Good morning, and welcome to the Sensient Technologies Corporation 2023 Q3 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then 1 on your touchtone phone. To withdraw your question, please press Star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Steve Rolfs. Please go ahead, sir. Good morning. Welcome to Sensient's Earnings Call for the Q2 of 2023. I'm Steve Rolfs, Senior Vice President and Chief Financial Officer of Sensient Technologies Corporation. I am joined today by Paul Manning, Sensient's Chairman, President, and Chief Executive Officer. Earlier today, we released our 2023 Q2 results. A copy of the release and our Investor presentation is available on our website at sensient.com. During our call today, we will reference certain non-GAAP financial measures, which remove the impact of currency movements and other items as noted in the company's filings. We believe the removal of these items provides Investors with additional information to evaluate the company's performance and improves the comparability of results between reporting periods. This also reflects how management reviews and evaluates the company's operations and performance. Non-GAAP financial results should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is available in our press release. We encourage Investors to review these reconciliations in connection with the comments we make today. I would also like to remind everyone that comments made during this call, including responses to your questions, may include forward-looking statements. Our actual results may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings. We urge you to read Sensient's previous SEC filings, including our 10-K and our forthcoming 10-Q, for a description of additional factors that could potentially impact our financial results. Please keep these factors in mind when you analyze our comments today. Now we'll hear from Paul Manning. Thanks, Steve. Good morning and good afternoon. Sensient's local currency revenue this quarter was in line with last year's Q2 revenue. Our adjusted local currency, EBITDA, and operating income were each down about 7%, largely due to the continued impacts of destocking globally and declines in volumes on many consumer product categories, primarily in North America and Latin America. As we have been discussing, we anticipated the volume declines due to destocking to continue throughout the Q2. In general, we saw the impact from our customers' destocking activities broaden across additional product lines in the Q2 and to a greater degree than we had anticipated. Destocking will obviously not last forever, but when it will end for different products and geographies is becoming more difficult to predict. In parts of our business, we have seen improving order patterns. In others, we have yet to see order patterns return to normal. Despite destocking, we are beginning to see an increase in promotional activity in certain North America Food product categories. New product launch activity remains healthy. Furthermore, we continue to experience strong sales wins, effective pricing implementation, and an overall low attrition rate. We're focusing on the areas of our business we can control: sales execution, customer service, and avoiding attrition on our existing sales. Our new sales wins continue to be at a high level across all three groups. Our sales pipelines across all of our businesses remain robust. These new sales have been across all our product lines and throughout most of our geographic regions. These wins remain at a historically high rate for the company, which bodes well for a post-destocking world. We still continue to see positive momentum in new product launch activity, and we expect this activity to continue into next year. We are monitoring cost inflation and continue to implement pricing actions as needed. We have begun to see supply chain and raw material cost improvement in some areas. However, we also continue to experience overall elevated energy, growing costs, and commodity costs in certain geographic regions. As we have communicated over our last couple of calls, the timing of our pricing actions versus the timing of cost inflation may distort our quarterly year-over-year comparisons. Destocking continues to be the main headwind throughout many of our businesses. While destocking initially had a more profound impact in our Flavors and Extracts Group, we did experience an increased level of destocking in both our Color and Asia Pacific groups during the Q2 compared to the Q1. The magnitude and timing of this destocking was somewhat unexpected. In addition to destocking, retail data for many of our customers indicates they are seeing negative volume trends for the last 24 months. We are starting to see improvement in certain businesses and geographies, and we anticipate the volume declines due to destocking to continue to moderate throughout the back half of this year. This volume decline, as well as the overall CPG volume declines in many Food and Personal Care product categories, has had an outsized negative impact on our operating profit this year. Our outstanding performance and strong volume growth in 2022 has also made for an exceedingly difficult comparison. Plus, our own efforts to reduce our inventory have impacted our margins. Now turning to the groups. The Color Group reported 2% local currency revenue growth in the Q2. Local currency operating profit was down approximately 8% in the quarter. The Color Group's revenue growth benefited from a high single-digit price increase, which was partially offset by an almost double-digit revenue headwind due to destocking. For the year-to-date period, the Color Group has reported 6% local currency revenue growth. The Food and Pharmaceutical product lines delivered 4% local currency revenue growth during the Q2. Food and Pharmaceutical product lines continued to benefit from new sales wins, particularly in the Natural Colors portfolio, but even these product lines have experienced an increased level of customer destocking in the Q2. Revenue in the Personal Care product line was down mid-single digits in the Q2, primarily due to customer destocking, especially in North America. Based upon these developments, I now expect the Color Group's local currency revenue to grow at a low to mid-single-digit rate and local currency operating profit to decline at a low to mid-single-digit rate in 2023. The lower revenue and operating profit decline in the Color Group are a direct result of the more than expected volume declines due to destocking and the continued volume declines in the CPG Food and Personal Care product categories. These volume declines have an outsized impact on operating profit and are especially stark in comparison to the outstanding results reported by the Color Group in 2022. Because I believe destocking will not last forever, I continue to expect the Color Group to deliver mid-single-digit revenue growth and mid to high single-digit operating profit growth in the long term. The Flavors and Extracts Group was down approximately 2% in local currency revenue in the quarter. The group's strong win rate and pricing were offset by ongoing customer destocking and ongoing CPG volume declines in the Food product categories, especially in North America and Latin America. The volume declines due to destocking that began in the Q4 of 2022 have continued throughout the first half of this year and have had an outsized impact on our operating profit. This impact is especially stark when you compare our current results to the outstanding results reported by the group in the first half of 2022. The Flavors and Extracts Group is well positioned for growth once the relatively short-term impacts of destocking subside. Our focus over the years on our product portfolio, sales execution, and customer service are the foundation that will support growth over the long term. I continue to expect the Flavors and Extracts Group to deliver incremental improvements throughout the remainder of the year. For the year, I now expect the Flavors and Extracts Group to deliver low to mid-single-digit local currency revenue growth, and I expect local currency operating profit to be down mid to high single-digits. Local currency revenue growth in the Asia Pacific Group was down approximately 1% in the Q2. Year to date, local currency revenue is up 7% in this group. Similar to the Color Group, customer destocking in the region broadened and was greater than expected compared to the Q1 of this year. Despite this headwind, the Asia Pacific Group continues to benefit from strong new sales wins across almost all regions. The group's focus on sales execution, customer service, as well as the investments we have made, position the group nicely for growth in the future. I continue to expect Asia Pacific Group to deliver mid to high single-digit local currency revenue growth and mid to high single-digit local currency operating profit growth in 2023. My long-term growth expectations for each of our groups has not changed. I continue to expect the Flavors and Extracts Group to deliver mid-single-digit local currency revenue growth, with mid to high single-digit local currency operating income growth. I continue to expect the Color Group to deliver mid-single-digit local currency revenue growth and a mid to high single-digit operating income growth. I continue to expect the Asia Pacific Group to deliver mid-to-high single-digit local currency revenue growth and operating profit growth of high single-digit to double-digit local currency growth. For 2023, I expect our local currency revenue to be up mid-single digits. As a result of the volume declines due to destocking and the volume declines in the Global Food and Personal Care markets, I now expect our 2023 adjusted local currency EBITDA to be down mid-single digits and our local currency EPS to be down high single digits. As I said, we're focused on the areas we can control: sales execution, customer service, and our product portfolio. This focus has fueled the exceptional growth we have experienced over the last few years. Our customers, like many other businesses, are currently focused on right-sizing their inventory positions. Overall, destocking is a short-term activity that we believe should improve later this year and into 2024. That is a bit longer than I predicted 90 days ago, which speaks to the volatility and uncertainty in the market. 2023 has proven to be a transitional year as we move from supply chain inflationary burdens of the last 2 years to a more normal environment. Recently, we have seen an increase in promotional activity across many product categories. Our new development activity with customers is healthy and remains a key part to why we continue to win new business. Overall, our strategy is sound, and we are well positioned for future growth. While I'm not thrilled about the current market environment, I am excited about our opportunities within each of our businesses and remain optimistic about the future of our business. Steve will now provide you with additional details on the Q2 results. Thank you, Paul. Sensient's revenue was $374.3 million in the quarter, compared to $371.7 million in last year's Q2. Operating income was $51.6 million, compared to $55.2 million in the comparable period last year. Foreign currency increased revenue and operating income by approximately 1% in the quarter. Interest expense was $6.4 million in this year's Q2, compared to $3.1 million in last year's Q2. The company's consolidated tax rate was 24.8% in this year's Q2, compared to 25.9% in last year's Q2. Diluted earnings per share were $0.81 in this year's Q2, compared to $0.92 in last year's Q2. Foreign currency translation did not have a material impact on EPS in the quarter. As we have discussed during our last couple of calls, we continue to focus on our inventory position. While we are strategically investing in the inventory for our natural ingredients business, we continue to be focused on decreasing our inventory across the remainder of our businesses. As a result, we are seeing an improving cash flow trend. Capital expenditures were $22.9 million in Q2 2023. We have reduced our estimate for capital expenditures this year and now expect our capital expenditures to be between $80 million and $85 million for the year. Our net debt to credit-adjusted EBITDA is 2.7. Our balance sheet remains well positioned to support our capital expenditures, sensible M&A, and our long-standing dividend, and any excess cash will be used to pay down debt. Regarding our 2023 guidance, we continue to expect our 2023 local currency revenue to be up mid-single digits compared to our 2022 revenue. As Paul mentioned earlier, we now expect our local currency adjusted EBITDA to be down mid-single digits in 2023. We also now expect our 2023 local currency EPS to be down high single digits compared to our 2022 adjusted EPS of $3.29. Our previous guidance called for our adjusted EBITDA to grow at a mid to high single-digit rate in 2023, and our local currency EPS to be flat to up low single digits in 2023. As we have discussed, in 2023, our EPS will be impacted by higher interest expense, approximately $0.22 or $12 million, and a higher tax rate. On a quarter-to-quarter basis, our tax rate will fluctuate. Therefore, we continue to believe our local currency adjusted EBITDA growth is an important measure of our performance. Based on current exchange rates, we expect currency to be modestly favorable for the full year. Thank you for participating in the call today. We will now open the call for questions. We will now begin the question-and-answer session. To ask a question, you may press Star, then 1 on your touchtone phone. To withdraw your question, please press Star, then 2. At this time, we will pause momentarily to assemble the roster. Our first question will come from Ghansham Panjabi of Baird. Please go ahead. Thank you. Good morning, everybody. I guess, Paul, you know, going back to your comments on destocking, and, you know, clearly that dynamic will not last forever, but it does look like volumes out of the CPG space of the companies that are reported thus far, you know, they're still down mid to high single digits. Are we at a point where destocking is sort of intersecting with just, you know, flat out, just weaker consumption at the end market level? You know, how do you see that dynamic playing out? I agree with your comment that they're on their businesses, the decline is there, plus their destocking, both factors for them. I think one of the key things that we're starting to see, particularly in North America, is promotional activity. For much of the Nielsen data we've been looking at, you've seen this sort of decline in the overall market for many categories. In fact, most categories, as consumers are destocking, transitioning how they purchase. Instead of stocking up on certain products, they're only buying one, and they're shopping more frequently. These are all very real dynamics, which have impacted many CPG companies who have these, you noted, these declining volumes. You add to that they in general, most branded companies and generic companies stocked up on inventory over the last couple of years. I think given the level of strength in the supply chain, the reliability improvements, there was almost a concerted effort across the board for everybody to start bringing inventory down. Yeah, they both sort of initiated at the same time, which has exacerbated this problem immeasurably for us. In fact, it's kind of part of the overall volume, the two of the big factors that bring down volume. I tend to think of what we're seeing right now is we're betting that the promotional activity signals kind of a flattening of the pricing in the market. Brands and generics and others will start promoting more products, buy one, get one free, things of that nature, which obviously preserves the price of the product, but offers consumers a discounted version, the buy one, get one free scenario. We think that that will expand and expand to more markets and across more product lines. That will hopefully promote the volume in the market, hopefully then accelerate the end of the destocking, which is very much a mixed game. I'll come back to that in a second. I think the promotional activity is a big one. I think the increase in new product launches, which we're seeing in North America, Europe, and throughout most of Asia. In fact, it's up everywhere except Latin America, new product launches. That's another very good indication that there is a need to move volume in this market and get consumers trying new products. I think these factors are picking up all very positive. Again, I think I said in the beginning, prices is sort of flattening out. Those come together, and I think everything kind of works out, everything works out of the system. It's the timing of when those things happen, right? The destocking, we have some customers who are done destocking. They're ordering as they have always been ordering. There are some who they were supposed to be done with destocking, but now will need another quarter. It's hard for them to predict that the market would be down as it has been, so that's why some of those calculations were a bit off. Of course, we have other customers who will be destocking until the end of the year. It's a very mixed bag. you know, as you look at our groups, I think Flavors is closest to being out of the destocking. We see that largely coming to an end here in Q3. That's a very good sign. Colors obviously took the brunt of their destocking impact there in Q2, and Q3 will be another tough destocking quarter for them. And that was expected, right? Flavors is a shorter shelf life in general and a more expensive ingredient. you could understand a company's desire to destock that type of product before they get to Color. That was not unexpected, Color lagging Flavors, but Colors will have a significant destocking impact in Q3, but we see that moderating substantially in Q4. Then Asia Pacific was very much an anomaly in Q2. We think that will be very short-lived, and we expect to have a pretty good quarter here in Q3 for Asia. Complicated answer, I'm sorry to say, but it's about the best explanation I could give for that one. No, no, it totally makes sense. You know, just as a follow-up to that, so the $0.30 or so EPS reduction for this year, for 2023 relative to your previous guidance, you know, just based on high single digits and declines and so on versus what you said before, how does that break up in terms of what are the major constituents? I mean, obviously, volume is a big piece of that, but is it mostly destocking that underlies that $0.30 reduction, or is there something else? I would tell you that volume is the single biggest factor. We have the destocking is a big factor. That you could take is a, depending on the business unit, that's kind of running high single-digit headwind for us. You could look at the actual organic declines in the market. That's running mid-single overall, high single-digit to double-digit for flavors, but mid-single-digit overall. Those are two of the biggest factors that are driving the volume piece. Then, of course, you have the... We already knew what our volume was last year, but what makes that more pronounced in these reports on EBITDA is the comparison to last year is rather pronounced. Now, where that plays out is, I don't want to get too much into the accounting gobbly goop here, but, you know, when the revenue is down and the volume is down, that flows through the P&L over the next several months, in essence. That's a bit of why, given the more significant volume declines we experienced in Q2, that's why we see that impact will continue into Q3 and Q4, just as the accounting works on the, when we produce less, to meet these customer, the reduction in customer demand. Okay, thanks so much. Okay, thanks, Ghansham. Mm-hmm. The next question comes from Joanne Lim of BNP Paribas. Please go ahead. Hello. Just a couple of questions from me. Just on the EPS guidance. Sorry to ask a similar question. Your revenue guidance remain unchanged, but you still expect EBIT and EPS to be worse. Can you just sort of help me understand how does that dynamic work out? That's my first question, and I'll ask my second one after. The simple answer is, we got more in price than we thought and less in volume, which is the easiest version. The harder answer is what I was just kind of discussing with Ghansham, how the reduction in volume in this quarter, we experienced that even in the out quarters. It has kind of a lagging effect. I think on the range of mid-single digit, anywhere between 4 and 6, you know, we could be at the lower end of that. We were previously probably at the higher end of that. There is somewhat of a downgrade even within the definition of mid-single digit. If, again, we thought we might be 6 or 7, but now we're saying maybe we're 4, that's still mid-single digits, there's a little bit of that as well. I would say that the real easy answer here is we got more price than we thought and less volume than we thought. Okay, that's helpful. Thank you. Just on natural ingredients, I noticed that in Q2 it was down 7%. What's driving this? Is there a destock there as well? Yep, sure. There's a fair amount of destocking in the natural ingredients business. You know, the crop costs have been elevated for the last couple of crop cycles. This is pretty well publicized between, you know, water, expense, labor, fertilizers, you name it, all the input costs have gone up. So that has again caused some consumers to trade down in some cases. Yeah, the bigger impact is as I described. Okay, that's helpful. Thank you. Maybe just a last question on destocking. Could you provide more color on, no pun intended, on which product categories and regions specifically are you seeing the destock? Okay, specifically for Color, you'd like to know? No, for across, like, all the segments, please. Okay. The destocking, it's not unlike what I was describing last quarter, right? There's sort of a geographical dimension, then there's a product line dimension as well. The most significant destocking that we see in the company is North America. Period. Full stop. We see that first out of the gate with flavors. Again, 'cause our belief is higher priced item, raw material for a customer, kind of a longer not as long of a shelf life as a Color. That was kind of the first one. As a customer looks at his most expensive raw materials, Flavors would come on the list before Colors. Continuing down that list, though, Colors would eventually be there, that's kind of the phase we're in now. North America for Food, North America for Personal Care has also been significant. Next up would be Latin America, principally Food. Substantially less than that would be Personal Care. Europe, there's been destocking, but it's not to the same magnitude as the U.S. In fact, in some product categories, we see a little bit of return to growth. Asia Pacific, very limited destocking. There's been destocking, but it has been, I would tell you, a smaller number of our customers, but just more significant actions by those customers. In fact, they were so significant, as you could see, that we'd like to think that some of those impacts will be much shorter-lived than what you're seeing in Colors and Flavors. As you'd think- Very helpful. Yep. Beyond that, really just customer product categories. You know, things like dairy and ice cream, those destocking efforts are largely done because customers could only hold so much of that inventory anyway, so there wasn't a whole lot to destock. Certain other categories, certain beverages or canned foods or savory products that have a very long shelf life, customers might have accumulated a fair amount of those types of products. Ditto for things like Personal Care, where there tends to be a lot of inventory in the system, and customers may have a fair amount of that inventory. Again, given the very long shelf lives on those products. That's how as our product categories play out, that's how we're seeing that play out in the market. Okay, that's very helpful. If I can squeeze in one more? Sure. Just for Q3 and, you know, the rest of the year, I think you've given a good sort of summary of your expectations. In terms of this destocking, what have you heard from customers so far, just year to date and their expectations for the year? Well, it's a mixed bag. Some customers are done destocking. They'll tell you that. They order normally, very easy. Others will tell you: "Well, we're destocking, and here's the date where we're going to start resuming normal order patterns." Then there's a whole group of customers, who have. It's a little bit harder for them to determine, and understandably, because it's harder for them to see what's happening in the market, in terms of end consumer activity. No clear picture. I would tell you that, many more Personal Care customers, are closer to being out of destocking than, say, Food customers are in general. It's a complicated picture. You know, when a customer is ordering, you know, 700, 800 raw materials, they may not always have a precise set of calculations for your particular raw material to help you conclude when they will start ordering as normal. Complicated picture, but I think in general, as I said before, Flavors, I think we're pretty much should start to see substantial reduction in destocking here in Q3. We should be I would like to think, completely out of that by Q4. Colors will be very much in the destocking frenzy here in Q3, but substantially improved in Q4 and beyond. Then Asia Pacific, I would tell you that right now we're looking just fine for Q3. Okay, that's very helpful. Thank you very much. I'll pass it on. Okay, sure. Yep. Thank you. Once again, if you would like to ask a question, please press Star, then 1. Our next question comes from David Green of Boldhaven. Please go ahead. Hi, Paul. Hi, Steve. How are you? Hello, David. Hello, David. Hey there. Couple of questions. In terms of your assumptions around full year guidance, I guess baked into that is an improvement coming through in the second half. It would be really helpful just to get a bit of color behind what's giving you the confidence there. Maybe specifically, you referenced, Paul, an improvement in F&E in Q3 from less of a headroom from destock. What gives you the confidence in that, given the general ability to sort of predict the destock is very difficult at the moment? Obviously, why APAC Q2 was really a bit of an anomaly and Colors Q4, you said you're expecting a strong rebound. Again, what gives you the visibility and confidence on that for Q4? All right, let me write all those down. You had about 4 in there. Okay, the first one, what gives me the confidence, most simply, would be the level of new wins we're generating in the groups and the implementation of pricing. Across Color, Flavor, and Asia, we continue to have really strong new win rates. We're still very active at customers. We're still very successfully selling our products. To me, that is the number one thing that we can control, and if we don't execute on that, then we are not running the business properly. We are executing on that, and that is running very well, and that bodes very well for the future. That gives me a lot of confidence. Number two, pricing. I think we've done very well on implementing pricing. We generate t hat was about high single digit benefit in Q2, and we've been able to maintain that pricing in most cases. We've been able to do that without sort of adding a lot of attrition to the business, which is a very important factor. Those factors, those are really the basis for my confidence as I look to even to Q3 and Q4, because these wins in, as I describe them, I mean, they start and then they'll run their cycles, across Food, across Personal Care, very high quality wins as well. I think that's another good factor. To your point about Flavors kind of starting to see some improvement in Q3, yeah, I think Flavors will start seeing some improvement in Q3. A customer can't destock forever, and we're nearing the end for many. In fact, we've already achieved the end for some, particularly, say, in our sweet flavor categories, where I noted earlier that there's only so much a customer could have held as inventory, given the perishability limitations of those products. Those are all positives. I think you'll start to see some improvement in Flavor in Q3. Then y-you had the Asia Pacific for Q2. Yeah, I think, we effectively had a number of our customers who accelerated destocking efforts in Q2, and they moved very, very purposefully to do so, and in a way that was very, very directed and short term. Let's get it done and let's get it done now. So that was completed substantially among those customers in Q2. To the last part of your question, what gives me confidence in Color, say, in Q4 and beyond? You know, if there's one very, very strong foundation to our company, it's been certainly Food Colors and our Personal Care business. I think in general, you know, Colors, up until, you know, the start of Q2, has been running really, really high win rates, really, really high revenue. You know, destocking came very, very dramatically here in Q2. Oh, you know, we were still up 2%, but we would call that fairly substantial destocking efforts. That was about a 9%-10% headwind for Colors in Q2, so much higher than in Q1. We may have a rate that is at least that much in Q3, probably about that much in Q3. Then we think Flavors, unlike Color, sorry, Flavors kind of lingered a little bit longer. We think Colors will be a little bit shorter, but more dramatic. But I don't know 100%. I think that, again, I look to the very, very solid win rate. Colors has the highest win rate in the company right now. They have excellent pricing, implementation as well, and their attrition is very, very manageable. I think those are other factors that give me significant confidence in Colors. Then again, with the new product launch activity continuing to improve, Colors is also very, very well positioned to capitalize on those, with those new wins. I think I covered all your questions in there. Yeah. No, that's perfect. Maybe just specifically on Colors. I don't know if there's more to flesh out here or not in terms of, you know, the demand versus destock dynamic and whether really we should really be focused just on the destock in terms of the driver of the weakness for Q2, potentially for Q3. Well, I would tell you this, as how we got to that 2% growth in Color, about 4% of that was a market decline. Destocking was more than twice that. If destocking could go away, David, I'd be the happiest guy on the planet right now. Yeah. Great. Then just another quick one on input costs that you talked about. You just mentioned water, energy, labor. Just sort of wanted to get a more general sense for that. Is that something that sort of you see as being quite persistent? You know, It's a little bit counterintuitive, I guess, on the energy side, because I think historically you've said energy costs in Europe were a headwind when energy prices were very high in Europe. Now, energy prices in Europe are, you know, have come down a long way. I'm just trying to understand the sort of moving parts there. Yeah. I'll answer the first part, then I'll have Steve answer as well. The main costs that, you know, we still see elevated costs in many categories, certainly not as elevated as they had been previous. You just mentioned one of them, on energy. For sure, energy is down in many of the regions. In fact, most. Growing costs, though, has been a persistent factor. You know, the issue with growing costs, as you grow a crop with elevated input costs, that crop doesn't come out of the ground the next day. The crop comes out of the ground, like, months later, and then you start selling it. What you're selling now is a reflection of input costs from, like, a year ago, or, you know, right, depending on what crop year you're selling. There is a lagging factor there. You know, the first year when you saw those input costs go up, we still had the lower costed crop, so we benefited from that. Now you kind of, it's not so fun on this end of the equation, where you've got to deal with previously elevated costs that have impacted your inputs. Steve, you want to add some additional color there? Yeah. you know, I think you hit on a lot of it. This quarter, our costs are higher than they were in the Q2 of last year. We're certainly seeing improvement and relief in a lot of areas. Energy would be one of them, but keep in mind that a lot of times we will have forward contracts for energy, and so it could have been that we were partially hedged last year, and now if we're hedged, we're hedged at a higher rate. There's a little bit of a delay in that respect. Then, as Paul said, with some of the agricultural inputs that are harvested, maybe just once a year, you can see a delayed impact because those were grown, you know, under an inflationary environment and are just coming out of the ground now. Great. Thanks. Thanks again. Okay. Thanks, David. There are no further questions at this time. I would now like to turn the conference back to the company for any closing remarks. Thank you very much for joining us this morning. That will conclude our remarks today. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.