which we've discussed above and are now largely behind us, we want to take you back to the beginning of 2007 when we set our current annual distribution rate at $1.20 per unit. This was long before the 2008 run-up in commodities. 2008 was a very successful year for many companies including Chemtrade, but we can achieve solid results without relying on a year like 2008. Rather, we set our distribution rate so that it would be sustainable even in bad times. While I admit that in 2007 we didn't foresee an economy as bad as it is today, we still remain confident of our ability to generate more than sufficient funds to maintain our distribution rate even at current demand levels.
Demand for all of our products was lower in Q1 than the last couple years, but we still generated margins on our primary products above the margins realized in the first quarter of 2008. Demand has still not recovered, but for certain of our key products demand and pricing seem to have stabilized. It’s hard to point to anything definitive but it does appear to be that way. We are, of course, watching this very closely and reacting quickly to market information.
Our refinery customers appear to be ramping up their activities, and the market-related downtime taken by many base metal producers seems to be having a firming effect on acid pricing. Our SHS products continue to be under stress from lower newsprint demand.
So, while there is still great uncertainty in the marketplace, it feels better to us than when we reported our year end results. Further, these market dynamics have to be overlaid with our contracts which do mitigate some of the market effects.
The second half of 2009 should be stronger than the first half even at current demand rates. We now have Beaumont back on stream, most of the ancillary costs related to it being offline have worked their way through the system, and our capital expenditures are higher in the first half of the year than the second. All told we continue to believe that over the next 12 months we will generate distributable cash above our distributions and that the 2nd half of 2009 will be stronger than the first half, even if demand doesn’t increase.
Before I hand the call back to the operator for the Q&A, I would like to remind you about our annual meeting which will take place this morning at 10 a.m. at the TSX Broadcast Centre. I hope everyone will be able to join us there.
Thank you for your attention. Rohit and I would now be pleased to answer any questions you have.
OPERATOR: Thank you. Ladies and gentlemen, we will now conduct a question and answer session. If you have a question, please press the star, followed by the one on your touchtone phone. You will hear a tone acknowledging your request. Your questions will be polled in the order they are received. Please ensure you lift the handset if you are using a speaker phone before pressing any keys. One moment, please, for your first question.
And our first question comes from James Leung of Mackenzie Investments. Please go ahead.
JAMES LEUNG: Good morning, gentlemen.
MARK DAVIS (President and Chief Executive Officer, Chemtrade Logistics Income Fund): James.
JAMES LEUNG: Those are very, very respectful results, guys. Very good.
MARK DAVIS: Thank you.
JAMES LEUNG: Specific question on your SPPC Division … Based on the results and the comments you made, your pricing for Q1 would be an improvement over the pricing that you achieved in Q1 '08 but probably down from Q4 '08. Is that a fair assessment to make?
MARK DAVIS: Yes.
JAMES LEUNG: Okay. When you say that the volume… your demand… that I assume also means volumes were down roughly 20 percent generally in the sulphuric acid in the acid division?
MARK DAVIS: Yes, I think it's probably fair to say it’s down 20 percent for actually all of our products except for chlorate.
JAMES LEUNG: Okay. And what would the chlorate volumes be?
MARK DAVIS: That would have been lower.
ROHIT BHARDWAJ (Vice President, Finance and Chief Financial Officer, Chemtrade Logistics Income Fund): Yes, it’s not materially different. You can actually… If you’re modeling you can… If you're using 20 percent, that's close enough.
JAMES LEUNG: And so that would blend in all the volumes from international as well, is that right? Or is… you always think of international as something sort of different.
MARK DAVIS: Yes, James, we should keep international a little different because our, you know, sensitivity to volume is a little different in that business as well. So 20 percent is more applicable to North America. International volumes are down as well; in fact, they may be down even more than 20 percent.
JAMES LEUNG: Would it be… If I ask you… How much would they be down? When you say more…
MARK DAVIS: More than 30 percent range.
JAMES LEUNG: More than 20 or about 30?
MARK DAVIS: Thirty… 30 percent.
JAMES LEUNG: Thirty, okay.
MARK DAVIS: Yes. You know, again, if you just step back at a macro level and, … Again, we're all aware of the economic conditions. If you think about Europe as a general segment in the first quarter, I think actually their economy seized up even more than the North American economy did.
JAMES LEUNG: As you exit the quarter – and I know you made some comments about how the demand in pricing dynamics would trend – So if you extend that sort of projection forward, how do you see the rest of '09? Will you be able to get back some of the volumes? Are the people, you know, starting to talk to you about getting products and how is the pricing?
MARK DAVIS: Yes, we think we can. I mean, I don't think we're different than a bunch of other people. Every time it looks like the economy starts to turn over for the positive, actually it has a hiccup and resets. Having said that, we see, certainly, pockets of our customer base or related industries that appear to actually have more momentum today than they did in the first quarter. The easy examples for us, because we're tied in pretty tightly with them, are the oil refineries, where, yes, it is gasoline season starting but some of our refinery customers appear to be ramping up their production quicker than what they had told us they were going to do two months ago.
You know, it appears that the fertilizer guys are actually making product again, which, you know, is not a big customer base of ours but it's a related industry. And they're not running like they did last year, but actually they're running better than they did the first quarter. So it’s a long-winded answer to say, we think actually demand should be stronger for the rest of the year. We don’t have to count on it to back up our statements, and we also think that pricing actually is stabilizing or stabilized. Again, we're not counting on an uptick but it does have a firmer feeling to it today than it did two months ago.
JAMES LEUNG: Switching gears to chlorate and when you say the demand is, you know, obviously… Is that more of a, I would say, seasonal or temporary issue? Or do you see that still, the rest of the year with demand come back? And I… we know we had to… on the demand side there are certainly challenges at the end user basis.
MARK DAVIS: In our chlorate segment, again, in that business, we're actually in, we think, a very nice but niche position. Our main customer, I think, plans to run hard for the rest of the year and the amount of volume that our main customer, you know, Canfor doesn't take is important to us but it is not going to actually swing our results materially. And the customers we sell that material to as well, at least today actually, have indicated that they expect to run at normal rates for the rest of the year. I mean, obviously, all that can change but right now, we think that the shortfall in chlorate demand should not be something that continues for the whole year.
JAMES LEUNG: What about pricing? Or is that year-over-year what sort of changes would you see?
MARK DAVIS: Remember, it's a little distorted, okay, because the majority of our stuff actually is disconnected from market pricing, right?
JAMES LEUNG: Okay.
MARK DAVIS: Canfor is formula-based pricing on costs, right? And on the remnants it's probably higher or flat this year versus last year, but it hasn't fallen.
JAMES LEUNG: Okay. Just a final question on CAPEX. I know that you guys gave and are still sticking with your guidance of 20 million. Would that be something that would be sustained over 2010? Would that also be a year that… I know we're talking way ahead but would that be also a number that's good for 2010?
ROHIT BHARDWAJ: I think, James, as we mentioned in the past, it is something we are continually monitoring but our expectation is, yes, it would be in that kind of a range for at least one more year and then in 2011 we'll have to see, you know, what projects we’re going to do. But it's safe to use that number for 2010.
JAMES LEUNG: Okay. Good. Great. Thanks, guys.
MARK DAVIS: Thank you.
ROHIT BHARDWAJ: Thank you.
OPERATOR: Next question comes from Nima Billou of Bloom Investment Counsel. Please go ahead.
NIMA BILLOU: Morning.
MARK DAVIS: Hey, Nima.
NIMA BILLOU: Quick question. It just went by a bit quick, but the additional costs in terms of sourcing third party product for Beaumont, did I hear that right as being $0.19 a unit?
MARK DAVIS: The aggregate costs for Beaumont not running, okay, was $6 million or about $0.19 per unit.
NIMA BILLOU: Okay. And that includes down time in addition to third party costs?
MARK DAVIS: Yes, and it also accrues extra freight, storage, you know, charges of actually finding storage. And what we tried to actually calculate for you folks is the extra cost hit more so than lost margin from not running.
NIMA BILLOU: Mm-hmm.
MARK DAVIS: So there were $6 million of avoidable costs had our Beaumont plant not suffered the incident it suffered last August.
NIMA BILLOU: So that's why, in terms of your guidance on the back half, you feel confident, despite maybe a depressed demand environment that, when it's got, you know, full or close to full reliability you'll have better results in the back half?
MARK DAVIS: Yes, two reasons. That's one and the second, again, is that all of our major shutdowns… You know, we said the major acid plants have been done in the first quarter.
NIMA BILLOU: Yes.
MARK DAVIS: The Pulp plant gets done in the second quarter so our second half CAPEX is lower than our first half CAPEX.
NIMA BILLOU: Okay. That 20 million that you’ve guided, does that include that environmental CAPEX to get that Riverton plant up to speed by 2012?
ROHIT BHARDWAJ: Yes, and, again, we have pointed to the 20 million but if you see our actual language, we say we expect it to be a bit higher than what we were last year, which is 20. So maybe it’s a little higher, but it does include the environmental stuff too.
MARK DAVIS: But you should also know, Nima, is that the big CAPEX for the consent decree is with regard to Riverton, but – I'm going by memory here –I don't think we really start significantly spending on Riverton probably until 2011.
ROHIT BHARDWAJ: Yes.
NIMA BILLOU: Okay.
MARK DAVIS: Right? So that won't be in this number or in 2010's number.
NIMA BILLOU: So, yes, it's one big hit at one time, in a sense.
MARK DAVIS: Well, there's a bunch of other plants which are smaller CAPEX to fix that will hit ‘09 and ‘10.
NIMA BILLOU: Yes.
MARK DAVIS: The biggest hit would be in ‘11 when, hopefully, we're through some of these other big projects on our reliability stuff.
NIMA BILLOU: That's helpful. And to revisit Canfor, we know that you're protected on the cost side for, let's say two thirds. Are you protected against volume at all? Or if they decide, as you said, to dramatically reduce volume in the short term, you would take a hit?
MARK DAVIS: No, if you… The contract is on the site – and, again, I'll go by memory – but there is protection if they don't take a certain amount of volume. I'm forgetting what that volume is; I think it's 48,000 tons.
NIMA BILLOU: Okay.
MARK DAVIS: You know, we then have an obligation to try and market it and get as much of a profit as we can to offset the hurt to Canfor but there…
NIMA BILLOU: Yes.
MARK DAVIS: There is a minimum volume requirement in that contract.
NIMA BILLOU: And they’d have to make up the difference for whatever that minimum volume is.
MARK DAVIS: That's right.
NIMA BILLOU: For what margin you get in the marketplace.
MARK DAVIS: That's right.
NIMA BILLOU: Okay, that's helpful. And finally, you said you'd started to see… I mean broad demand was down 20 percent for acid. You're starting to see a bit of stabilization and you said some positive news in terms of the metals… metal refining activity in the future?
MARK DAVIS: Yes, as you know, it's a complicated picture to triangulate, right? We think that we've seen stabilization of our base demand customers.
NIMA BILLOU: Okay.
MARK DAVIS: Which is, broadly speaking, general industry.
NIMA BILLOU: Yes.
MARK DAVIS: So we think, actually, that's stopped coming down. And if you take a look at some of the announcements from, for example, Xstrata or the Noranda Income Fund, who have been restricting their production for reasons they state, some of which are metal related; some are actually sulphuric acid, I think. They've taken some significant capacity off line and with Vale Inco's additional two-month shut down they’ve taken significant capacity off line. So certainly on the supply side, both of those events have a stabilizing effect on pricing. And if we get an uptick in demand from general industry, that can be very beneficial.
NIMA BILLOU: Great. Thanks very much for the colour.
MARK DAVIS: Thanks.
OPERATOR: Next question comes from Bert Powell of BMO Capital Markets. Please go ahead.
LEANNE: Hi, this is Leanne sitting for Bert. Hi, Mark. Just a follow-up question on the Pulp Chemicals. And how much are you selling outside of Canfor?
MARK DAVIS: We sell about two thirds to Camfor, so we sell about one third to the others.
LEANNE: Okay. On the international side, was there any lingering benefit in the quarter from contracts that are related to the 2008 benefits from the small amounts of uncommitted acid?
MARK DAVIS: No, there weren't. The market has changed so drastically that actually the ability of our international business to generate the money it generated in the first quarter…
LEANNE: Okay.
MARK DAVIS: Had nothing to do with that hangover of old contracts. It had to do with market knowledge, infrastructure and the ability to move product in a very difficult time of declining demand.
LEANNE: Okay. Next couple of questions just related to the modeling. So the… in the quarter, there is 1.7 million of natural gas swaps that benefited G&A. So the current natural gas prices, what would be the impact in Q2?
ROHIT BHARDWAJ: Actually, natural gas, I think didn't change much in the quarter; if I remember correctly, it’s somewhere between $3.50 and $4 in MBTU. So there shouldn't be much change in the value of our hedges other than some will drop off because this was a one-year hedge.
LEANNE: Yes.
ROHIT BHARDWAJ: But since one quarter is gone, some of it will become realize. But in terms of an unrealized impact in Q2, it should not be that significant, unless prices change in the second quarter. So far, they haven't but we’ve still got a month and a half to go so…
LEANNE: Okay. So what's the sensitivity? Can you give us a… just a sense?
ROHIT BHARDWAJ: Yes, I think the sensitivity, if I remember, is about… we’ve got about 600,000 MMBTUs hedged, which means that every dollar change on an annual basis is about 0.6 million… just around $1/2 a million.
LEANNE: Every dollar change in natural gas?
ROHIT BHARDWAJ: Yes, in terms of just our hedge positions, we have about a 1million… It’s actually a bit less; it's like maybe 500,000 MMBTUs so it's about $500,000 for a year impact.
LEANNE: Okay. Okay, just on the swap, you'd extended a swap on the debt and will roll 9.8 million of fair value liability into the new swaps, right? And what's the net impact on the interest expense beyond the 1.4 million of increased amortization expense per quarter?
ROHIT BHARDWAJ: We added one more year to our interest swaps, as you point out.
LEANNE: Yes.
ROHIT BHARDWAJ: The net result is that our interest expense goes down a little bit between now and 2011 because we're able to put in new hedges at lower rates than we used to have.
LEANNE: Yes.
ROHIT BHARDWAJ: So interest rates will be… interest rates will be a little bit lower as we go through the next two years.
LEANNE: So how much down?
MARK DAVIS: I think it's that… The amount’s quantified, I think, in the MD&A.
ROHIT BHARDWAJ: Yes. We do have some comments in the MD&A on the interest rate side. If you take a look at that and if you still have a follow-up, you can give me a shout.
LEANNE: Okay. Thanks. That's all my questions. Thank you.
MARK DAVIS: Thank you.
OPERATOR: Ladies and gentlemen, if there are any additional questions at this time, please press the star, followed by the one. As a reminder, if you are using a speaker phone, please lift the handset before pressing the keys.
Our next question comes from Damir Gunja of TD Securities. Please go ahead.
DAMIR GUNJA: Thanks, good morning.
MARK DAVIS: Hi, Damir.
DAMIR GUNJA: Just want to touch on the extended Inco shutdown and I guess the sourcing of alternate product in the market. This might be a little out there but is it possible that it's even a benefit to you, given current market conditions and what you're able to do?
MARK DAVIS: I think I'll try and answer that one this way. As I said, we knew that Vale Inco's labour contract was over at the end of May when they take their normal shutdown, so we positioned ourselves that if they had a work stoppage for some reason, actually, that we would have sufficient inventory and be able to cover them off. So for the 60-day extended shutdown that they announced is… I don't think it's a benefit to us, but I also don't think it's a detriment to us, because I think we foresaw that possibility and planned for it.
If their shutdown is extended, then your question gets interesting and my crystal ball, frankly, isn't clear enough. Whether or not it's a benefit or a detriment depends upon what happens to industrial demand, what happens to other availability of acid, which is also linked to what Xstrata may or may not do for the balance of the year since, as you know, they’ve publicly announced they're actually not running at full rates. So, again, it's my long-winded answer to say what I normally say in answer to this question is, I don't know if it's good. I don't think that it's bad. And I think that the organization has the ability to actually react with dispatch to whatever set of circumstances we find ourselves in.
DAMIR GUNJA: Okay. No, that's fair. I think just a final one. In the past years, you've said that the second half has been sort of a 60 percent to 40 percent split to the first half. Would that still hold this year, do you think?
ROHIT BHARDWAJ: Yes, I think that will be in the ballpark because in other years sometimes, we’ve had other factors at play. But this year we have done most of the turnarounds in the first half and so that's a fair representation, I think.
DAMIR GUNJA: Okay. Thanks, guys.
MARK DAVIS: Thank you.
OPERATOR: We have a follow-up question from Nima Billou of Bloom Investment Counsel. Please go ahead.
NIMA BILLOU: Yes, I just saw in the notes, you had a modest increase in allowance for doubtful accounts. What was that driven by and what's your sense on counterparty risk as the recession worsens?
ROHIT BHARDWAJ: That is an area that, you know, we have been paying more attention to, obviously, in these economic times. So that increase was driven by, you know, some… where a couple of customers filed for Chapter 11, CCAA and so we did increase our allowance for doubtful accounts. And as we go forward, we don't have any specific accounts that we are, you know, particularly concerned about in the future. But we are, in general, concerned about counterparty risk, and so we'll be increasing our allowance probably for the rest of the year as well.
NIMA BILLOU: Okay. Are you worried about concentration at all in terms of customers? Or these are smaller customers that have kind of encountered financial difficulties? In terms of your larger customers, are you concerned at all?
ROHIT BHARDWAJ: Well, there’s always varying degrees of concern so I wouldn't say there's a high degree of concern, but we do… you know, we are somewhat concerned about the economy at large but not specifically a large customer.
MARK DAVIS: I think, as a general statement, is we did get… we did take charges for two large customers specifically, which would be the Chapter 11 filing by Lyondell in the States and Abitibi for a lesser amount. But the build-up of reserves as referred to in the note is no one particular concentration or concern…
ROHIT BHARDWAJ: That’s right.
MARK DAVIS: But just a general prudence on the economy as a whole.
NIMA BILLOU: Okay. Thank you.
OPERATOR: Mr. Davis, there are no further questions at this time. Please continue.
MARK DAVIS: Thank you all for listening and I will repeat correctly this time that our AGM is at 10:00 a.m. today at the TSX Broadcast Centre. Thank you, everybody.
OPERATOR: Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. You may now disconnect your lines.
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