James Hardie Industries - Q4 2020

Transcript

Operator (participant)

Thank you for standing by, and welcome to the James Hardie Q4 FY 2020 results briefing conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Dr. Jack Truong, Chief Executive Officer. Please go ahead.

Jack Truong (CEO)

Thank you. Good morning and good afternoon, everyone. Thank you for joining us on our Q4 fiscal year 2020 earnings call. I will begin by providing our perspective on how we have been managing the ongoing COVID-19 global crisis in our company, followed by a review of our Q4 and the full year FY 2020 operating results. Our CFO, Jason Miele, will then cover the financial details. Finally, I will end with an update on our strategic focus for fiscal year 2021, and the outlook for the current quarter. On that note, I wanted to take the opportunity to once again congratulate Jason on his recent appointment as Chief Financial Officer of James Hardie. His strong track record of financial and business leadership, as well as his intimate knowledge of James Hardie company, will be critical as we continue to execute on our global strategic plan.

Let's now turn to page eight. While our focus of today's discussion is on Q4 and fiscal year 2020 performance, I would like to provide you with a perspective on how we have been managing the ongoing COVID-19 global crisis. Our approach on managing this crisis has always been about providing the absolute clarity of direction throughout the organization, and at the same time, being able to gain real-time feedback on key happenings from all of the markets that we participate in and from all of our frontline employees around the world. This is essential in allowing and empowering our leaders at various levels in the company to make the right decisions in real time that are fact-based, rather than based on noise or assumptions.

Consistent with our foundational Zero Harm culture, our primary objective is to ensure that the health and safety of our employees, customers, and suppliers are taken into consideration in all business decisions we make. Toward this end, we established consistent, clear, and specific pandemic protocols that were implemented across the globe to ensure we have one global James Hardie standard. These protocols include executing strict physical distancing guidelines of maintaining at least six feet or two meters of separation between employees in all of our facilities, including manufacturing locations and corporate offices. Additionally, in all facilities, we have implemented extensive disinfection and hygiene processes to eliminate the virus and to prevent the spread. Outside of our facilities, we are committed to helping our employees and their families maintain safety and well-being by providing access to personal protective equipment and hygiene kits for employees.

For those who go to work every day to manufacture and to develop products, as well as to service customers, the take-home kits are for personal use to ensure our employees and their families are safe, and offering additional sick leave and childcare support benefits, and executing a work-from-home model where possible and applicable. While this crisis presents our leadership team and our employees throughout the world with a very real challenge, I'm confident that our relentless focus on maintaining a safe and sustainable work environment will help strengthen our business continuity and to ensure that we can continue to produce products and serve our customers seamlessly. With that said, I would like to transition now to our key operational results for the fourth quarter and for the full fiscal year 2020. Let's now turn to page nine.

I'm pleased with what our global James Hardie team has accomplished in fiscal year 2020. We continued to execute a global strategic plan, leading to an outstanding performance in fiscal year 2020. Collectively, as a team, we have generated significant positive momentum on the transformation that we embarked on over a year ago, and we expect to continue this positive momentum into fiscal year 2021. This is now the fourth consecutive quarter that the company delivered consistently strong results. From a global perspective, our group results were highlighted by strong volume increase of 7% in the quarter, led by excellent volume growth in North America of 10%. Significant growth in our Adjusted EBIT of 21% in the fourth quarter, again, driven by excellent EBIT growth in North America of 26% and a 4% growth in our Asia Pacific business.

Our Adjusted NOPAT increased 17% for the quarter and also for the full year. Our operating cash flow increased an exceptional 48%, providing improved liquidity and financial flexibility for our business. While I am proud of the outstanding fiscal year 2020 performance, I'm even more excited about our continued positive momentum into fiscal year 2021. Let's turn now to page 10. North America continues to deliver excellent results across the board in all key financial metrics, including volume growth, EBIT growth, and EBIT margin. In the Exteriors business, our volume growth accelerated in the second half of the year, posting an 11% growth in Q4 and 9% growth for the full year. In the Interiors business, the volume growth continued to improve each quarter during the past year. We delivered 5% volume growth for quarter four and 1% for the full year.

We continued to improve on the execution of HMOS, the Hardie Manufacturing Operating System, and generated $29 million of Lean savings for the full year, which is ahead of plan. For the full year, our EBIT margin reached an exceptional 25.9%, exceeding the top end of our long-term target range. These results reflect the significant impact of commercial transformation from pull to push/pull and Lean transformation in our network of plants. For the full year, North America delivered 7%+ of PDG or growth of our markets, and the previously mentioned 25.9% of EBIT margin. This is the first time in more than a decade that North America delivered PDG in the 6%+ range and an EBIT margin greater than 25%. It is another confirmation that we are now operating consistently at a new step change level.

Let's now turn to page 11 for our European results. In Europe, if you recall from our Q3 earnings call, we indicated that our commercial execution in Europe was lagging that of North America. At that time, we made several key adjustments that we expected would improve our results. I'm pleased to report that we saw significant improvement in our commercial approach in Europe in quarter four. Our quarterly revenue is back on track at 7% growth. In quarter four, we continued to deliver strong revenue growth in our fiber cement business of 50%, resulting in a full year growth of 32%. Additionally, fiber gypsum revenue improved to 3% growth for the quarter, resulting in a 2% growth for the full fiscal year.

However, the positive growth in the quarter did not translate to EBIT growth due to integration costs and SG&A costs that were significantly higher than were expected. In addition, we have unfavorable freight costs in the quarter as we navigated through the various lockdowns in various countries to service our customers. We are addressing these issues, and we expect it to be back on track in the near term. Let's now turn to page twelve for our APAC results. In APAC, our Australian business held their own, even in the face of downward market pressure, seeing continued growth of our markets. However, volume, gross profits, and EBIT of APAC in Q4 were unfavorably impacted due to the mandatory lockdowns in New Zealand and the Philippines as the COVID-19 crisis progressed in March.

As a result, we saw a moderate EBIT growth in Australian dollars of 4% in the fourth quarter and 2% for the full year. APAC EBIT margin for the full year was 22.7%, which is in the top half of our long-term range. APAC's solid financial results, driven by our Australian business performance, reflect how the team remained disciplined in their approach to executing on push/pull and the Hardie Manufacturing Operating System, leveraging best practices from other regions to continuously improve throughout the year. Now, I would like to turn this over to our CFO, Jason, to discuss additional detail on our financial results.

Jason Miele (CFO)

Thank you, Jack. I will start on slide 13 with a discussion on our liquidity and cash management actions. In the graph on the left-hand side of the slide, we have laid out our liquidity position as of the end of the third quarter, fiscal year 2020, the end of fourth quarter, fiscal year 2020, and as of April 30th, 2020. You can see we have made significant improvements in our liquidity position over the last four months, increasing liquidity by $114 million. I want to start by focusing on our liquidity improvement in the fourth quarter and the month of April before shifting to discussing the actions we have taken to help ensure continued strong liquidity throughout the COVID crisis. The improved liquidity from December 31st through to April 30th is primarily driven by strong sales growth and cash conversion.

As Jack discussed earlier, we had a strong fourth quarter, including an exceptional March, and as you can see, the impact of the strong sales and our conversion of those sales into cash as our liquidity position increased from $464 million at December 31st to $578 million at April 30th, a $114 million improvement over that four-month period. This strong sales performance in our fourth quarter was driven by our North American, European, and Australian businesses. In Europe, we returned to strong revenue growth in Q4, with revenues up 7% in euros, including a 50% increase in fiber cement sales. In Australia, the team continued to drive growth above market.

Finally, in North America, the team continued to drive our commercial transformation, leading to another strong quarter of growth in our exteriors business at +11%, and also strong growth in our interiors business at +5%. While the strong sales performance improved our liquidity position significantly, it was also hugely important that we took quick and decisive actions when the COVID pandemic arose, to ensure we not only maintain our liquidity position, but we improve upon it. The management system we put in place over a year ago was critical in our ability to execute these initiatives across our global operations effectively and instantaneously. These included tactical cash and cost measures, such as a hiring freeze, elimination of temporary and consulting-type workers, a travel freeze, and a reduction in discretionary spending, among others.

But in addition to these tactical actions, we also made more strategic and significant decisions to help ensure strong liquidity and financial flexibility going forward, including the immediate suspension of dividends as approved by our board and announced on May 5th, and a significant reduction in capital expenditures from our three-year run rate of $240 million to an estimated range of $80-$95 million for fiscal year 2021. Our capital expenditures in fiscal year 2021 will be focused on safety, maintenance, and innovation. As Jack will note later in our first quarter FY 2021 guidance, we will continue to improve our liquidity position.

This continuous improvement will be driven by not only our relentless focus on our cash and cost initiatives, but also our continuous focus on serving our customers and driving strong sales. Moving on to slide 14. On the next two slides, I want to recap the actions we took on May 5th to improve and secure our global operations, and also discuss the financial impacts of those actions. Starting on slide 14 with the recap of the actions. To better harmonize supply and demand in North America, we took two significant actions. One, we will be closing our Summerville, South Carolina plant in the United States, and two, we will be delaying the commissioning of our Prattville, Alabama plant, also in the United States. In our Asia Pacific region, we also took two actions.

One, we will be moving to a regional model for the manufacture and supply of fiber cement in the New Zealand market. This will include the closing of our Penrose, New Zealand plant later this calendar year, and the importing of products from Australia to New Zealand. The second action in Asia Pac, we are exiting our James Hardie Systems business, which we had acquired about four years ago. This includes the closing of the plant in Cooroy, Queensland, in Australia. In our European business, we have idled our Siglingen plant in Germany temporarily to better match supply and demand in the short term in Europe. And finally, we also reviewed our organizational structure and resourcing levels globally and made strategic adjustments to ensure we are well positioned to continue to serve our customers in this fast-changing market environment.

We believe these actions not only help us stay strong during the crisis, but also ensure we emerge from the crisis even stronger. Moving on to slide 15, we have outlined the financial impacts of these actions. On May 5th, we announced that we anticipated approximately $90 million of non-cash impairment expense in the fourth quarter of FY 2020. We've outlined the actual amount here, which was $84.4 million across all three regions, as well as general corporate costs. These impairments relate to the closure of our Summerville and Penrose facilities, the exiting of the James Hardie Systems business, as well as the impairment of some non-core assets in North America and Europe. There are more detailed descriptions of these impairments within the financial statements and the management analysis and discussion documents filed with the ASX, and which are available on our website.

Several of the actions we announced on May 5th resulted in reductions to our workforce, totaling approximately 375 employees around the world. We estimate that severance costs totaling approximately $10.5 million will be incurred and expensed. These expenses will be recorded primarily in the first quarter of fiscal year 2021, with a small portion recorded in the second quarter of fiscal year 2021. Consistent with the accounting guidance regarding one-time COVID-19 costs, including severance-type costs, we plan to exclude these one-time COVID-related costs from Adjusted EBIT and Adjusted NOPAT in fiscal year 2021. We anticipate $20-$30 million of EBIT accretion in fiscal year 2021 associated with these actions.

The EBIT accretion will present itself across all operating segments and across numerous P&L line items, including depreciation, labor costs in both SG&A and manufacturing, cost of goods sold, et cetera. While we will achieve EBIT accretion in each quarter of FY 2021, we anticipate the amount of accretion will increase each quarter throughout the fiscal year. I want to now spend a little time discussing how the EBIT accretion impacts each of our segments. In North America, we will derive EBIT accretion in FY 2021, associated with the May 5th announced actions as follows: First, the impact of closing Summerville, primarily EBIT accretion derives through reduced headcount and lower depreciation and other fixed costs associated with operating the sites.

Second, we will also have lower depreciation due to the impairment of the $29 million of non-core assets we impaired in the North American segment. Third, there will be labor cost savings associated with the resource realignment we announced on May 5th. In Asia Pacific, we will derive EBIT accretion associated with the May 5th announced actions as follows. First, impact of closing our Penrose facility, primarily EBIT accretion derives to reduced headcount, lower lease costs, and other fixed costs associated with operating a site. Second, the impact of shifting to an import model for our New Zealand market. We have modeled this to be gross margin and EBIT margin accretive to our New Zealand business. Of course, these specific benefits will not arise until we have fully shifted to an import model later in the fiscal year.

Third, impact of closing our James Hardie Systems business. This business operated at an EBIT loss totaling approximately $5.5 million across the last three fiscal years. And fourth, there will be labor cost savings in Asia Pac associated with the resource realignments. And finally, in Europe, we will derive EBIT accretion associated with the May fifth announced actions as follows: First, labor cost savings from the resource realignment, and second, some minor savings and depreciation associated with the $5.5 million of non-core assets that were impaired in Europe. So to summarize, we expect 20-30 million in EBIT accretion in FY 2021 associated with the actions we announced on May 5th.

To be clear, that is not a full twelve months of EBIT accretion, as these actions were announced in May, and some of the actions, as an example, closing Summerville, will not be fully complete until later in the fiscal year. Lastly, the 20-30 million of EBIT accretion will not occur evenly across the four quarters of fiscal year 2021. It will be increasing or accelerating each quarter throughout the year. Okay, moving to slide 16 to discuss cash flows and capital expenditures. As I noted earlier, our operating cash flow increased 48% year-on-year. This was primarily driven by the strong operational performance and cash generation of our operating business units, in particular, our North American and Australia businesses. Year-on-year, there were significant changes in the amounts used for investing activities and the amounts used for financing activities.

These changes are simply reflective of the fact we made the Fermacell acquisition in FY 2019, and there was no such transaction in fiscal year 2020. Shifting over to the right-hand side of the slide, we have provided our capital expenditure profile across the last three fiscal years, along with our estimate for fiscal year 2021. In fiscal year 2020, our capital expenditures totaled $194 million. This included work on two significant expansion projects: the Greenfield site in Prattville, Alabama, in the United States, and the Brownfield expansion at our Carroll Park facility in Queensland, Australia. We plan to complete the construction of Prattville in the next few months, so we can leave the site in the optimal position for commissioning when we need the additional capacity. For now, we do not anticipate commissioning Prattville anytime sooner than fiscal year 2022.

In regard to our Carroll Park expansion, we completed that project in the third quarter of fiscal year 2020, and we will commission that sheet machine when we determine the demand across Australia and New Zealand requires it. We currently anticipate that to be in fiscal year 2022, but we will continue to monitor the impact of COVID-19 on the demand in New Zealand and Australia to determine the appropriate commissioning date. That sheet machine is fully constructed and is ready to commission when we need the additional capacity. Lastly, as we noted in our May 5th announcement, we have adjusted our planned capital expenditures for fiscal year 2021 to be in the range of $80-$95 million. Our capital expenditures in FY 2021 will be focused on safety, maintenance, and innovation.

Moving on to slide 17, which shows our debt structure and liquidity as of March 31, 2020. There is no change to our debt structure. We continue to have three sets of senior unsecured notes and the $500 million revolving credit facility. As we have noted in the past, the revolving credit facility does have an accordion feature, which allows for the potential to access an additional $250 million of credit. At this time, we have no plans to access the accordion feature. We are comfortable with our current debt structure and our liquidity position. Specific to our liquidity at March 31, 2020, we had $365 million available to be drawn on the $500 million revolving credit facility.

In addition to the funds available to be drawn from the RCF, we had $144 million of cash at March thirty-first, so between the funds available under the RCF and our cash on hand, we had a total of $510 million in liquidity at March thirty-first, 2020, and as I mentioned earlier, we improved that liquidity position to $579 million at the end of April. We expect to continue to improve our liquidity position as set out in our guidance. Regarding leverage, we improved our leverage ratio to 1.9 as of March 31st, 2020. As you are aware, our RCF has a covenant, which requires us to remain under a leverage ratio of 3.0.

With our leverage ratio currently at 1.9 and the cash and cost actions we have taken, we are confident we will continue to maintain strong liquidity and a good leverage position. Overall, we remain well positioned with strong liquidity and financial flexibility. I will now hand the call back over to Jack to go through our current strategic priorities, provide a quarter to date trading update and Q1 fiscal year 2021 guidance.

Jack Truong (CEO)

Thank you, Jason. Now let's turn over to page 19 for an update on our fiscal year 2021 strategy, and starting with a summary of our current strategic priorities. As I stated earlier in this call, while we're truly in the midst of a global crisis, I'm pleased to note that our teams from around the world are highly engaged in continuing to build and improve on our commercial and Lean transformation success. To that end, our current strategic priorities reflect not only on our core values, but also on our commitment to maintaining business continuity. These priorities include, one, to manage a safe and sustainable work environment via our culture focus on Zero Harm. It is critical to our business continuity to continue to produce and serve our customers.

Two, to maintain strong liquidity and financial flexibility through specific working capital actions that Jason highlighted, along with continuing to drive our engagement with our customers and be able to serve our customers through our production. Three, to continue to gain market share via our focus on push-pull. We will stay close to our customers and service them seamlessly, while continuing to work with our builders and contractors and create demand for our broad portfolio of products. Now, more than ever in a down market, we are very focused on driving market share gain via providing the best value to our customers. And we will continue to build on our disciplined approach to Lean manufacturing initiatives to deliver on continuous improvement in servicing our customers and generating Lean savings each and every day in our network of plants.

Lastly, but certainly not least, continue to develop high impact innovations that our customers expect from our company. I turn now to page 20, where I would like to share with you an example of how James Hardie offers a full exterior solution that's consistent to our strategy that we embarked on over a year ago. This is how we are going to market, to really drive more growth and provide more solutions to our customers and our end users. Now, I'd like to highlight here that James Hardie is more than just a plank company. We offer builders and contractors solutions that are both functional, with unique properties of low maintenance and durability, and aesthetic, with endless possibility of designs for almost all of their exterior needs. You can see that these include our ColorPlus Technology to mix and match different color palettes.

HardieShingle, to provide accents that meet builders and customer preferences, be it in the Northeast of the U.S. or in the Pacific Northwest. A true portfolio of exterior options to meet multiple architectural and design needs, such as HardiePlank lap siding, HardiePanel vertical siding, and HardieTrim batten boards, and complementary siding products, including HardieTrim boards and HardieSoffit panels. Now, shifting to page 21. This is an example of how we used and leveraged on James Hardie broad portfolio of exterior products and our broad portfolio of brands, that address everything from starter homes to luxury custom-built homes, and this is the example of what we would go to market in Atlanta, Georgia.

So you can see that from our Cemplank brand that used primarily for starter homes to the first move up, and then to our core James Hardie exterior solutions for second move-up homes and semi-custom homes, and then our Aspyre Collection for the luxury custom-built homes. There truly is a James Hardie exterior solution for every home at every price point, that mean and resonate with the homeowners in those different price points and different locations everywhere around the United States and Canada. That's an example. This portfolio of James Hardie exterior solution allows home builders to build differentiated homes at price points from the starter all the way to luxury, and for our customers to serve home builders with more products and solutions from James Hardie as a one-stop shop.

Now, moving on to page 22, I would like to highlight specifics related to our quarter-to-date results and our Q1 fiscal year 2021 guidance. Now, as you know, the COVID-19 crisis is driven first by health issues and then economic issues. It's therefore very difficult to predict how the housing market will perform this year, given the highly volatile nature of the crisis. Nevertheless, we focus on what we can control, and that is to continue to accelerate our market share gain while delivering strong returns based on our Lean transformation. Now, I would like to share our actual volume results from the first of April of 2020, through the 15th of May of 2020, which reflected the continued execution of our commercial transformation in light of the ongoing COVID-19 crisis. In North America, our exterior volume is down about 3%.

In Australia, the volume is flat, and in Europe, volumes is down about 16%. This is primarily driven by the fact that both the U.K. and France, two of our top markets in Europe, were almost locked down completely during this time period. Now, based on our continued focus and discipline on executing our global strategy, we're providing the following guidance for quarter one of fiscal year 2021. Our North America Adjusted EBIT margin will be in the range of 22%-27% in quarter one. Our liquidity will be greater than $600 million at the end of the first quarter. We'll maintain a leverage ratio of less than 2x at the end of the first quarter.

Now, as we enter fiscal year 2021, I would like to reiterate that we continue the path of driving a fundamental transformation in our company, while managing through this global crisis. As a company, we believe that the strategic actions that we have outlined today will not only enable us to manage and thrive throughout this crisis, but will also strengthen our company coming out of it. We're on a journey of transforming our company from being a big, small company into being a small, big company. We're creating and becoming a customer-centric company that strive to become that trusted and valued partner for our customers globally. We continue to build capabilities and processes that connect our core strengths to generate scale, to deliver on profitable growth consistently. While we're on the right track, our fundamental transformation is far from complete.

We still have significant work to do across our key focus areas, and as I mentioned in last quarter's earnings call, we will continue to connect our businesses together and focus on critical few opportunities that will create value and earn our customer business every day via increased demand for our products and solution to the builders and R&R contractors. We are having a more efficient supply chain that serve our customers better, that connect the demand through our customer back into our manufacturing plants, our network of highly efficient plants to serve our customers better. We have a more enabling tool that make it easy for our customers to sell our products, and we are high impact innovation that expand market opportunities for our customers.

When we're able to deliver consistently on all of these objectives, we will truly be a global company that can deliver sustainable and profitable growth. We look forward to building on this momentum that was generated in fiscal year 2020, and navigate effectively through the current crisis with a keen eye toward coming out of the crisis as an even stronger James Hardie. Now, I would like to thank all of our James Hardie team members around the world for an outstanding year of financial performance and an unwavering commitment to zero harm. I'm excited for what the future holds. Thank you, and let's now move on to Q&A.

Operator (participant)

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. First question comes from Lee Power with CLSA. Please go ahead.

Lee Power (Analyst)

Thanks, Jack. Thanks, Jason. Jack, can you just talk to the biggest factor that kind of drives the bottom versus the top end of that 22%-27% North American margin range? Not only for the year, but also the quarter, given that you're halfway through the quarter.

Jack Truong (CEO)

Yeah, Lee, really the top end to that really will be driven by how efficient and how we continue to drive continuous improvement in our network of plants. And then we're now about four quarters into the transformation. It is important that for us to continue to drive that improvement. And then the bottom end of that, it really depends on what type of volume that will come our way, that is quite high, highly volatile.

Lee Power (Analyst)

Okay, sure. And then if we just look at the first quarter to date, have you got any... I mean, I know you don't like talking PDG on a quarterly basis, but have you got any idea what the market did versus your PDG contribution? And then just as you're answering that, you mentioned accelerate PDG. Do you mean that the rate of PDG could be above the 7% that you achieved, or are you talking about holding that number?

Jack Truong (CEO)

Well, you know, Lee, I think it is, it's a combination of what is the market growth gonna be, and then really more important is that how fast we gain market share. We can't control on what the market growth, but we do control on how well we drive our market share gain. What we know is that during the past few weeks, our business have really improved quite a bit compared to the beginning of the quarter.

That really, really there's a combination of us continuing to accelerate our market share gain, as well as we also noticed that as some of the states begin to ease up on the shelter in place and more of the construction work going on, that there is also the growth in the markets.

Lee Power (Analyst)

Okay. So do you think you would have been above 7% PDG for the, for the period April through to May 15th?

Jack Truong (CEO)

Yeah, Lee, it's kind of hard to really know, you know, within the quarter, what the PDG is, but certainly what we know is that we have been growing a lot faster than what we see in the markets. But really, to really understand what the actual PDG is, you know, that's something that we have to look at over a longer period of time.

Lee Power (Analyst)

Okay, thanks. And then just one final one on Europe. You've obviously built out the headcount there. Is that done? And then where did most of those roles actually end up going to?

Jack Truong (CEO)

Yeah, it is, we're in the process of executing that. Of course, you know, in Europe, there's certain process that we have to go through to get that completed. And so most of the roles are really in the Western European countries, certainly in Germany is certainly one of the places that the roles actually came from.

Lee Power (Analyst)

Okay, cool. I'll leave it there. Thank you very much.

Jack Truong (CEO)

Thanks, Lee.

Operator (participant)

Thank you. The next question comes from Peter Steyn with Macquarie. Please go ahead.

Peter Steyn (Analyst)

Good evening, Jack and Jason. Thanks for your time. Just, I suppose following on from what you're seeing in the market, it'd be interesting to just get your sense of the scenarios that you're planning to... across the three regions, Jack. At this stage, you know, how do, how are you guys sort of broadly delineating the, the planning process and the decisions that you've made?

Jack Truong (CEO)

Well, Peter, let me just walk through the regions. So in North America, you know, that we build on our strength in and out in the market, that where we have really a good market position. That being in the Pacific Northwest, in the Southeast, and then the East Coast down the Mid-Atlantic and the Carolinas. So in that area, it's really about for us to continue to execute our game plan of leveraging on our Win with Color and new products, and that's the first thing.

The second thing is that, we're now beginning to really accelerate our really leverage on our exterior solutions that I just shared with you in the pre-presentation, is that we have a full line of products at different price points that would allow us to be able to penetrate those market that really resonate with the builders and the homeowners at different price points. So that's, and that's, so that's a. And then, and of course, the wraparound that is really the continuing focus on our push-pull strategy to accelerate the demand creation, while continuing to work closely with our customers to create that value with our customers.

So that's that is in North America. Now, moving on to Europe, and it's really the key opportunity we have in Europe is that we the flooring product is really a key growth area for our company, and in Europe that's based on fiber cement. And it is a unique and differentiated products, and it is right now within the when the market is quite or the economy is quite tough and which is the R&R become a really good opportunity for us, and that's an area that we're gonna focus a lot more in.

And also with the fiber cement, it is still the continuing approach of leveraging on the channel access and then the market access that we have with fiber gypsum in Europe to continue to gain placements, promotions, and then share. Which we have demonstrated that we're able to do that effectively. And again, with the focus for our European team to really being moving from being just a pull company to become really push-pull, and the team has really, during the past six or nine months, they have really grabbed on to the strategy and really been gaining a lot of momentum in that area.

And then moving on to the Australia side, it is really this is where we just continue to build on the momentum that we have had during the past two three years of being closer to our customers and gaining a lot more trust and credibility with our customers that would allow us to be able to sell a more broad portfolio of our products, while we continue to do work with our builders to really spec in a lot of our solutions to help them build homes that really allow us to build more of the lightweight homes that would be able to take share away from brick homes.

And particularly now, within the tough economy, and there it tend to be in our favor that the market is shifting to more of a lightweight construction in Australia. And then, so really the bottom line, push-pull approach around the world, and really take advantage of the broad portfolio of products that we have, but we really put it in the solution type as opposed to selling just products.

Peter Steyn (Analyst)

Yeah. Thanks, Jack. There was a lot of useful detail. I suppose in essence, I was curious whether you're thinking V-shape or U-shaped recovery from here, and your actions, which are different, suggest that you're a little bit more cautious.

Jack Truong (CEO)

Yeah, I think we'll be more or less. I think more like a swoosh.

Peter Steyn (Analyst)

Yeah.

Jack Truong (CEO)

The Nike swoosh type. I think, we're, you know, when we sit back and look at this, you know, this is a health. Initially, this is a health-induced crisis. And, just so before, the, the COVID was declared a pandemic, the housing market in North America was, was, humming. I mean, it was growing. The housing start was, in January and February, was, in, the 20+%. And then, so but then, you know, with the, lockdown and shelter in place, and it's health-induced, so, so that's, so that demand was kind of, been dampened, a little bit there.

But then as time went on, and you have, and you've probably seen the same number I've seen, is that we're now particularly in the U.S., we have 36 million folks out of work. That means that, you know, there are gonna be less of folks that can buy homes, at least in the short term. So now that kind of become a little bit on the economic crisis that we have to deal with. And so it. We get an idea with those two factors are beyond our control, and what we can control is really about making sure that we serve our customers a lot better than anyone else, and continue to create value in the marketplace, and then grow our share.

Peter Steyn (Analyst)

Thanks, Jack. Sorry, let's just bounce one quick one at Jason. Jason, could you give us a sense of what your exit run rate on the $20-$30 million worth of EBIT optimization benefits would be? You know, given that it ramps up through the course of the year, but you'll be realizing $20-$30 million. You know, what are you thinking about run rates at the end of the period?

Jason Miele (CFO)

Yeah, Peter, thanks for that question. Yeah, we're not gonna. I feel like we've provided some pretty specific guidance around that. Certainly at the Q1 results in August, we'll give specifics on what was achieved in Q1, and give more details around the arc. There's certainly early days with a lot. A few of the actions we are taking, primarily when you start talking about shutting down plants and those costs associated with that. So let us get through to August, and we'll give you more clarity on the exact run rate.

Peter Steyn (Analyst)

No worries. Thanks. I'll leave it there for others.

Operator (participant)

Thank you. Your next question comes from Keith Chau with MST Marquee. Please go ahead.

Keith Chau (Analyst)

Good evening, Jack, Jason, thanks for taking my questions. The first one, Jason, I just wanna go back to one of your comments earlier, where you were saying the business has improved quite a bit through the quarter. So I know it's hard, you know, at the best of times, to talk about general trends on a month-on-month basis, given orders. But are you able to provide us with a bit of qualitative commentary on how those orders, or, sorry, those sales have progressed through the first six weeks? If it was down 3% for those six weeks, you know, is it possible that May volumes were actually up relative to last year, or am I reading too much into that?

Jack Truong (CEO)

Oh, you know, it's you know, what we provided you there is really at the six weeks into the quarter. That's our shipment to our customers, so it's really our actual sales. So what we really saw was that really during the last three, four weeks, that our orders have been getting stronger and stronger each week. And then what's really the few key things that we saw is that from the new home constructions, and particularly in the South and Southeast and in the Carolinas, quite really good for us.

And then, moving on to the R&R side, it's kind of in this because this health-induced crisis, what we see here is that a lot of folks, the contractors who usually do a lot of big remodeling job, are not, you know, really at. For the first many weeks that they're not allowed to, I mean, most homeowner would not really have a lot of job for those contractors. But what we saw is that then that the DIY, which is Do It Yourself, since there's a lot of shelter in the home, shelter in place, there's a lot of growth that actually come from that, the do it yourself channel.

That's the kind of pretty much the dynamics that we have been seeing.

Keith Chau (Analyst)

Jack, in May, were your sales up versus last year?

Jack Truong (CEO)

We'll keep that quite confidential right now, Keith.

Keith Chau (Analyst)

Sure. Okay. No, appreciate that. The other thing is, to what extent do you think this is, or potentially could be a bit of, demand catch-up from the start or the period. You know, if you try and distinguish between, you know, what is catch up and what is underlying demand, do you think underlying demand is still running negative, or is it still too early to tell?

Jack Truong (CEO)

I think it's a little bit too early to tell, Keith. I think the key areas that we're watching is really about how fast do people go back to work? And we still have roughly 36 million Americans are out of a job. And I think the key is how, you know, of course, as you know, that there is, there's a lot of stimulus that the government have put into the country. But the key is that how fast do people go back to work? And that's that is really the key driver that we're looking for. But certainly, we know that going to the March period, the housing market in the U.S. has been on a hot streak.

Keith Chau (Analyst)

Okay.

Jack Truong (CEO)

So the demand was very strong before the COVID was declared a pandemic.

Keith Chau (Analyst)

Okay, and with respect to your primary demand growth that was achieved in the period, you know, reasonably a very strong result in FY 2020 of about 2%. Are you able to give us a bit of a sense of which segments that's been derived from, whether it's been new build, R&R, and potentially, you know, which products you're taking share from?

Jack Truong (CEO)

Yeah, we do take a lot of our share from the exterior siding products, Keith.

Keith Chau (Analyst)

Mm-hmm. And is that principally a new build, R&R? Are you taking it from LP, vinyl?

Jack Truong (CEO)

For the whole market, Keith.

Keith Chau (Analyst)

Okay, thank you. And then on the Lean targets, you know, another $20 million-$30 million of benefits from the reconfiguration of business that was announced this morning. Is that on top of the Lean savings or the Lean targets that were previously disclosed?

Jack Truong (CEO)

That's correct.

Keith Chau (Analyst)

Okay. So if we look at the Lean savings that were generated this year of $29 million, I think that was well ahead of the initial $15 million-$20 million that was targeted this year. So perhaps if we just focus on the North America business, I think the target was $100 million previously. Are you able to give us a sense of what the shape of Lean delivery looks like in FY 2021 and FY 2022 to get to that $100 million?

Jason Miele (CFO)

Yeah, Keith, the curve we, or the shape of that curve we gave you, previously several times, remains the same. So the second year target is getting up to $45-60 million. So there was a range within that.

Keith Chau (Analyst)

Mm-hmm.

Jason Miele (CFO)

Certainly we've positioned ourselves well to get higher in that range, but the shape of that range is in it already, and that remains unchanged.

Jack Truong (CEO)

So, Keith, the way to think about that is that we go into fiscal year 2021. We need to make sure that minimum, that we continue to keep the savings of $29 million in this year.

Keith Chau (Analyst)

Mm.

Jack Truong (CEO)

And then improve on that, right? And then to get to that $40-$45 million that Jason mentioned as a total. Right? So that's. There's really that continuous improvement approach that the Lean initiative will really deliver savings for us.

Keith Chau (Analyst)

Okay. Okay. Thanks, Jason. I'll leave it at that for now. Thanks.

Jack Truong (CEO)

Thanks, Keith.

Operator (participant)

Thank you. Your next question comes from Peter Wilson with Credit Suisse. Please go ahead.

Peter Wilson (Analyst)

Thank you. Like, to start just on, on North America margins for FY 2020. So very strong full year result, 25.9%, exactly in line with what you said you'd deliver. But if you just look at the quarterly trend, I mean, Q2 was 27%, Q3 was 26%, Q4 was 25%. Even though, I guess, you know, Lean savings would have been increasing through then, raw material input costs were improving. So can you just give us some explanation for that deteriorating quarter by quarter trend throughout the year?

Jason Miele (CFO)

Yeah, Peter, I think the primary thing which we had flagged throughout the year was we were going to invest in top line growth. You certainly would have seen that in the fourth quarter with SG&A being up 110 basis points versus as a percentage of sales versus the prior fourth quarter, so as we continue to invest in SG&A as well as innovation, which we started flagging, I believe, first quarter of last year, some of those costs started to increase throughout the year. That's why we had signaled the 25%-27% range. I think the first time was at the end of the second quarter. We've delivered right within that range.

Jack Truong (CEO)

But I think, Peter was asking about Q1.

Jason Miele (CFO)

No, I think he was asking why Q4 was-

Jack Truong (CEO)

Oh, Q4. Okay.

Jason Miele (CFO)

Do I have that right, Peter? You're asking why Q4 was 25.3?

Peter Wilson (Analyst)

Yeah, you have that right. My next question was-

Jason Miele (CFO)

I think.

Peter Wilson (Analyst)

Because, just, I guess, to follow up Keith's question, you know, you are gonna get further Lean savings this year. The comments previously have been that you intend to reinvest that. Is that still the case? And, thus, should we expect, you know, to observe an increase in SG&A for FY 2021?

Jason Miele (CFO)

I think the totality of FY 2021, Peter, is we're not providing guidance on currently. Certainly, some of the actions we announced would be reductions in SG&A. I think... Are you asking how do we get to the 22%-27% range?

Peter Wilson (Analyst)

I'm really looking, I guess, for that, and full year, I guess, should we expect an increase in growth investment, if you wanna call it that, that will offset some of the Lean savings that you expect?

Jack Truong (CEO)

Peter, I think that's what you're asking about the whole year guidance. So right now, we're not giving the whole year guidance, and what we announce here is really the guidance within the quarter.

Peter Wilson (Analyst)

Okay. Q1 then, can you give us an idea of whether there are any, you know, any kind of short-term spike in costs related to COVID inefficiencies or anything of that nature in Q1?

Jason Miele (CFO)

Yeah, Peter, certainly, we're entering or we are in a volatile and uncertain market. There are impacts of COVID that we are experiencing, but not so significant that we don't believe we'll be able to deliver 22% to 27% EBIT margin. So I, that range is first grounded in the Lean program we implemented and the savings we're driving from that. We delivered 25.9% last year. That's kind of the basis as we enter this year, with certainly, you know, the potential volatility of the housing market, you know, leaving us with a broad range as we enter the back half of May.

Peter Wilson (Analyst)

Okay, that's good. I'll leave it there. Thank you.

Operator (participant)

Thank you. Your next question comes from Simon Thackray with Jefferies. Please go ahead.

Simon Thackray (Analyst)

Sorry about that. I had myself on mute. Good morning or good afternoon, Jack, Jason. I just wanna follow up on Keith's question, just to understand a little better. The Lean benefit's 29 million banked this year. The target's still in place for next year, which is fabulous, and you make the point, Jack, you've gotta keep the 29 to make the target. Is there any element of Lean which will be volume dependent in that target?

Jack Truong (CEO)

Yeah, of course. Of course, as Simon, you know, is the more volume that we can flow through our plants, then of course the saving is really coming off of how efficient that we produce the products, and that's where the Lean savings will come from in terms of real dollars.

Simon Thackray (Analyst)

So yeah, that's what I thought, Jack. So I'm just wondering why you'd be so firm on the target if you don't know where the volume's gonna be in FY 2021?

Jack Truong (CEO)

That's why we have the target range between 22% and 27%.

Simon Thackray (Analyst)

But you've got the Lean benefit range aligned with that margin outcome, so there must be a volume assumption?

Jack Truong (CEO)

Absolutely.

Simon Thackray (Analyst)

Okay.

Jack Truong (CEO)

And then, like we m-

Simon Thackray (Analyst)

Okay.

Jack Truong (CEO)

Like we mentioned in the call, is that it's quite highly volatile. So we made certain assumption on what the volume would be, the range, and that's where the 22%-27% comes from.

Simon Thackray (Analyst)

Okay. All right. Well, there's some math there that I'll have to do. But, building on your insight into R&R, which I thought was really interesting, versus DIY, you know, the customer... I'd be interested in your insights into how customers or segments have reacted in different countries, given the approach to COVID has been different in different countries. Are you able to provide some insight into the sort of differentiated reaction of customers in each country? Because I think that's interesting.

Jack Truong (CEO)

Well, I think the, I mean, I would say the first few weeks when the COVID was declared a pandemic, there's everything was kind of shut down. People didn't know a lot of time, a lot of folks would not be prepared in terms of how to deal with because this is now a highly infectious disease. But then as time went on, and as our team around the world start to really engage with our customers and where we then shared our best practices together, and then that's when our customer depends on, you know, the new constructions or in multifamily or in the R&R, they would have different approach in terms of trying to get back to work.

But certainly from the new construction side, there's a lot more proactiveness to do that, rather than on the R&R side, a lot of the homeowners were not wanting to have people inside their home to do remodeling.

Simon Thackray (Analyst)

That would then sort of presuppose that the 60/40 rule of R&R versus new construction. That's obviously where a lot of uncertainty comes from in the R&R channel, I presume, and therefore on the margin and the volume outlook. But you made a comment about the DIY channel, and I note from your 20-F, from F-55, that in your concentration risks, that Customer A has had a fabulous, fabulous year. It's grown in sales 7.5% after growing 5.5% the year before. I presume that's the Depot. Can you talk to Customer A or talk to the channel and DIY and whether there was a fair amount of DIY, what we'll call pantry stocking, going on in the March quarter?

Was there a surge in that DIY into the channel?

Jack Truong (CEO)

And it's not so much on the surface as much as in terms of our team. Just remember, Simon, as if you probably remember the last four or five quarters in the interior business for us is that particularly through the two DIY channel that we made a big change from being a company where we rather than call on the stores, now we reallocate our resources call on to the headquarters of these two customers.

Simon Thackray (Analyst)

Mm.

Jack Truong (CEO)

By doing that, our team became a lot more engaged and be more proactively in managing the promotions and then having our products at the right locations and merchandised correctly. So that's why, if you look at the progress of our interior business, has been improving every quarter since.

Simon Thackray (Analyst)

Yeah.

Jack Truong (CEO)

So it's really all about creating the demand and having our products merchandised correctly.

Simon Thackray (Analyst)

That's, but that's reflected in that sales growth that I'm looking at in Customer A, presumably, which is up 12% in North America?

Jason Miele (CFO)

We don't disclose who Customer A is, Simon.

Simon Thackray (Analyst)

No, I know that, Jason. I know. I thought I should ask, though. I should try. And then just finally, Jason, on Prattville, just a bit of housekeeping. No commissioning until FY 2022, but ostensibly done. Just in terms of any holding costs, I presume, you know, there's no depreciation until it's commissioned. I just want to be clear on the impact of no openings till 2022.

Jason Miele (CFO)

That is correct, Simon. Depreciation does not commence until you start a line up.

Simon Thackray (Analyst)

Yep. And so are there any holding costs or other things that we have to be aware of or will be taken above or below the line on Prattville?

Jason Miele (CFO)

There. We might keep some. We would keep some people out there making sure we have the facility ready to go when we want to bring it up, Simon, but it's very de minimis to what you're thinking about.

Simon Thackray (Analyst)

Cool. Cool. All right. Thanks so much, gents, for taking my questions.

Jason Miele (CFO)

Thank you, Simon.

Operator (participant)

Thank you. Your next question comes from Brook Campbell-Crawford with J.P. Morgan. Please go ahead.

Brook Campbell-Crawford (Analyst)

Yeah, good afternoon. Thanks for taking my question, Jack and Jason. Just on, interested to understand PDG in the current retail environment in North America. Do you feel you need to tweak or adjust at all any of your programs in order to capture share in the current volatile and weak environment? Or is it a case of just continuing what you've done over the last 12 months?

Jack Truong (CEO)

Yeah, it's just a case of where our teams continuing to gain a lot more momentum. They know how to execute our push-pull strategy a lot better every day, and that's just the effects of continuous improvements. And it's really during this crisis, you know, having become a lot closer to our customers really help us navigate through this crisis a lot better. And that's what you see. And while we continue to put a lot more focus, too, on creating demand with the builders and contractors with our more broad suite of solutions, products.

Brook Campbell-Crawford (Analyst)

Okay, got it. Thanks for that. And just the -3% sales growth in the quarter to date, I'm just wondering if you feel that represents market demand. So is there any sort of destocking in the channel? I'm trying to understand if your shipments into the channel of -3% closely represents sales out of the channel to installers.

Jack Truong (CEO)

Yes. I think, yeah, the way to look at this is that, remember, we are a push-pull company. Traditionally, it's really, for us, is about creating the demand. And so it's what you see there is not a destocking or stocking. It's just a way for us to create demand, and then we're having our plants running efficiently, and we're able to supply to drive that demand.

Brook Campbell-Crawford (Analyst)

Okay.

Jack Truong (CEO)

And so-

Brook Campbell-Crawford (Analyst)

No, that's clear, then, Jack. And last one for me, just on the medium-term PDG targets that you set out over the last year or so, being 6%+ in the medium term, just whether or not you still feel that's a realistic target in current environment?

Jack Truong (CEO)

You know, our goal is always gonna be that we deliver that 6+% PDG with strong returns. And going before the crisis and during the crisis, that's still our goal.

Brook Campbell-Crawford (Analyst)

Excellent. Thank you for that.

Operator (participant)

Thank you. Your next question comes from Craig Woolford from Citi. Please go ahead.

Craig Woolford (Analyst)

Hi, Jack and Jason. Just a question on the North American segment. As you pointed out to an earlier question, [audio distortion]. I think in the quarter, the fourth quarter, it looks like it was up about $10 million due to higher marketing and labor. It was deliberate investment. Can you just clarify, do you expect that incremental $10 million in marketing and labor to carry through into 2021? Or is that part of the additional cost savings that you called out?

Jack Truong (CEO)

Yeah, so, so just to address the fourth quarter, you know, so, way before the pandemic crisis started, part of our plan was, Lean savings was to invest, some of those back into our business, be it through demand creation, to make sure that our products are well communicated and then packaged correctly for our customers to market and sell better, as well through innovation. So a lot of those that you saw in Q4, the increase in SG&A, those decisions were already made, a few months before the quarter. So we could, so we didn't pull back.

But now, going through the first quarter, it is just like Jason has highlighted in his section, that part of our crisis management plan is that we actually reduce the amount of marketing spends, and also in our headcount, to make sure that we resource appropriately and correctly.

Craig Woolford (Analyst)

Okay. So it is separate to the initiatives that were outlined in the slides on the $20 million-$30 million?

Jack Truong (CEO)

Which slide, Craig?

Craig Woolford (Analyst)

Well, it's where you're talking about the EBITDA accretion in FY 2021 of $20-$30 million.

Jack Truong (CEO)

Oh, that's-

Jason Miele (CFO)

Yeah, it'd be a bit commingled there, Craig. So the resource realignment would certainly be included in that number, which would impact SG&A. And then some of the items I talked about in the cash and liquidity section, the more tactical items about reducing discretionary spend, travel freeze, et cetera, are some of the things Jack was discussing, that would also impact SG&A. So yeah, separate, but those latter items would be separate from that number.

Craig Woolford (Analyst)

Okay. Thank you. And then the volumes are down 3% in year-to-date for the first quarter. What's happened on pricing in the North American market? Has there been any movement in pricing in recent times?

Jack Truong (CEO)

Our pricing, you know, that we had a price increase, effective April 1st, and then, and that's that. The pricing still holds.

Craig Woolford (Analyst)

And last one is just, is there any change that the company's looking to make? Any concerns you would have around the receivables balance, given the climate, just in terms of risk of bad debts?

Jason Miele (CFO)

Yeah, Craig, that's a great question. Certainly something we're looking at closely as part of our cash initiatives and keeping a close eye on receivables globally. You know, we obviously have experience going through the GFC. You know, as always, you accrue for a bad debt reserve, we would have increased that appropriately, considering the market we're entering. But there's not specific customers we're concerned with. It's just a prudent decision, leveraging our experiences from the GFC.

Craig Woolford (Analyst)

Thank you.

Jason Miele (CFO)

Thank you.

Operator (participant)

Thank you. The next question comes from Paul Quinn, from RBC. Please go ahead.

Paul Quinn (Analyst)

Yeah, thanks very much. Just one question really. It's all on the North American exterior volume guidance, or, or not guidance, but like you said, it was down 3% for the first six weeks in the quarter. Just trying to figure out, for the quarter, does that look like that's gonna accelerate through the quarter, i.e., increase from -3%, or is that coming down?

Jack Truong (CEO)

You know, Paul, you know, like I mentioned, you know, it is, we're in a high volatile market, so it's tough to kind of predict what's gonna happen in the future. But certainly what we saw and experienced is that, as the quarter went on, our business getting stronger.

Paul Quinn (Analyst)

Okay, so business is getting stronger, so it's actually getting better going forward. Okay. That's all I had. Thanks very much.

Jack Truong (CEO)

Thanks, Paul.

Operator (participant)

Thank you. The next question comes from Sophie Spartalis with Bank of America. Please go ahead.

Sophie Spartalis (Analyst)

Good morning, Jack. Good morning, Jason. Just three quick questions from me. Just in regards to your order book visibility, have you seen any deterioration, any signs of deterioration in that order book visibility over the last few weeks? And if you can also just talk about how or where the inventory level, or how high the inventory levels are sitting across the supply chain in each of the three jurisdictions, please.

Jack Truong (CEO)

Yeah, I mean, you know, I don't like to talk about the order book, that's just so short term. But I think given that the crisis that the market is on, I will make a comment. You know, certainly our order book has really strengthened the past few weeks and has really been increasing. And then even more encouraging is that the inventory of our product in the channel is onto lower.

Sophie Spartalis (Analyst)

Okay. Okay, that's great. And then just in terms of price, can you just talk through sort of your expectations on price, maybe for the next sort of 3-6 months? Do you think you'll be able to hold prices if volumes do deteriorate significantly, your plan there?

Jack Truong (CEO)

Yes. We're holding our price. Yes.

Sophie Spartalis (Analyst)

Okay. And Jason, just a quick question for you. Just in terms of given the changes in the plans, are you willing to provide any FY 2021 depreciation guidance numbers?

Jason Miele (CFO)

Sophie, we'll give that. We'll give an update in August, so certainly we give you depreciation in the appendix every quarter. In the slide where we discussed the accretion or the actions we took on May fifth, I kind of outlined that there would be depreciation savings in North America as well as in, yeah, primarily in North America. I think you know the size of our plants. Summerville is not one of our larger plants. I'll leave it at that for now, and certainly you'll start to see that, the impact in Q1.

Sophie Spartalis (Analyst)

Okay. That's great. Thank you, and thanks for all the detail. Thanks.

Operator (participant)

Thank you. We have come to the end of our question and answer session. I'll now hand back to Jack for closing remarks.

Jack Truong (CEO)

So, thank you all very much for calling in. And, you know, we certainly, we're in a very uncertain time, in a very highly volatile market environment. But it's very reassuring for all of us within James Hardie is that we now have a Hardie Management System now that allow us to really understand in real time what's happening in the marketplace at different levels that within our company, that allow our team to be able to make the right decisions, and then be able to flow up the most important item to allow us at the leadership team level to also make the right decision for the company level.

And that means that it's important for us to really build on our strength, and our strength here is to continue to be closer to our customers, continue to create demand in the marketplace, even during the crisis right now, to ensure that we build on the momentum that we had delivered this past year.

And then to continue to execute our Lean manufacturing system so that we can generate volume that deliver on the profit returns, so that we can continue to invest and continue to have the right cash flow and continue to improve the liquidity for our company as we navigate through the crisis and be able to survive and thrive however long this crisis will last. And so that is really what our company and everyone teams around the world are focused on. Thank you all very much for joining the call, and have a good day and good afternoon.