ATR - NYSE

Ladies and gentlemen. Thank you for standing by. Welcome to Aptar's 2023 Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Introducing today's conference call is Ms. Mary Skafidas, Senior Vice President, Investor Relations and Communications. Please go ahead.

Thank you. Hello, everyone, and thanks for being with us today. Joining me on today's call are Stephan Tanda, President and CEO at Aptar; and Bob Kuhn, Executive Vice President and CFO at Apt. Our press release and accompanying slide deck have been posted on our website under the Investor Relations page. During this call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measure and our reconciliation are set in the press release. Please to the press release disseminated yesterday for reconciliation of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call. As always, we will also post a replay of this call on our website. And I would now like to turn the conference over to Stephan.

Thank you, Mary, and good morning, everyone. We appreciate you joining us on the call today. I will begin my remarks by highlighting our results for the fourth quarter and the full year. Later in the call, Bob Kuhn, our CFO will provide additional details on the quarter and yearend results. Starting on slide 3 for the fourth quarter, Aptar achieved core sales growth of 2% and finished a year strong with adjusted EPS of $1.21 per share due to the record year for both our proprietary drug delivery systems as well as our fragrance dispensing technologies. We achieved significant margin improvement in the quarter with an adjusted EBITDA margin of more than 21%, a three point increase over the prior year's quarter. The margin improvement was driven by a strong focus on cost management across the company as well as rapid growth in the pharma end markets. In quarter four, robust demand continued for proprietary pharma drug delivery systems which grew across several key applications such as emergency medicines, allergic rhinitis, central nervous system therapeutics, and natal decongestions. Solid growth from fragrance dispensing solutions also drove positive results in the quarter. Turning to slide 4 for the full year, Aptar delivered core sales growth of 3% with Pharma delivering 10% core sales growth, while Beauty was up 2% and Closures declined 7%. About half of the decrease for Closures was due to the passing through of lower resin costs to our customers. As a reminder, our Pharma business is a pipeline-driven business, its projects taking anywhere from 5 to 15 years to be ready for commercialization. In 2023, we had the highest number of new product launches since 2018, while adding an equal, risk-adjusted value of new project opportunities to the pipeline, which bodes well for continued solid growth. It is important to note that sales from most of our new launches continue to build once they have been on the market for a few years, which underpins the raising of our long-term core sales growth targets for our Pharma segment. Turning to our Beauty and Closure segments, order books have steadily grown. In our Beauty segment, we have improved our win rate of new business and the retention of existing business. After our first full year of operating the Closure segment, we are also seeing our beauty, home, care, and personal care closure opportunities increase. As a reminder, focusing more intently on opportunities in these areas was one of the reasons we brought Closures under one roof. Overall, 2023 was a pivotal year filled with many accomplishments. With an increased focus on both the top and bottom line, Aptar our achieved double-digit earnings growth, double-digit adjusted earnings per share growth and increase of 24%, very meaningful EBITDA growth and significant margin improvement across each segment. Improved ROIC by two percentage points within our raised long-term target range and reduced SG&A expenses as a percentage of sales. In 2024, we will continue to focus on growth and disciplined cost management, which will in turn help us expand our EBITDA margins into our long-term target range. Our cost management efforts will remain a key focus as we continue to reduce SG&A expenses as a percentage of sales. Looking back at 2023, we also took several important steps operationally that I would like to touch on now. These efforts are critical to executing our strategy and are helping to propel the company forward. We realigned the company to be closer to our customers, simplifying our Beauty segment and bringing Closures all under one roof. We continue to invest in our manufacturing operations with capacity expansion as well as new state-of-the-art sites in France, the United States, China and India. We initiated restructuring and cost reduction actions in all regions. For example, in our Closure segment, these actions will continue to drive asset utilization with benefits realized in the second half of 2024. And while 2023 was focused on organic growth, especially with two of our three large capital projects coming online, partnerships and acquisitions continue to play a key role in growing the company by adding key capabilities, technologies, and talent worldwide. After digital health had a productive year from that perspective. We extended our partnership with Chiesi to conduct clinical studies in the US for asthma and COPD, which will help demonstrate the positive effect of digital health and improving patient outcomes. Aptar Digital Health also recently signed an enterprise agreement with Biogen, a leading global biotechnology company, to operate and develop their digital health solutions. The initial scope of the multiyear contract covers several indications in neurology and immunology across 15 countries. This opportunity will help us broaden the ways we can monetize our digital health capabilities. Not only to build and deploy our own solutions, but also supporting our customers to deploy and commercialize their solutions. The details of this agreement will be announced in the press release right after this call. I also wanted to talk about an exciting development to increase the competitiveness of our operations in Asia and beyond. We recently signed a joint venture agreement with a China-based pump manufacturer. As part of the partnership agreement, we will acquire a 40% stake in the company. Through this partnership, Aptar will have access to cost-effective pump manufacturing in the region, faster go-to-market agility, and a more complete end-to-end local supply chain, all of which will further increase our profitability in China and the Asian market more broadly. We expect to explore leveraging this partnership also for certain regional consumer healthcare dispensing systems. Additionally, we will have access to competitive mold and machine building capabilities that can be used globally and will provide us with high quality, better cost, capital investment alternatives. Finally, the partnership will also give us access to much needed regional anonymization manufacturing capabilities. These capabilities will help us meet growing demand of the middle class consumer across Asia, a consumer that is driving profitable growth across each of our segments. The transaction is subject to satisfaction and completion of various conditions and is expected to close later in 2024, at which time we will be able to disclose more details. Now, let me highlight a few of our recent innovations and product launches shown on slide 5. In the pharma space, Aptar's unidose device is the nasal delivery system for another opioid overdose rescue treatment recently launched. Aptar's elastomeric components are featured on an existing GLP-1 molecule recently launched for a new indication. Turning to Beauty, in Europe, our customizable and interchangeable fragrance pump is featured on Yves Saint Laurent’s new prestige fragrance. And our premium pump is also the dispensing solution for a new L 'Oreal facial skincare product. In the Closure segment, we have a new technology on the market in China for the Gongfu Tea and Cephei coffee brands. Our solution separates the powder from the water until the user activates the closure with a push to dispense the powder into the bottle. While our active polymer technology protects the quality of the powder until it is ready to be used. This is just a great example of combining our active material science protection technology with our dispensing closure. Now pivoting to sustainability, we are proud to receive recognition from both Newsweek and Forbes during the quarter. We ranked number 29 on Newsweek's America's Most Responsible Companies lineup. And Forbes ranked us number 13 among the World's Top Companies for Women, which places us in the top 5% of the 400 companies ranked. Before I turn the call over to Bob to share further details on quarter four, let me summarize shareholder returns for 2023. We returned over $104 million to shareholders through dividends and the repurchase of over 399, 000 shares for $47.6 million. We also completed our 30th year of paying an increased annual total dividend and celebrated our 30th anniversary as a New York Stock Exchange listed company. With that, I will turn the call over to Bob.

Thank you, Stephan. Good morning, everyone. Starting on slide 6, I would like to say summarize the quarter. Our reported sales increased 5%. This included a currency translation benefit of approximately 3%. Therefore, core sales grew 2%, primarily due to strong growth in farmers' proprietary drug delivery systems and continued demand for fragrance dispensing solutions in Europe and Latin America. As shown on slide 7, we reported fourth quarter adjusted earnings per share of $1.21, which is a 27% increase over the prior year's adjusted EPS. During the quarter, we achieved adjusted EBITDA of $179 million, which increased from the prior year's fourth quarter by 22%, driven by expanding margins in all three segments. Turning to some of the details by segment for the quarter, our Pharma segment’s core sales increased 11%. Approximately 9% of the growth came from increased volumes, especially in our proprietary drug delivery systems. Looking at sales in the Pharma segment by market, for our proprietary drug delivery systems, prescription core sales increased 24%, primarily due to continued strong demand for dosing and dispensing technologies for emergency medicines, allergic rhinitis, and central nervous system therapeutics. Consumer healthcare core sales increased 13%, driven by higher sales for eye care, nasal saline rinse solutions, and nasal decongestants. Injectables core sales were basically flat due to difficult comparisons over the prior year fourth quarter. Demand for elastomeric components used for biologics continues to grow, and this helped offset other categories that were down in the quarter. Additionally, turning to our active material science solutions, core sales decreased 15%, excluding non-recurring sales of COVID-19 at home test kits in the fourth quarter of 2022, core sales decreased 7%. Lower demand for our products used on probiotics, which experienced rapid growth over the last couple years also contributed to the decline in sales. Pharma's adjusted EBITDA margin was 34%, a two point improvement from prior year. The margin improvement was driven primarily by strong product mix. Turning to our Beauty segment, core sales decreased 6% in the quarter. Looking at the Beauty segment by market, Beauty core sales decreased 4% due primarily to lower sales in North America. Fragrance sales in Europe continued to be strong, but were offset by lower sales of our products used in facial skin care applications. Personal Care core sales decreased 7% with lower demand across all regions. Home Care core sales decreased 20% due to lower demand in both North America and Europe. This segment's adjusted EBITDA margin for the quarter was 15%. The improvement in the margin was due to our continued focus on cost management, restructuring actions, and a net positive impact of one-time items. The Closure segment's core sales declined by 4% compared with the prior year's quarter due to the passing through to our customers of lower resin costs as well as lower volumes. When looking at the market fields for Closures, food core sales decreased 10%. The decline in sales was driven by lower sales in Europe and North America for sauces and condiments and Asia for infant nutrition. Beverage core sales increased 17% due to healthy demand across all regions with higher sales of bottled water, concentrates, and sports drinks. Personal care core sales decreased 2% compared to the prior year's quarter. While we saw improved volumes particularly in North America and Latin America, the resin pass-through more than offset volume increases we experienced in this market. In our fourth category, which includes beauty, home care, and health care, core sales decreased 2%. The segment's adjusted EBITDA margin was around 13%. This represents a three point improvement over the past year. same period last year primarily due to cost and productivity management. Our total CapEx spend for Q4 2023 was $81 million with the majority going to our Pharma segment. Two of our three large capital expansion projects are now online with our injectables capacity expansion targeted to be completed by the end of 2024. For the quarter, the three large capital projects made up about 15% of our total CapEx spend with the majority allocated to our injectables capacity expansion. Slides 8 and 9 cover our year-to-date performance and show 3% core sales growth and our adjusted earnings per share which were $4.78, up 24% compared to $3.87 a year ago including comparable exchange rates. Reflecting on 2023, Aptar finished the year with good top-line growth and adjusted EBITDA despite a difficult environment in North America and our injectables expansion and ERP implementation. We also took steps to reduce our fixed costs, a focus that will continue in 2024. In 2023, cash flow from operations was a record $575 million. Free cash flow was $263 million for the year, up from $196 million in 2022 due to improved earnings and working capital management. Our strong cash flow has allowed us to neutralize any impacts on our interest expense coming from the rising rates by paying down a portion of our debt that had come due. Reported depreciation and amortization expense increased 6% or $15 million to approximately $249 million in 2023. Moving to slide 10, which summarizes our outlook for the first quarter, we anticipate our strong momentum to continue and expect first quarter adjusted earnings per share, excluding any restructuring expenses, acquisition costs, and changes in the unrealized fair value of equity investments to be in the range of $1.10 to $1.18 per share. The estimated tax rate range for the first quarter is 24.5% to 26.5%. We are not expecting currencies to have an impact compared to the prior year. We currently estimate depreciation and amortization for 2024 to be between $260 million to $270 million. We expect our capital expenditures in 2024, net of any government grants, to be between $280 million and $300 million, with the majority of capital allocated toward our Pharma segment. In closing, we continue to have a strong balance sheet with a leverage ratio of approximately 1.5, which allows us to continue to invest in the business, pursue strategic opportunities, and continue to return value to shareholders in the form of dividends and share repurchases. In addition to our cash dividend payments to shareholders, which totaled $27 million in the quarter, we repurchased approximately 81, 000 shares for approximately $10 million. At this time, Stephan will provide a few closing comments before we move to Q &A.

Thank you, Bob. In 2023, we delivered very strong results, and we intend to build on this momentum in 2024, starting the year with a solid first quarter. Our first quarter growth will be spurred by our Pharma's franchise proprietary drug delivery systems, which saw double-digit core sales growth already in the quarter one of 2023, as well as the demand for elastomeric components for biologics. We also expect our Beauty and Closure segment to benefit from the progressive recovery of the North American market, and we anticipate continued demand for our fragrance dispensing technologies, which also had double-digit core sales growth in quarter one of last year. We remain focused in reducing SG&A expenses and reducing our manufacturing fixed costs as a percentage of sales. We took several steps in 2023 to expand our margins and that remains a key priority for 2024. We serve attractive, rapidly growing markets where we create differentiation throughout technologies with an emphasis on sustainable solutions. We are a trusted partner to our customers because of our regulatory expertise and our end user focus. Our advantage market position enables top-line growth while our focus and prudent cost management benefits our bottom line. We are energized and excited for the year ahead and expect a strong start of the year. With that, I would like to open the call up for your questions.

[Operator Instructions] So our first question comes from the line of Ghansham Panjabi of Baird.

Thank you, operator. Good morning, everybody. I guess first off on the pharmaceutical specific to 4Q and the 11% core sales growth versus let's say 8% in the third quarter. Did the fourth quarter come in essentially in line with your internal plan? And if it was above, which sub verticals sort of came in better or worse than you thought specific to pharma?

Good morning, Ghansham. Yes, look, overall, we continue just to be impressed with the pool of proprietary drug delivery systems, clearly nasal delivery, whether it’s allergic rhinitis, whether it’s emergency medicines continues to do well, but the growth is really broad based, so maybe that was a tick better, but really, it's really broad-based.

Okay, and then in terms of biologics, obviously including GLP-1, clearly a growth driver for elastomers and you're supporting that with capacity efficient, et cetera. How has your market share trended for this class of drugs relative to the historical share that you've had in elastomers?

Yes, we really don't track it that way. What we do track is the application, so as a reminder for any of those autoinjectors and fancy, you have a plunger and then you have a needle shield. And clearly, as we said before, we are on three major STUs of those drugs out there and the auto injectors. And but we, market share, we really track much more broadly for the injectable space. And as there we are still much smaller than the market leader, but continue to have very good project built in our pipeline and feel good about prospects.

Okay, then just finally for the third question just comparisons on EPS are going to get much more difficult year-over-year starting in the second quarter, how should we sort of think about earnings growth profile as the year unfolds more fully? I mean, obviously, you've given guidance for 1Q, but again, the comparisons are quite a bit more difficult to keep onwards. Thanks so much.

Yes, look, we're really executing the plan that we shared with you in September of ensuring we have strong operating leverage by attacking costs often in areas where we haven't done really in history of the company like in Europe, increasing productivity in our plants, bringing on capacity, it's more productive. So our intent is really to have the bottom line grow quite a bit faster than the top line. Now, bottom line growth will not be disconnected from the top line, but certainly double-digit EPS growth remains our ambition.

Yes, maybe I could add, Ghansham, that even with the very good 2023, we did have two pockets of weakness, right? One was in North America, in our consumer good side of the business, and the other one was injectables with the ramp up of the new facility and ERP implementation. The strength that we saw throughout the year, whether that was from proprietary drug delivery systems or a fragrance business in Europe, is expected to continue to grow, not at the same pace, of course, because of the strong double-digit that we saw this year, but is growing nonetheless. You take that with an improving situation gradually in North America and a nonrepeat of what we saw in the injectables in Q1, and that's where the confidence comes in.

The cost reduction is still, will flowing to the P&L as the year progresses. I mean, just one example, the facility enclosures that we are shutting down in France in the middle of the year. The benefits of that, you will only start to see in the second half of the year, and it's just one example.

Our next question comes from the line of George Staphos of Bank of America.

Thanks, everyone. Good morning. I hope you're having a good start today. Thanks for all the details. Just piggybacking maybe on Ghansham’s questions. First question for me, should we expect pharma growth still in your target range for core growth and should we expect that we'll see margin expansion both for Closures and Beauty in 2024 given what you're seeing right now?

So, hi, George. Yes, we certainly expect pharma to normalize its growth but that means staying within its long-term target range of 7% to 11% and yes, all this productivity work to your second question is designed to have our consumer facing businesses increase their margin and get into their target ranges. That's the whole point and we are making good progress on the productivity and efforts and I have to say the teams are energized to find additional ideas and additional opportunities and starting to become a point of pride in the company and really taking root in our culture.

Stephan, do you think in your target range is maybe exiting the year from a mark standpoint or is it --?

Yes, I'm not going to paint myself in the corner, I've learned that. But we are certainly depending on the recovery in North America and how polymer does see that top line growth should be in the target ranges and we continue to make progress on our profitability.

Okay, my last one I'll turn it over to be fair. I know you said you can't share much but we'll try again. Can you talk a bit about the investment that you're making in China? Kind of some color around that, a wide cost return expectation that you can share there. And just actually, did you say there are some one-off items in Beauty? Did I hear that right, Bob? Thank you, I'll turn it over.

Yes, let me take the first one and then Bob come, back on the second one. So fundamentally, we've been prided for this, we're living in a new world. The competitiveness of supply chains regionally is very important and we have a number of steps that we are executing on to increase our competitiveness. This one that I mentioned earlier in China is really a company we've collaborated with for some time and now making a minority investment in and we really see it as filling out some of the gaps we have in our industrial footprint in China that will serve us well to serve not only the Chinese consumers but consumers across Asia and in particular, I would highlight that it's an integrated capability of designing and building molds, building equipment, some additional dispensing manufacturing capability that's complementary to what we have, and last but not least, additional metal and anodizing capability that's almost impossible to get new approvals for, and it's very important to have for integrated solutions. So, in respecting our partner's wishes, we're only disclosing a lot more detail when we close, but what we can disclose, you will find in the K.

Yes, and George, on the point, on the one-time items positively impacting, we were happy to report that we were able to close out our insurance claim dating back to our fire and our anodization facility in France, so that's now behind us, which is great news. The huge devaluation in Argentina was an unforeseen negative in the quarter, and then we had some other items that popped up from a quality perspective that we're not anticipated. All-in-all, it netted, let's say, roughly about a $2 million positive in the quarter for Beauty.

Our next question comes from the line of Daniel Rizzo of Jefferies.

Hi, good morning. Thank you for taking my questions. Just getting back to what's happening in China with the JV, which sounds exciting. I was wondering if there's a concern with protecting IP in the region, just given you working with a local manufacturer?

Look, we've been operating in China since the mid-90s, so I think we're quite experienced in how to manage IP risks, and it really depends. In this case, we're really existing a lot of technology from the partner and getting that at competitive conditions, and it's just making the local supply chain more complete and more competitive. And I mean, by analogy, we're also improving the competitiveness of our North America supply chain, and we are actually expanding capacity in Mexico as more and more of our customers want to do nearshoring and reroute some of their supplies in the US, so we're expanding our capabilities in Mexico to make the US supply chain more competitive. So it's really similar kind of concept, just broader based.

Okay, and then with the restructuring and productivity costs, just two questions. One, what is the cash cost going to be for 2024, for the region and the productivity you're doing? And two, when should we think that we're kind of getting towards the end of the program, or is it ever going to end where a lot of the heavy lifting is already done?

Yes, so we don't give guidance on that. When you do these things in Europe, roughly that you can have a two to one kind of rule of thumb, meaning that the annual savings rate costs about two times as much in terms of restructuring costs because basically you're talking about severance for people. And that's guided by law and the social plans. And yes, what we have on the hopper now, so to speak, we see contributing to the bottom line in ‘24 and well into ‘25. But if you get additional ideas, of course we will execute on those. The big themes are reducing labor, streamlining factories, shutting down some factories like the closure facility in France, and moving activities into global talent centers in Eastern Europe, in Mexico, and in Asia. So those themes will continue. And as we have new ideas and additional ideas, we will disclose them at the time when we are ready.

Our next question comes from the line of Alexander Yee of Wells Fargo.

Hey, this is Alex on for Gabe. Thanks for taking my question here. I guess I want to ask about the pharma pipeline. I know you guys laid out a path back in your industry during September. Can you maybe provide any updates that you guys have in terms of new projects or any kind of conversion or commercialization improvements that you guys are seeing for 2024 versus from when you gave us the last update.

Sure, Alex. What we try to describe maybe a bit complicated, of course, the pipeline has things going in and things coming out. And when you launch a product, those are no longer in the pipeline. We had in ‘23 a record year of new product launches, those things come out of the pipeline, and then, of course, it depends how well they do in the marketplace, and that's usually a multiyear built. What we said is new projects that we put into the pipeline were on a risk-adjusted basis. That's how we measure the pipeline value, of equal value of what has come out of the pipeline in terms of product launches. So we feel actually very good about that given the record launches in ‘23, and that's why we feel, it’s another reason why we feel very comfortable with to raise the long-term target for pharma. Incidentally, we also see, although it doesn't have the same mechanics, but we see the order book, if you want, order pipeline growing in the consumer-facing market as we are more on the front foot with project opportunities.

Okay, thanks. I guess, can you, I don't know if you can, but if you could, how much would last out biologics be as part of your pharma portfolio?

Yes, we really don't give that detail, but what we have said is that, I'm going back a little bit, the pandemic has really been good for us in the sense that our technical capability was tested by everybody. They came to the conclusion that they are equal to the market leader, which means companies do new projects in biologics and otherwise, but especially biologics, look to us as being a partner for a particular project. So our biologics pipeline is growing quite well, but we're not, and that has led us to the significant investments we made in additional capacity, $180 million plus an acquisition in China plus the build-out in North America. So that gives you a sense for the confidence we have in the pipeline. That doesn't say anything that the other pipeline -- the other end markets are shrinking. The overall pipeline continues to do very well.

Okay, thank you. And one last question, and I'll turn it over. In the [inaudible] segment, it seems like some companies are talking about consumer weakness in Europe but you guys are kind of talking, continue strengthening the preferences. Is that, do you think, is that a difference in just demographics, the entire consumers between real portfolio and other European packages, I guess? Or any kind of color you can kind of share on what's driving the strength there. Thank you.

Sure. And as a reminder, when you look to what we record in Europe, part of that is actually what's consumed in Europe, and we do see some weakness in home care in Europe and personal care. What we found in terms of fragrance is those products tend to end up around the world. So there, we're not only signaling what's happening in the Europe consumer market, but fragrance globally, because LVMH launches the fragrance and it goes around the world and so on. So what you hear from us is not that different, except that when we talk about fragrance, it's more signal that launch activity continues for our fragrance customers, and we expect growth in the kind of 3% to 6% range for our fragrance business. While we experience the same kind of consumer that other companies experience, and indeed, we see pockets of weakness in that then gets consolidated into our Beauty results and into our closure results.

As there are no additional questions waiting at the time, I'd like to hand the call back over to Mr. Tanda for closing remarks.

Great. Thank you. So let me end the call by zooming out a bit. Again, we are closing out the very successful year with 2023. It's really the company and all of our businesses are much stronger than the year ago, as many of the initiatives and projects that we kicked off during the pandemic are now coming to fruition. And our enhanced execution capabilities are being put to work in our factories and in the marketplace. And as we talked about, we are executing the ambitious plan that we shared with you at the Investor Day in last September and have a very strong focus on both the top line and on productivity gains, ensuring that our bottom line growth faster than the top line in keeping us on this double digit EPS growth trajectory. So as we enter 2024, we have strong pipelines and a growing order book. We expect the momentum to continue, even though as we just talked about, we see pockets of economic weakness in some of our regional end markets. We also entered the year with a number of productivity and cost reduction efforts well underway, mid-flight so to speak, and they will keep adding to the bottom line throughout ‘24 and into ‘25. And then in addition to that, our teams are eager to find additional productivity opportunities, which is that a leadership event last week, it's really becoming a point of pride in the company and taking root in our culture, just like innovation and sustainability. We are increasing the competitiveness of regional footprints with our actions that we talked about in Europe, in Asia, now including a joint venture, and in North America, including expanding our Mexican capacity for the North American market. Our strong balance sheet allows us to continue to invest in future growth and productivity investments. As you know, we are fans of bite-sized, bolt-on partnerships and acquisitions and have developed a solid track record to deliver against those, as well as return funds to shareholders. So when you consider all the puts and takes for the coming period, it's our proprietary drug delivery systems will continue to grow even after the strong year ‘23 and remain inside the growth target of our overall pharma growth target. Injectables for sure will not repeat the ERP issue, and it's benefiting from a strong pipeline in biologics and otherwise. We didn't talk about digital health, but this project win that we have with Biogen, again, the press release is coming out in 15 minutes or so, bodes well for our digital health business as we start to more and more operate digital health solutions for our clients. Elsewhere, fragrance will continue to grow also after year of double digit growth. We anticipate the North America destocking to abate and Asia is pulling nicely while China recover is a bit more muted, India starts to really pull much stronger and our expenses, whether it's SG&A or manufacturing fixed costs are coming down. So when you sum that all up, that bodes well for 2024 and beyond and we look forward to discuss in more detail with you on the road. Thanks for joining.