Fresh Del Monte Produce, Inc.

Good evening to our conference call participants in the US, and good morning to our call participants in Asia, including Singapore, the Philippines, and other locations. This is the conference call for the fourth quarter and full year results of Del Monte Pacific Group, or DMPL, ending April 2020. Representing Del Monte in this call Arcito Alejandro, Group Chief Operating Officer of DMPL. Parag Sachdeva, Group CFO of DMPL and Del Monte Foods Chief Operations Officer and CFO. Greg Longstreet, CEO of Del Monte Foods. And this is Iggy C. Son, Chief Corporate Officer of the MPL. Before we start the call, may we request everyone to please mute his or her phone? Thank you. So, Parag Sachdeva will now present our results.

Thank you, Iggy. On slide five, starting with both water highlights, Group sales expanded by 48% due to pandemic-driven higher consumption of healthy and culinary home products, with US sales up 65% and Philippines sales up 18%. EBITDA increased by 44% to US dollar 55.9 million, but one-off plant optimization and retiring loan-related expenses in U.S. contributed to a net loss of $12.4 million. Net profit would have been U.S. dollar $4.8 million without one-off expenses. Our subsidiary Del Monte Philippines, Inc., BMPI, had a net profit for the full year of $67.6 million. We had a private equity investment in a 12% stake in DMPI for US dollar 120 million, which is resulting in a valuation of US dollar 1 billion for DMPI and a net gain of US dollar 77 million that was booked in retained earnings. Special dividends. of US dollar 1.4 cents per share was declared. We have successfully refinanced Del Monte food loans as a subsequent event. Slide six. In terms of outlook, we will continue to meet sustained demand for our trusted, healthy shelf-stable products. and continue to optimize our production facilities while implementing strict safety measures. Our strategy is to strengthen the core business, expand the product portfolio in line with market trends for health and wellness, and grow our branded business while reducing non-strategic business segments. Aside from the DMPL-based business, DMFI is also well positioned to improve performance in fiscal year 21 with better sales mix and management of costs. We do not anticipate material one-off costs in the coming fiscal year. The DMPL group is expected to return to profitability in fiscal year 21 by unforeseen circumstances. However, due to the seasonal nature of the group's business, Some quarters may still incur a net loss. On slide seven, fourth quarter group results summary. Sales of 638.4 million, higher by 47.6 versus prior year. US sales, as mentioned, are up 65.2%. Philippines higher by 14.5% in local currency and 17.7% in US dollar terms. SMW brand in Asia declined by 50%.

Can we ask everyone to please mute his phone or her phone?

Let me repeat that. SNW brand in Asia declined by 15%. Mainly due to lower sales of fresh pineapples in North Asia. JB in India declined by 14% in local currency as the B2B business did get impacted by COVID-19. EBITDA of US dollar 59.8 up 38%. due to surge in volume in the U.S. and Philippines amidst pandemic-driven higher consumption of trusted, healthy, health-stable products. Operating profit of U.S. dollar 34.2 million, up 21% from 2018. Net profit of U.S. dollar 4.8 million, down 48% from 9.2 million. All of the above profitability numbers Our above one-off costs and our versus last year. Slide 8, a brief overview of non-recurring expenses. Net one-off costs in the fourth quarter is US dollar 15.2 million on a pre-tax basis, mainly coming from true-up costs related to closure of plans and execution of asset-light strategy amounting to US dollar 3.9 million and 11.2 million dollars relating to retiring loans in the US almost one year ahead of maturity. US dollar 3.4 million is the deferred tax on undistributed share in profits of our subsidiary DMPI for the quarter. A more detailed overview of our results for the quarter on slide nine. Fourth quarter sales at US$638.4 million, 47.6% higher than last year from higher sales in the US, Philippines, and SNW package sales in Asia driven by the pandemic. Will be explained more in the turnover analysis. Our gross margin at 17.8% lower by 110 basis points. led by higher product costs, mainly from metal packaging, lower fruit and vegetable yields in the US, particularly for tomatoes and peas, higher transportation costs to meet the surge in demand, and unfavorable sales mix from higher sales or private label ahead of the discontinuation of certain product lines, and lower fresh fine sales in the fourth quarter. Cost headwinds and unfavorable mix was partly offset by price increase in Philippines mainly. Gross profit at US$113.4 million higher than last year by 39% due to surge in sales volume as explained above. Our EBITDA of US dollar 59.8 million up 38% from 43.3 due to surge in volume. On a reported basis, EBITDA and operating income are also higher by 43.9% and 26.8% respectively. Our net finance expense includes US dollar 11.2 million accelerated costs for retiring loans of DMFI as outlined in the one-off cost and impact from change in lease accounting by almost US$2 million. DMPL's share in the Peel Fresh joint venture in India was a loss of US$0.9 million and lower than last year due to lower sales for food service and key accounts impacted by COVID-19 and higher overheads. Tax expense of U.S. dollar 3.8 million includes U.S. dollar 3.4 million deferred tax on undistributed share in profits of our subsidiary DNBI. Net debt at U.S. dollar 1.36 billion lower by U.S. dollar 95 million due to significant improvement in cash flow from operations. cash flow from operations improved by almost $182 million versus a year ago. Our gearing ratio at 2.41 times, mainly driven by lower loans due to significantly higher cash flow from operations, were offset by the reduction in equity due to net loss incurred during the year as a result of group-wide restructuring initiatives partly offset by the gain generated from the sale of shares of the MPI as mentioned above. On slide 10, we'll give you some context on our sales and turnover analysis. Americas constitutes 79% of total group sales, is higher by 65% in the first quarter, to US dollar $505.5 million, mainly driven by higher volume due to increase in demand from COVID-19 across categories, higher sales for Contadina brand from distribution games, and higher sales of private label ahead of the discontinuation of certain product lines that will be in place from fiscal year 21. The MFI benefited in the categories and segments with strong leadership positions as consumers initially turned to trusted. Our 52, 13, and 4-week share growth outpaced category growth across all categories. The momentum peaked in mid-March with volumes similar to what was typically seen during holidays as consumers stocked their pantries. Our new products contributed 5.5% to DNFI's retail and food service sales in the fourth quarter. Asia Pacific sales in the fourth quarter increased by 5% to US dollar 122.3 million from US dollar 116.5 million, mainly due to increase in all major segments, including Philippines, SNW packaged as well as exports of packaged pineapple products across the globe, partly offset by lower sales of fresh pineapples in North Asia from lower demand attributed to COVID-19. Sales in the Philippines domestic market were up in both peso and US dollar terms by 14.5% and 17.7% respectively, mainly due to higher volume, both in general and modern trade, favorable sales mix, and a series of price increases across all categories in line with inflation, mostly taken in fiscal year 90. Group continued to progress with distribution transition in general trade, and Cito may talk about it more in his update. Europe's sales, were higher at US dollar 10.6 million by 5.2%, mainly from higher sales of packaged pineapple products. Now moving on to full year results, starting with fiscal year 20 group results summary, sales of US dollar 2.1 billion are higher by 8.9%. Pleased to report that US sales are higher by 8.8%. If we take out the impact of Sager Creek, which had sales in fiscal year 19, BMFI sales would have been higher by 10.6%. Philippines, higher by 6.6% in local currency and 10.1% in US dollar terms. SMW brand in Asia grew by 9.2%, mainly due to higher sales of fresh as well as processed. despite fresh sales being impacted by COVID-19 in the fourth quarter. JV in India had a marginal growth of 1% in local currency with Q4 sales, as explained, impacted by COVID-19. EBITDA of US dollar 225.7 million up 45% from US dollar 156.1 million due to higher volume and price increases taken in fiscal year 19, both in US and Philippines to offset the cost, the impact of cost segment. Operating profit of US dollar 134.7 million, up 46% from US dollar 92.5 million. Net profit followed the operating profit and at $32.2 million, was double that of prior years US$50.8 million. All of the above profitability numbers are without one-off costs now versus last year. Flight 12, full-year non-returning expenses. Our total one-off costs are US$93.2 million on a pre-tax basis. This includes US$79.8 million in closure sale of production facilities. As previously outlined on 1st November 2019, the MFI successfully sold and transitioned its Cambria operations and related employees to Seneca Foods Inc. The MFI had also entered into an agreement to sell its production facility in Sleepy Eye, Minnesota, and Mendota, and that has now been completed, and these two plants have been closed in the fourth quarter of fiscal year 20. DMFI has also completed the sale of Crystal City, Texas facility at the end of April 2020. The production at these rationalized facilities have been transitioned to other DMFI production facilities in the U.S. as well as to the strategic co-packers. The sale proceeds from the sale of four plants are U.S. dollar 27 million. In Q1, we incurred U.S. dollar 39.6 million of tax on intercompany dividends of subsidiary. DMPI of Philippines subsidiary DMPI declared dividends to its parents, and the dividends were taxed at 14%. Additionally, we also booked a deferred tax liability on undistributed share in profits of US$7.5 million for FY20 on undistributed share in profits of the MPI. As previously mentioned in the Q4 update, $11.2 million relating to retired retired loans in the u.s are also in our full year number we also booked a gain of u.s dollar 1.5 million on buyout of 2l uh secondly in there slide 13 provides a little bit more deep dive into our full year results very pleased to report that sales at U.S. dollar 2.13 billion, 8.9% higher than last year across U.S., Philippines, and S&W in Asia and Middle East. Sales growth of 47.6% in Q4 contributed to full-year top-line growth. Excluding Sager, sales are up 11%. This will be explained more in the turnover analysis. Gross margin at 21.2% is higher by 100 basis points, led by price increase in Philippines and U.S. markets. Fees more than offset unfavorable impact from local to DC pricing, particularly in first half. Higher cost of template in the U.S. Unfavorable yields largely due to weather, both in U.S. and Philippines, for raw and finished products and under adoption of overhead due to reduced back in the US. EBITDA of US dollar 225.7 million and operating profit at US dollar 134.7 million higher versus last year by 45% and 46% respectively on a recurring basis mainly due to increased cost profit. Impact from change in lease accounting on EBITDA is US dollar 29.5 million. And even if we take the same amount, EBITDA of US dollar 196.2 million is at 26% growth versus fiscal year 90. On a reported basis, EBITDA and operating income are 142.2 million and US dollar 51.2 million respectively and include impact of one-off costs incurred following the closure of four production facilities. Our net financing expense is higher from the change in lease accounting by US dollar 8.5 million. Last year also included a net of one-off gain of US$16.7 million on purchase of second year loan versus US$1.5 million in fiscal 2020. As also explained in the one-off cost, Q4 also includes US$11.2 million related to retiring loans in the US almost one year ahead of maturity. DMPL Shared and Feel Fresh joint venture in India was a loss of US dollar 2 million and lower than last year due to lower sales to food service channel and key accounts impacted by pandemic and increase in cost of commodities, higher overheads and strategic marketing investment to accelerate growth of processed food business that was undertaken in the second and third quarter. Tax expense. of US$29.2 million includes intercompany tax on dividends amounting to US$39.6 million, deferred tax of US$7.5 million on undistributed profits of the MPI as explained in one-off costs offset by tax credit from higher losses due to closure of production. Net debt and gearing ratio have been covered in the Q4. On slide 14, when it comes to the sales outlook, America's constituted 72% of total group sales, higher by 8.8% to US dollar 1.4 billion, mainly driven by surge in consumption and shipment for shelf-stable products caused by pandemic as consumers initially turned to trusted names. DMFI has fast-tracked its innovation pipeline in sync with trends for health, snacking and convenience, and launched innovative products in growing refrigerated produce, packaged vegetable, and frozen categories. New products contributed 5.1% to DMFI's retail and food service sales in the last 12 months. Asia Pacific sales grew by 9.3% to US dollar 555.2 million from 507.3 million, driven by increase in sales of SNW business, both fresh pineapple and packaged fruits, as well as retail sales in the Philippines. The Philippine market sales were high by 6.6% in peso terms and 10.1% in US dollar terms respectively driven by peso appreciation price increases in line with inflation as well as volume growth. Price increase and lower trade promotion spent contributed 2.6% to net sales growth driven by a series of price increases across all categories mostly in 2019. Sales increased across modern trade and general trade by double digits as all categories delivered growth. As mentioned, the group continued to progress with distribution transition in general trade with distributed sales to their customers going at 7% in volume terms. Europe sales were higher at US$34.1 million by 6.8%, mainly on higher sales of packaged fruit and pine juice concentrate. With that, I would hand it over to Greg for market update on the U.S. business.

Thank you, Parag. If you turn to slide 16 in the presentation, you'll see a recap of our Del Monte Foods USA business market share. We had a very strong quarter in market share and experienced growth in each one of our business units, our canned vegetable business, canned fruit, fruit cup snacks, canned tomato and also our broth and stock business all grew share during the fourth quarter. It was a very strong quarter for category growth, particularly in center store, grocery store products as consumers responded to the pandemic. And what that pandemic led US consumers to do was to turn to trusted brands, healthy shelf stable products, and really identify new ways to prepare more meals at home. I'm pleased to report that we not only kept up with category growth, we outpaced category growth in each of our businesses and benefited disproportionately from this issue with consumers and the trust that consumers have in our brands and our products was certainly displayed. And this is all consistent with our long-term initiative to invest in building our brands, bringing differentiation and innovation to market and expanding our distribution channels. On the next slide, slide 17, some brief highlights from our US Q4 results. Our sales increased 62% in the quarter over a year ago to just over 500 million US. Again, pantry loading occurred Due to the pandemic, but in this prolonged pandemic, what we saw was consumers buying more and more of our products and using those products. And we saw many repeat sales with consumers. We also attracted new consumers and increased our household penetration during this period. So we're pleased with that progress. And we also saw continued progress with new products. This is an important initiative for us. And we continue to receive accolades for our new product and innovation work. Recently, our Del Monte Foods R&D organization and team was recognized by Food Processing Magazine as R&D team of the year for large company category in the US due to our extensive portfolio of innovation that we've launched over the past 12 and 18 months. Reported and adjusted EBITDA for the quarter was US 34. and US 38.1 up 31 and 25 percent from prior year quarter respectively. Slide 18 are just a few of the highlights of our communication efforts during the fourth quarter, primarily in response to the pandemic and to COVID. A lot of effort done to promote our products as an essential product for consumers to thank essential workers on the front lines, inspire consumers to use more of our products at home through new recipe ideas and new usage suggestions. We also benefited from being featured across many channels of media in terms of products to buy, products to use as you migrate to more home meal cooking, whether you're in a shelter in place environment in the U.S., or whether you're restricted from going out and dining, our products performed quite well and were a natural substitution for consumers' needs. So continue to be pleased, and that certainly continued through the summer months here at West Business. Slide 19 is a continued effort around innovation and using innovation to open up new channels of business for us. We've been pleased with the success of our Del Monte bubble fruit product. This is an innovative line of fun fruit snack products that contain bursting boba. It's the first of its kind in the US market, and it's done exceptionally well in outlets like Costco, which is a highly innovative retailer. We're in six of their eight locations around the country and have performed well and have continued that distribution with commitments from Costco into the next fiscal year. Our food service business on slide 20 has learned to be creative and nimble and adaptive to this environment. Obviously, with away from home consumption drastically changing in the US, we've been creative. We've used to offer as takeout and dine out solutions for many restaurants when consumers are looking for snacking ideas for their family. That's been successful. built a larger business with our pizza topping business for those pizza delivery companies that are having success in this environment. And we've done a lot of work to support COVID relief. And I found a great avenue there with many distributors in the food service area to help support local food banks and those in need and have been very active in that area. Slide 21 recaps a big year for us in terms of our asset light strategy. As we've described previously, We were simply overbuilt. We had too much capacity that was unused. Our cost basis was too high. And our goal was to reduce our footprint and pursue further production in those facilities that we thought were more contemporary, that were lower cost, higher yielding, more productive sites, and really work to fill up those sites and utilize all capacity. And pleased to report that we are able to move our capacity utilization for our vegetable business, our largest business, from just under 50% in prior years to over 95%. We're even approaching 100% capacity utilization this pack season, and that's bringing some significant savings to the company that we're benefiting from in fiscal 21 and will continue to benefit from in future years. On slide 22 is another significant event for us. that was completed in the fourth quarter are refinancing. We market and refinance 1.3 billion US. We partnered with JP Morgan in that effort on a bond issuance of 500 million also included in this refinancing was a $450 million asset-based loan. And as a part of this process, DMPL continued their investment and support in our business with new equity, as well as a conversion of our prior second lien into common equity in DMFI. Bond investors overall responded positively to our bond issue, our accelerated path in terms of top line growth and innovation, as well as our lower cost structure. DMFI reduced total loan facilities from US $1.4 billion to US $950 million, as a part of this process. I will now transition the presentation to Mr. Cito Alejandro.

Thank you, Greg. Over now to chart 23. It was a year of growth across all categories of Philippine domestic. Market share grew throughout the year, but further accelerated in the fourth quarter. Our value proposition of health and wellness and enjoyable, delicious home cooking works very well in this pandemic environment. Chart 24. Philippine domestic volume grew 18% in dollar terms and 15% in peso terms. Growth was primarily driven by the retail segment. E-commerce also grew, although not yet as dominant as retail. Food service, however, was impacted by the closure of restaurants, hotels, and resorts. Our two fastest grat categories are 100% pineapple juice and our full line of cooking sauces, ingredients, and meal mixes. Chart 25, our fourth quarter programs focused on helping mothers trapped at home with menu planning, given the steep rise in home cooking and equally important, the need for variety in home cooked food. Chart 26, Here is a classic example of how our menu planning addresses unique restaurant dishes that were unavailable during the lockdown period. Part 27, our beverage category is one of our biggest volume and profit drivers. Here you will see our popular Del Monte beverages offering health benefits related to stronger immune systems. Fit and Right, meanwhile, provided lockdown relevant healthy tips. Chart 28 shows our marketing efforts to increase consumption of our canned fruit pineapple. We featured how mothers can use it in different cooking occasions. We endeavored to make our offering equally relevant in this COVID environment. Chart 29 and moving now to SNW. This shows the full line of our SNW fresh and packaged food and beverage portfolio. China is our biggest market in Asia where our business was severely impacted due to COVID. Therefore, as you will see in chart 30, sales of SNW declined in the fourth quarter. Our higher sales of healthy, shelf-stable packaged products was not enough to offset the huge decline in sales of fresh pineapple. due to the China lockdown because of COVID. On the brighter side, there have been some improvement in our fresh pineapple sales over May and June, and we expect this to continue in the remainder of the year. Chart 30 just shows the various sales and marketing efforts that we have done in Singapore. These included brand equity building activities as well as in-store promotions. Moving now to India, Our business was significantly impacted by lower sales of branded packaged products, mainly from COVID and higher cost of commodity. Food service accounts for 50% of India's sales. Thus, the impact on the business was greater than other DMPL markets. Chart 33 shows our social media campaigns in India, with consumers forced to stay at home, Del Monte stepped up to provide easy-to-make recipes and menus for different meal occasions. In chart 34, here we extended the campaign to online food and mom communities to increase awareness and saliency of the Del Monte brand. I'll now turn you over to Iggy Sison.

Thank you, Tito. On chart 35, we completed a private equity investment in the Montefilippines for $120 million to a private equity investment firm. The MPI was valued at 15.7 times FY 2019 earnings, resulting in an implied equity value of $1 billion for the MPI for this $120 million investment. And this is highly commendable given the declining capital markets with the Philippine Stock Exchange Index down about 25% from the peak index of last year. And as Parag earlier stated, this resulted in a net gain of 77 million US dollars, which was booked in retained earnings instead of net income in the P&L. The proceeds were used for repayment of DMPL bank loans and this private equity investment is a testament to DMPI's solid standing and future prospects for growth as a food company. Del Monte is well positioned in this environment given our nutritious long shelf life products which consumers are using to prepare more meals at home as well as build their immunity. On the sustainability front, on slide 36, as an essential industry, the Montepacific Group continued producing amidst the pandemic lockdown, whether it's a shelter in place in the U.S. or community quarantine in the Philippines. In order to meet demand for nutritious health-stable food. Our group ensured the health and safety of our employees and workforce, adhering guidelines of global health organizations and government health ministries across locations. Del Monte Foods donated $2 million worth of food to Feeding America in response to the pandemic while the Del Monte Foundation in the Philippines donated food and beverage to over 200 government and private organizations, 40 healthcare workers, other frontliners, and marginalized communities in the Philippines during the lockdown. DMPI collected over 19 tons of plastic waste for conversion into school chairs and tables for donation to government schools. On slide 37, Given the successful private equity investment I mentioned earlier and the net gain of $77 million, the Del Monte Pacific Board approved a special dividend of 1.54 US cents per share to common shareholders. So to recap the outlook, We will continue to optimize our production facilities while implementing stringent safety measures to meet sustained demand for our trusted, healthy, long shelf life products as consumers stay at home, prepare more meals, and have more snacking occasions with our products, both Cito and Greg highlighted earlier. Our strategy is to strengthen the core business, expand the product portfolio in line with market trends for health and wellness, and grow our branded business while reducing non-strategic business segments in the group. Aside from the DMPL-based business, Del Monte Foods is also well positioned to improve performance this year in FY 2021. better sales mix, and cost management. The Del Monte Pacific Group is therefore expected to return to profitability in FY 2021, varying unforeseen circumstances. However, due to the seasonal nature of the group's business, some quarters may incur a net loss. Before we open the floor to questions, we would like to remind the DMFI bondholders on the call that Greg and Parag with the DMFI management will hold its management call on the 24th of July at 8 a.m. Pacific time. So with that, we would now like to open the floor to questions.

Hi there. You got Jason from Lowe's Corporation just reaching out regarding the DMFI empathy. Just wanted to see if there was any incremental color you can provide regarding the volume cadence in the months after your reporting period? Just want to understand what the general trends are.

Yes, yes. Well, given the environment that we still are in throughout most parts of the US, consumers have continued to rely heavily on e-commerce and grocery stores to feed themselves and their families. So we continue to benefit from a strong surge in our core business as well as our new products. So we have maintained a pretty steady state of demand that approaches double digits in most of our businesses beyond the reporting period. Hope that helps.

Got it, I understand. Is it possible for, and I'm happy to take this conversation offline or perhaps for the call, on the 24th, but in respect, are you able to get more granular in terms of the, you know, to disaggregate sales, what proportion is coming from volumes versus pricing and the like? And again, happy to take this call offline if there are other people have other questions regarding other entities.

No, we're happy to follow up with you on that offline. You know, one of the things that certainly also benefited us during this fourth quarter demand and the continued demand is you've seen across the US retail prices have risen. There's been less need to promote. So we've pulled most of our trade promotions and discounts off our go-to-market strategies. So we have seen enhancements in margins and profitability. So we're selling more product at much higher rates at regular retail, non-discounted retail pricing. So that's certainly been a benefit for us um and a continued benefit into the new fiscal year but but happy to take that more offline and alfred and i can follow up with you uh separately great thanks hello hello yes please

I actually emailed my questions to Jen. Maybe she can just run through the questions I've listed down. I think some have been answered, but I think the others are still unanswered.

Jen, would you like to read the questions of Mr. George Shantz?

The first one was on one-off expenses and whether we are still expecting any one-off expenses in FY 2021.

As I mentioned in my update, we are not expecting any material one-off expenses in fiscal year 21.

Thank you. My second question is related to the sale of DMPI. We already sold 12%. Do we envision to sell any additional years? In the forthcoming years?

No, not in fiscal year 21. We may go for an IPO if market conditions permit in fiscal year 22, but it's too premature to to sort of confirm the same.

To build on what Parag said, as we advised the market in June 2018, we deferred the IPO, George, two years ago. And we advised the market that when market conditions permit, then we will relaunch that IPO at a future date. In the meantime, we completed that private equity investment.

Yes, understood. Actually, the market is not looking good. Except that, well, your stock price here in the Philippines is up by 23%. Congratulations to the management and the board of Del Monte Pacific and Del Monte Foods and Del Monte Philippines. Now I have a third question. related to COVID in China, which hit our fresh pineapple sales. I think in your presentation, you did mention some recovery. I wonder what is the extent of the recovery of fresh pineapple sales in China?

Okay, let me answer this, George. This is Sito Alejandro. We were badly hit. Yeah, our business was badly hit starting February, March, and April, though. it started to recover in April. But as we look at May and June, we're now at about two-thirds of our regular volume in China. Oh, that's good. So it's a real good sign. We are very scared because it went down to as low as 20% in February. So now we're back to two-thirds of our regular normal volume, and we will continue to build on that. So we anticipate that the coming months will be favorable. The summer months are always favorable for pineapple. So the fruits are there and we continue to receive week by week higher orders from China.

That looks promising then. My first question is with respect to India. When do you foresee it breaking even or making profit?

To answer your question, George, actually, we were making cash profits last year. This year, obviously, as I explained, due to strategic investments in marketing and also our fourth quarter significantly being impacted by COVID, we ended up with the net losses of almost $2 million being our share on the losses. But we do expect the performance to improve, particularly in the second half, once things do normalize. And we are also focusing more on retail business. So we expect to see improvement. And also, break-even should be, from a net income perspective, should be next year.

Should be next year. Okay. Yes. And, well, my last question is really on the interest rate. Sorry, I wrote 16%, but I think it's about 11.3% for your three-year debt.

On the five-year debt, it's around 11.85% or 88% to be more precise.

Well, isn't that quite high given the prevailing interest rate in the U.S.? ?

I would say for comparable credits and at the timing that we did the deal, we did secure market rates and we did pretty well and our offer was oversubscribed by almost $200 to $300 million.

Yeah, I think the rate offered was quite high because the five-year treasury bonds are only about quarter of a percent so if you offer 11 and a half or something like that that's really very attractive for investors but nonetheless it's there so we just hope that you know uh at some point in time our credit standing improves and we'll be able to refinance uh down the road at the lower rate yes that's our plan yes that's the plan that's the plan okay very good yeah that's all i had when i reviewed the presentation that you uh I do appreciate answering all of them. Thank you. Thank you, too.

Thank you, George.

Are there any other questions? Sorry, one more question. This is Jason again from Lowe's. Just curious, for the American sub, is the call going to be tomorrow at 11 a.m., or is it going to be on July 29th at 10 a.m.? ?

Tomorrow or tomorrow at 8 a.m. Pacific time. Has JP Morgan sent that out to you? No. No, they haven't.

I can follow up with them directly tomorrow.

We'll make sure that tonight too. There's another message that's sent. Alfred, are you on the phone? He might be on mute, but we'll follow up. Yes, I am, Greg. Okay. Alfred, we should just make sure that that call is broadcast, you know, the time of that call and details are broadcast to all investors.

Yes, we issued a press release, and we also put notices on our bond portal. But if the person who's asking the question doesn't you can either go to the intro links or you can reach out to me directly, and I'll be happy to make sure that you have access to that.

Could you give me your email address? I'll shoot that to you right now.

I'll reach out to you. I'll reach out to you.

Okay, sounds good. Thanks.

See you.

Okay, are there any other questions? Okay, if there are no more questions, this concludes our conference call, and thank you for joining us today.

Thank you very much.

Thank you. Thank you very much. Thank you. Thank you, everyone. Thank you.