James Hardie Industries plc (JHX) Q1 2016 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Q1 FY16 Briefing Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. [Operator Instructions]. I must advice you that this conference is being recorded today, Friday, August 14, 2015. I would now like to hand the conference over to your first speaker today, Mr. Louis Gries. Please go ahead Mr. Gries.

Thank you, Eileen. Hi everybody. Thanks for joining the call. Matt Marsh and I'll walk through the call our results in a normal way, as Eileen said Q&A at the end and any media questions we might get would be after investor and analyst questions. Matt and I are in Dublin tonight, so the slides will be flipped in Sydney so we’re going to calling out slide numbers. So the first one slide is the cover sheet, slide number two is Page 1 and the disclaimer, Slide number 3 is page disclaimer, Slide 4 is the normal agenda we follow, Slide 5 is cover sheet and Slide 6 starts the overview that I’ll be talking through. So, net sales are only up 3% for the quarter. That’s partly because the U.S. is flatter than it has been this quarter comping against last year than we’ve been experiencing and the other part of the other businesses comp well in local currencies but not back as we brought in the U.S. dollars, so sales up 3%. The operating profit line is kind of the opposite story, that’s up strongly. That’s really driven a lot by the U.S. and just manufacturing efficiencies in some import cost benefits in the U.S. But again, all businesses performed well on the bottom line. Again all the businesses had a higher volumes and higher sales price. The U.S. again below our target and below what we’ve been experiencing and we’ll talk about that some. As I said, the big bottom line comp in the U.S. really drove the large improvement on the bottom line, both for that business and the Group. We came in at a 26.6% EBIT margin in the U.S. business, which is above our, obviously, above our 20% to 25% target. That’s not been usual for the first quarter but we also feel like we’ll operate above that target for the full year. So, we really feel pretty comfortable how the business is operating. And the contribution margin meeting through the better manufacturing performance is likely to carry itself through the year. As we had indicated, we are going to be more active in the share buybacks than we have been, so Matt will cover that in some detail. And we also have talked in the past about our Carole Park capacity startup. That continues to go well. We go to Page 7, gives you the Group’s bottom line financials. Everything up strongly, so very good bottom line results for the quarter, comping against last year’s same quarter. Slide number 8 brings us back to the U.S. Basically the summary on the quarter in the U.S. it was a good quarter. We just need to gain traction on the market side. We indicated going into the year we’ve grown above our market index. Market index, as we normally look at, our PDG, or which is how we perform against the market index. We normally look at a four quarter rolling. We are above our market index. It’s debatable whether it is single quarter came in above the market index. The market wasn’t great, but the 4% volume growth fell short at what our targets were for the quarter. So going to the chart, you see sales 5, volume 4 and average price 1. And we get the average price increase in an unusual way. The market price was up close to 3%, which we’d indicated that our expectation. But the 3% gap knock back in the quarter by both product mix and by foreign exchange, and foreign exchange is mainly between dollar coming off against the U.S. dollar. And we have a reason both positioning Canada now, so that did affect the average prices as is published. Again, EBIT margin up 32%, we’ve been talking for several quarters now, actually it’s been about a year since we started to really gain momentum in manufacturing and that momentum continues. The first quarter comp for the U.S. business on EBIT and the EBIT margin side was a little bit easier because what we’ll see in future quarters is we’re starting to get some of those manufacturing gains last year, where last year’s first quarter didn’t have any of the gains in the results. So, the 32% up on the EBIT line shows where we’re at on manufacturing compared to where we were last year. And it also shows more favorable input cost for pulp and energy, mainly. The Slide 9, just our normal chart. You can see a nice upward trend since fiscal year ’14. We’re pretty much at the top or above the range now for about five quarters. And like I said, we actually feel like we’re going to stay above that 25 for the full year. So, pretty confident about how the business is running. Like, I said our focus would be on top line growth, which brings to the next slide, Page 10. In market index we’re already -- would be up slightly. We’re still trying to figure out the new construction exactly where this year is likely come in on a new construction. As most of you know, we felt we’re going into a year that new construction would be up slightly. I think that’s still our view and hope where it is right now, we haven’t really taken a view, which just obviously not strongly at market we’re operating in. And most of you know we have a good position in the Texas market, which is not up so far this year. So the impact that a lot of you have questions about in previous quarters is, if Texas is in a good market this year, how do our results come out. And I think we’re showing in that, of course the top line [skepticism] a contributor on the top line it’s big enough to dampen that results. But our bottom line result we empowering through even without a good market in Texas and deliver the financials. I am having said that I don’t want anyone to misinterpret my comment that our top line problem is Texas. I think we have a couple of things in play again mostly we’re on the call last quarter we would have indicated we had moved our annual price review up a month, so that the Board could get into the system before the billing season started. So to more the March 1st increase which did bring some of our volume forward from the first quarter this year to fourth quarter last year. And obviously we haven’t asked them how much volume that is, it’s probably turned in about what we thought it would. So that definitely was factored now. What I don’t want to get away from is the reality that we’re working to increase our primary demand growth or our market share gains, or our volumes above market index. So whatever you want to describe it. And I think it’s clear in the business that so far we don’t have question on that lift up that we’re looking for. Now there is no more variance you get in your volume, especially when you’re comp in quarters. I think we have normal variances that’s little bit on the low side this time. But I do think it’s normal variance. Unless you would have seen it impeding comp low this quarter and final slightly positive but not much this quarter. So it’s not like this is a market shift problem, we think it’s a market momentum situation where we’re trying to increase [actually] in the market and so far that hasn’t begun to happen. So again looking at Slide 10, the other thing that would be different this quarter than last quarter are our volume and revenue tick up would be about the same because we only get the 1% price improvement. Assuming that the Canadian dollar starts to stabilize at or near the level in fact I think you will see us come back to more or closer to 3% as we’re talking about. By the way I didn’t expand on the product mix, but part of the product mix price dampening is actually good news because most of you know a sense about this time last year we’ve been focusing in increasing our three interiors backer board business and clearly that's starting to happen as picked up momentum quarter-to-quarter. So this quarter backer, or first quarter backer was much better than last quarter backer it was actually higher mix of our sales. Page 11 just a price chart is the exact for that period of time in 12 and 15 where we can get off track with some of our tactical pricing. The price stories still a pretty good story and like I said we don’t think the 1% improvement on last year we saw in the quarter will play out in the full year we think will be present at 3%. Asia Pac business obviously operate in a good market, all of the increases in housing meeting in the medium density that you’ve seen in Australia doesn't necessarily play to our strengths but we're still on a good market in Asia Pac that goes for the Philippines and New Zealand as well in local currency -- I’d say 15% volume of plant 5% price. Of course in U.S. dollars EBIT doesn’t look good but Australian dollars it does, a point I think it fills the top line that there is no leverage against top-line and the only thing I want to point out is they don’t get the same input cost benefits the U.S. does because they buy pulp in U.S. dollars they get benefit and plants our improvement trend line like the U.S. not quite a steep of the slope but also they’re going to start up at Carole Park. You got your start up dollars and there quarterly result as well. We think we are about three quarters away through those start up dollars like I said the start up is going well. So it’s been a very positive result for the Australian business but is largely is Q1 results. So I hand it over to Matthew for financial results.

Thanks, Louis. Page 13 is a flip, we got a page 14 just the summary of the group results and then I’ll go through the normal sort of pages that we covered entire quarters with you. So strong earnings growth as Louis indicated volumes were up across all our business units albeit a little bit lower than we expect them to be. Average sales prices were up in both the U.S. and Europe as well as Asia Pacific and lower input cost we’re seeing in both segments more or so in the us than as we’ve just indicated in Asia Pacific but we’re pushing in the lot of our major input cost plus utilities that are turning favorably from a market index standpoint and then we’re performing little bit better than that. So that’s providing some additional uplift to margin rates and the we'll try to give you the input cost in a little while. Organization costs were up a bit mostly consisting a stock compensation and correspondent to the share price being up 14% and the second biggest driver is foreign exchange losses as the dollar increase the core SG&A expenses were actually down a little bit and the corporate SG&A expenses were up just slightly. Net operating cash flows were $55 million for the quarter those were up in comparison to a year ago where they're about 43 million. From capital allocation standpoint no real change in the strategy we continue to execute on that after the quarter end on July 1st we made a payment to the AICF of AUD81.1 million Australian, $60 million that represents 35% of our free cash flow for last fiscal year. And after the June period we purchased approximately 1.7 million shares for about $23 million as part of the share buyback program that we talked about in May on strategy to shift our additional shareholder returns this year to share repurchases from special dividend. We go to Page 15, we’ll walk through the group result on a reported and adjusted basis as we normally would. So for the quarter we reported sales of 428 million they were up about 3% on both higher volumes and prices of local currencies. Gross profits of 157.6 those were up about 320 basis points primarily driven by the performance of the plants in the U.S. also that contributed the input cost in the U.S. and the gross price increase is partially offset by the FX dynamics in the mix announced that we talked Louis about earlier. Total SG&A of 61.5 in comparison to 59.9 a year ago so up about 3%. Like I said stock compensation was the primary driver there that’s up about 14% corresponding to the share price. Discretionary expenses and foreign exchange were both higher and those are partially offset by kind of core SG&A expenses in the business units in the division if you will were flat to down. On the non-operating side, we had early as the EBIT of about 85 million in comparison to 50 million a year ago between EBIT and net operating profit really three dynamics one is just expense increase now that we're feeling the fourth factor of our debt position. Two, we had announced the sale of our Australian pipes business and there was a small gain on that sale and so that's another income as well as some unrealized foreign exchange gains and impact of industry swaps are done in that line item and I'll talk about that more later. Income tax expense increased primarily as a result of the operating income and I'll go through ETR as well. if you go to Page 16, you can see a specific adjustments in the quarter of about 4.5 million in comparison at 21.5 million a year ago those adjustments are really driven by a 1% change in the Australian to U.S. dollar exchange rate from the beginning to any balance sheet date and that compares about a 2% change in the spot rate so in the first, second and third quarter the liability and the assesses adjustments are all foreign exchange related typically the adjusted net operating profits were up strongly as we've talked about almost 30% a 26% increase on adjusted EBITDA a 6 million swing in other income and expense again there is really three major items in there about $2 million of favorable foreign exchange on forwards about 2 million favorable change in the industry swaps and the $2 million gain in pipes is how you get to the 6 million change in that line item year-over-year and growth interest expense of about 6 million over the quarter. If you go to Slide 17. You can see the gross margins are continuing to perform well and Europe at about almost 37% quarter-to-quarter approximately flat up obviously substantially versus a year ago, all driven by the dynamic everybody talked about price improvements in all of our businesses and then were benefitting from both plant performance as well as markets for input costs as well as sourcing against those markets trends. On Slide 18. You can see from on input cost standpoint that pulp has stabilized and is starting to trend down the MBSK is down 3%, 4%, 5% year-over-year which is helpful. On the utility side gas and particular is down quite a bit. Cement one of the input costs that are up cement is definitely has a capacity or certainly a strong demand in the U.S. and as a result cement pricing is up and we're feeling that a bit and then you can see electricity year-on-years is down a bit but stabilize over the last several quarters. If you got to Page 19. We will run through the segments in a little more detail. If you can see the U.S. has EBIT of 90 million or 9.5 up about 32% compared to last year all of the dynamics that we've already talked about. Asia Pacific the gray bar is in U.S. dollars so what we report you can see that on our U.S. dollar basis it's down on a local currency basis in the blue bars its up so for the quarter our local currency base is 25.4 on a U.S. dollar basis 19.7 so again in local currency that business is performing well its being adversely effected by the strengthening dollar and the weakening Australian dollar but in local currency the segment results on EBIT in Asia Pacific were up about 15% compare to last year. On Page 20. No significant change in R&D that trend's broadly in line with our historic investment role of having about 2% or 3% of our top line invested in research and development the fluctuation quarter-to-quarter, year-over-year is just normal variation. As to no real change in research and development. On general corporate cost you can see up 13.5 mostly on the back half of stock compensation which I have already talked about a slight increase in discretionary expenses as well but the primary driver there is really stock compensation. Slide 21 is the chart that we would only show on the changes in the Australian versus the U.S. dollar you can see that translation channel is unfavorable impact on the Asia Pacific results which was indicated by the favorable impact on our corporate cost and Australian dollars which I think group level is not a substantial driver and has an unfavorable impact on the translation of the specified ability. Slide 22. Our effective tax rate for the year we're estimating to be on adjusted -- effective tax rate of 26.5% that adjusted income tax expense has increased due to the operating profits primarily in the U.S. the difference is between adjusted income tax expense and income tax expense on a reported basis are all primarily due to lower success and other tax adjustments. We continue to pay income taxes and either paid or payable and those jurisdictions you will see on the page on Ireland and the U.S., Canada, New Zealand and Philippines income taxes aren’t currently payable are paid in Australia excluding Ireland -- Europe excluding Ireland or in Australia the Australia tax losses primarily result from the asepsis deduction. The 26.5 effective tax rate is up largely because of the geography of the earnings growth in the U.S. and then the Australian translation of their result into the U.S. dollar reported results actually the headwind as well. Slide 23 from a cash flow perspective we had $55 million of cash flow from operations, up about 30% from a year ago where we reported about $43 million. Net income increased $31 million compared to last year. Working capital improved in the quarter on both inventory turns and accounts payable turns were slightly favorable year-over-year. Those were partially offset by accounts receivable in the quarter. The accounts receivables really were just related to the timing of when [billion] questions go out I think we’ll see that come back within the next quarter or so for the half year we'd expect -- I wouldn’t expect there to be working as an unfavorable dynamic. The capital expenditures are obviously lower last year. We were investing heavily in some capacity projects as those wrap up, both in Carole Park Plant City and Cleburne. You should expect capital expenditures year-over-year to come down and we’re seeing that in the cash flow. We’re obviously going to continue to invest in maintenance capital this year and we would expect our CapEx this year to be more in line with $100 million, $75 million to $100 million range and compared to last couple of years which was significantly more elevated than that. On the financing side, no dividends were paid in the current period in comparison about $125 million payment last year that related to the one-time special dividends on the 125 year anniversary and that was the major swing in the financing activities. Page 24, a very similar, this is an existing chart we’ve now showing for several quarters around financial management and how we’re thinking about our balance sheet. The fundamentals remained strong from a financial management standpoint margin and operating cash flow are in good shape. We continue to stay focused on governance and being very transparent. We’re still managing ourselves and thinking about our balance sheet from an investment grade perspective. Our capital allocation strategy has not changed. Our first priority continues to be investing in both research and development and supporting market organic growth programs. Ordinary dividend continues to be our second priority and then our third area of priority is continue to be around flexibility to withstand cycles having a balance sheet that can support strategic and accretive inorganic opportunities as well as additional shareholder returns. From a funding and liquidity standpoint, no real change since we last talked still about $590 million of bank facilities. Our liquidity position is very strong at about 68%. We’ve got about little over two year weighted average maturity on the bank facilities. The bond is obviously in place at $25 million over eight years. Our leverage continues to be within our target range. We go to Page 25, a little bit more on liquidity. The balance sheet continues to be very strong. We’ve had about $90 million cash, about $380 million of growth debt, $590 million of bank facilities, the bond and plenty of liquidity. So we feel good about where we are from a capitalization standpoint. Our net debt at the end of June was $290 million compared to net debt of $331 million at the end of March. Also at the end of June, we had the bond and the first interest payment was due or will be due on the 15th of August. And as I said on the previous page, we’re still well within our net debt target range of 1 to 2 times EBITDA excluding asbestos and in compliance with our covenants. On Page 26, an update on asbestos for the quarter, so claims that were received at the Trust during the quarter we’re 15% below the actuarial estimate and 11% lower than the prior corresponding period. Mesothelioma claims were up slightly in the quarter both versus the expectation in the actuarial estimate down about 5% versus a year ago. The average claim settlement sizes are generally lower this year. The average claim settlement is significantly lower at the moment in comparison to the actuarial estimate. Although as I think I’ve said in prior years, the first couple of quarters there tend to be a large number of large claims that Trust have to work through throughout the year. So, while it is a positive trend at the average claim settlement is below the actuarial estimate by 23%. We have to see how those large claims work themselves through to before it might take any great comfort in that one quarter performance. On slide 27 just a quick wrap up. So as Louis and I both said, Group sales up 3% for the quarter, adjusted net operating profit is up 27% based on all the dynamics that we talked about, primarily really strong performance in the U.S. from the plans and good local performance in Asia-Pacific. The financial management of the company continues to be on strategy and we continue to execute on the capital allocation that we talked about including our organic payment that we made in July to the trust. The share buyback activity that we’ve done in July and doing that still maintaining a balance sheet position that we think are both conservative and representative of investment grade company. On Page 28 if you go to guidance so the range of forecasts for net operating profits coming into the call was between 244 million and 286 million as many of you recall last year we did $221 million. We expect our full year adjusted NOPAT to be somewhere between 240 million, 270 million obviously with the number of assumptions in there probably the most significant assumptions are around seeing housing market and that’s the condition in the U.S. market continues for the rest of the year as well as input prices in foreign exchange. With that we can open up for questions.

Thank you very much. Your first question comes from the line of Michael Ward from Commonwealth Bank. Please go ahead.

Just quickly in the release this morning you talked about the margin in FY17 coming back into that range 20 to 25, is there anything shift this is around why that will actually come down or is it more just you guys sort of try to stick with you've always said that in the long-term will be around that 20 to 25 margin, you don’t necessarily think it will continue beyond sort of FY16.

I think regarding to your last part of your question, I think we are far enough in the year and we feel pretty confident that where ‘16 is likely to command but as far as '16, '17 at this point with input cost and program spending we’re just not going to change our target range I think we may come in above the target but that’s not something we’re planning to do.

And then I guess just extending on that, you sort of outlined what some of those targets spending an issues actually that might dampen that margin next year?

It’s kind of always tough here. You hear about you guys come in September or hear more about it but it’s on the market side obviously you can see kind of the trends in the business prior ‘14 we had kind of bottom line efficiency gap relative to what we are trying to do so we fix that over the last 12 months we grew our volume about 9% over prior four quarters. But this quarter we’re coming off volume comp before and we think it'll be better in the second quarter but it won’t be up to nine so we’re going to come out of first half with lower volume counts than we’ve been experiencing last couple of years. So that’s where most of our work is so that’s always tough, you always hear about non-metro markets R&R and fiber cement standard markets holds in our June product line plus outside in north top of the market product line which probably has a fair amount of spending, that’s going to be attached to it. So, all the same stuff, that’s kind of part of our 3590 and just getting in -- just moving that stuff down the track.

So I just finally, the manufacturing looks like pretty gains this period is actually relative to pretty tough comp last year. How much longer do you think that manufacturing momentum will support to the margins?

Yes, I think you got to watch last year first quarter comp I don’t think it was that tough just because manufacturing improvements weren't starting to come in at that point where is each quarter after that you start to see some of that and you saw more of in this quarter than you did last quarter. But the EBIT will be relatively tougher the comp against because of manufacturing improvements will start to being build in there some of the future quarters or some of later quarters last year. But I think somewhere along the line in last two quarters I think we got through the kind of next phase of manufacturing development that we were working hard to get through over probably six to eight quarter period and we’re having some trouble and I think we broke through I think one of the reasons we feel better about coming through the winter months where our EBIT margin is -- we are not using high utilizations to get less little get out of manufacturing we’re still not running our plants utilization. So I think we’re just generally better running the plants and don’t have to rely on 24X7 on all machines to get that last bit of efficiencies. I think it’s going to continue but like I said some of it’s really built in later quarter last year so we don’t look as big as far as even improvement goes.

The next question comes from the line of Emily Smith from Deutsche Bank. Please go ahead.

I was just -- I had a couple of questions in terms of you mentioned PDG you went for the show how to wins the quarter just wondering have you think you're tracking for the full year. Well obviously in sort of mid or half way through the next quarter just wondering have you are seeing sort of volume sales so far in the Q2 and just finally the volume growth that you guys did achieve in the quarter up 4% I think and I assures that you outperformed they'll pay you volumes are down around 6% in the quarter just wondering if you can give us an update on how you think you are tracking versus they'll pay at the moment?

Yes okay I get my normal quarterly warnings, it's pretty sure a snapshot. As far as SNLP if you look at four quarter rolling last year four quarters were both up 9% on volume so that longer story is a story we've been talking about for couple of years there at the ended it downturn and beginning recovery they grew faster and now to say of the market index so it's kind of hard to compare apples-to-apples so if you just go to raw number that grew faster than us and then we can afford with them and our plan is to get ahead of non-volume growth and over the last four quarters we haven’t done that now we've done as the one quarter but big deal they did it prior quarters so and even if you put those two quarters together it just it doesn’t really save you where we want to be. As far as PDG this year I think will kind of we have to get to where we went the last two years as a best case so as you know we're trying to kick it up two points side I definitely think we're going to lag with that expectation that we would kick up PDG at least the couple of points where we've been running. I think this year we might come in a little bit lighter and we have the last two years but I think that's more kind of normal variance than it is market share loss because as you pointed out LPs not out running as anymore and Vino did better this quarter but again it's only quarterly number I think the fourth quarter number on Vino well so points to their long term trend and that's what we're expecting. So I am already kind of like we'll be -- we expect to be up run our volume comp in the second quarter higher than 4% we realized in the first but it's not going to be lot, so we're going to come out like I said we grew volume 9% over the last four quarters we're going to come out of these first two quarters and we're going to be well short of 9% on a volume comp.

So where do you think the PDG will end up what was it, it was at 8% last year or 6%?

I mean we've been operating in that 6% to 8% range last couple of years and what I try to say is if I get the six I think can be okay looking at it right now and might be air below six I don’t expected to be at 8%.

And so does that sort of mean in the quarter you sort of feel that the market growth was negative?

Yes. I think I made that comment if you want to look at just the quarter I think you will have to say to market index was higher than 4% for not much I think in construction. Numbers are quite in so but I still feel like R&R up around four and that's good part of our business we're up four so if new construction actually is less than four than we got a very small gain and I don’t expect new constructions up much more than the four, so I just think its I just think we track were market index, for the quarter track below the market index vinyl check below their market index. Bricks not taking shares, stones not taking shares, [staples] not taking shares, so I just think it’s a clear only deal rather than anything you can point to is something that's happening in the market.

And just finally do you think they were some pull forward in the Q4 2015?

Yes. There was some pull forward and there is a bit of Texas playing in our numbers but again at the end of the day kind of stuff matters, it’s a market share gain we are trying to play and even if you do all your adjustments and explain everything in way at the end of the day we're still coming up short on what we want to do on the market share gain and that's our main job.

Your next question comes from the line of Simon Thackray from Citi. Please go ahead.

Just following on from Emily I just want to understand your comment where you on R&R sign that's driving recently well to run that 4% just given the trajectory to U.S. housing is pretty moderate for new construction. Can you just remind as to way you sit now in terms of volume mix between R&R and new construction and given the trajectory of new housing versus R&R how you expect that mix to change is that all over the next 12 to 24 months?

Yes. It doesn’t change much obviously we have our market share in each segment and then we have a growth rate in each segment. Even if our growth rate in the R&R segment is faster it's not fast enough to change if at a two year period. And what do we have is occurrence we had on R&R construction reporting. 60-40 is where we think we are and R&R and new construction and yes you like your programs better in R&R, you like your programs better than new construction. I would say the market share growth areas I like our programs better in R&R. So, if you ask me, which one I like to see you guys fix up the most I would say new construction. But again it’s not going to dramatically change the mix. I mean we’re been shooting for market share growth in these couple of segments and they’re kind of independent with each other, now they’ve come together when you do a market index and your growth gets that index, that’s where it’s going to go.

So just clarifying, where that 60% R&R 40% new construction?

That’s correct.

Then just another one, just to think through that if we can, the tax right in expectations for the balance of '16 and then going forward in expectation of absorbing any of the losses what we think about '17 obviously the U.S. as it ramps up is lifting the tax, rate. What should we be looking at for the full year of '16? And then maybe give us a bit of a feel without tax losses, when we start -- what the tax rate might look like for next year?

So for the year, obviously, we’ve estimated an effective tax rate at 26.5% so with the way adjusted tax rate works that is our estimate for the year especially for the first quarter. So that’s what we would expect. To the extent to that, total year estimate changes and subsequent quarters you may see that swing from quarter-to-quarter but our best estimate at the moment is that for the year the ETR should be, the adjusted ETR, should be 26.5%. And feels like about every other quarter I get the question on trying to forecast out ETR and obviously we don’t provide forward guidance on it. And I hope you don’t spend a whole lot of time trying to forecast it out multiple years out on ETR. So, I don’t have a specific number that I would want to guide you to for next year, I’d say for this year the 26.5% is our best estimate. It is up obviously over the last year and up over the last two years. That shouldn’t be a too great surprise given that the U.S. is a high tax rate jurisdiction and a greater percentage of the total Group profits are coming from that tax jurisdiction. So it’s really just due to rapid mix of earnings that’s causing the rain to rise.

I mean would it be easy -- with us how many underutilized or unutilized tax losses are still left in U.S. and Australia?

That’s not something that we would disclose.

We’ll move on. Just in terms of, whether it’s possible or not in the quarter to get a bit of a waterfall on the dollar impact of the input cost in terms of pulp?

So I think in the MD&A in the U.S. we had about 440 basis point increase in gross margin rates, a little over point of that is related to price and another three point to that’s related to production costs I think the best way to think about the production cost is about 25% of that benefit is coming from input cost and another 75% is our performance with the plants running better. As I indicated on the input cost chart, we’re seeing at the moment favorable market conditions on pulp and utilities and unfavorable dynamics on cement. Obviously, those can continue from quarter-to-quarter, so I think that’s positive about obviously the vast majority of that performance is coming from the plants.

And then one really quick one Louis if I may, Texas had record wet weather in May and then into June so did Oklahoma. Historically you said your share in those markets has been about 29% from recollection. Was there any impact in the quarter from wet weather at all that you could -- that was material to volume?

I mean, not only our quarter but right through year-to-date as we sit here today, Texas volumes are down. So yes I mean our volume growth seems pulled down, I don’t think it’s 29%, we have to check that number. But our volume growth being pulled down because a relative chunk of the business is running negative and it’s not running negative due to our market share, its running negative due to market opportunity.

There is no number you can put around it in terms of the impact of it?

It’s not that we’re going to talk about, I don’t -- again, we play a market share growth gain and there is no problem with our market share in Texas, so it’s not a huge concern to us if it rains or if the oil price knocks off some demand we're housing, it’s just some -- it’s real…

I am trying to understand it in the context of the volume numbers that you delivered year-on-year, that’s all?

What I wanted to hear on volume is I don’t like our traction on market share for ramp, so that’s the right one here….

Next question comes from the line of Jason Steed from JP Morgan. Please go ahead.

I just wanted to come back on, just on the PDG point, I guess Louis you just mentioned that you’re not happy with where you’re seeing your market traction at the moment I guess in the last three months from when you reported in May quite a significant scale back in that PDG from 10% to 11% territory that you’re talking about, then just curious to exactly what you think is not gaining traction is the case of making more investment as you refer to in your comments or when the market is soggy in like that this that you’ve done little bit more difficult market to gain traction. Just trying to understand I guess it is a big shift versus three months ago.

Yes, I guess that’s a good point, I did have a different view three months ago I knew what things we were funding on I knew what things we had management in place on and I guess all you could say I underestimated the life time between what we do and what happens as far as the movement in the market now. You framed your question exactly right PDG doesn’t mean you're going backwards so when your PDG drops it doesn’t mean you’re going backward it’s just means that you’re not doing enough to get the next piece, next piece and the next piece. So that’s kind of where we are at I don’t think we’re going backwards I just think some -- or some of the programs you run in the market you really get gains and then you kind of get near the end of that little S curve and then you got to keep putting more S curves in front of that if you want PTG to stay at the same level and if you want to accelerate obviously you got to get more in front of it. So that’s where we are at. Believe me I do not think this is a major problem of the business I think this is a temporary situation just like it was in ‘13 and some in ‘14 where we got pricing -- pricing off, we got our even margins to where we thought we’re going to coming out and even margins we didn’t come in anything much. I think it’s just normal stuff that happens in an organization where you try and fire balls and every once in a while one of them not been as well managed as theoretically could be based on our forecast. So that’s where we are at. I don’t have much -- I don’t have a lot concern. I think we certainly as an organization kind of know how to think about these things and know how to execute game plans but right now we’re lagging behind what we thought we would.

Now understand that, -- those expectations out of it. To recover from that lagging position, just one further question.

I don’t want you to bit easy on this, you don’t get to 35 market share by growing 4% comp. So we're not in the business for 4% volume comp. So it’s a quarterly result we won’t have a flow through year but we won’t have the kind of volume comp for year that lines up well with 3590. So we have some work to do.

I guess the target in your guidance that you do expect anything not to be where you were in terms of your guidance three months ago but certainly is an improving trajectory I presume on the PDG front.

Yes. This is -- and right now we’re not delivered on that but that is our emphasis and still our commitment.

One final question on circumstance like this in prior years where volumes fallen short of where your expectations for the market are, it’s present to be difficult for manufacturing perspective and I think pretty sharp movements in your manufacturing cost in light of getting ahead of the market as you describe it in the past, is it because that you now just fine tuned sufficiently and even when you fall short of market expectations we’re just not going to see the kind of variance that we have in the past, is that the reason why there is no drop-off.

Yes, of course anyone that runs plant I just run plants. You like volume, you can do more with volume then you can do with less volume, but I think we’ve just matured our manufacturing model and approach to where the guys they run these facilities know that volumes going to vary and it’s their job to deliver efficiencies at a given volume. So for instance when we start up on the plants hitting for there will be several machines in our system that lose volume because we started up that machine and all those plant managers know it's their job not to say, I got higher cost because I got lower demand or utilization. It’s their job to say okay, my new utilization is back and here is how I run my plan to optimize my performance around this. So that’s what I tried to allude to earlier I think in the past we did live a lot on 24X7 delivering that last little bit of manufacturing and clearly now we have a lot of machines that are used to not letting 24X7, so that’s not kind of like the key to getting the extra. We’re getting the extra without the super high demand and super high utilization at our machines.

Next question comes from the line of Matthew McNee from Goldman Sachs. Please go ahead.

It looks my questions have been answered but just a couple of small ones. Can you give us a feel for Canada what percentage of volumes that is for the segment just to give an idea materially?

Yes. Canada is between 10% and 15%.

Of volumes, not revenue?

Yes of volumes.

And higher revenue, its most color plus up there.

Okay.

It's almost our color to actually get out BC and BC has a decent color plus position.

Yes. And just to clarify Louis you were saying that for the full year you expect the average price to get closer back to that 3% up is that right?

I do expect that and like I said now yes I do expect that but I think no one's jumped on my comment about interiors yet that's part of our mix port problem in the first quarter was very good performance in interior so if we get any type of growth rates we added interiors, that will dampen our price but it will be good story rather than bad story it will dampen our average price.

I think the thing I would add on prices is probably the one thing that's a bit out of our control and getting to the three is just FX, so well it should trend up that way we just keep in mind we are seeing the 3% from a growth standpoint so we are seeing the price realization come through based on the actions we took from March and that's down from the bid by mix which is the parts that are really starts to come back we think and then we would expect there need some stabilization the Canadian dollar but…

On that basis you expect to get to the straight but here Canadian dollar depreciates further, put a bit pressure on there?

Yes. That's right.

Just the other one just in the obviously [Australia] specifically the margin was down you already mentioned that obviously pulp prices were pulled on that but was there any Carole Park drag on the margin or was Carole Park has ramped up there and not having any impact or [Indiscernible]

I saw that was a big machine like Carole Park is enough to impact a business of size of Australia's result so we can tell you how much is spread across it's going well but it's in our number so yes you got a little dampening but you said are down or down 10 basis points so we are referring to you down.

Yes. I just wanted to know whether it was a bit of pull down on the Carole Park ramp up. Mostly the other thing you mentioned is the margin in the quarter 26.6 the U.S. this equation now you are not going to enter but on from there how it goes if filings are up 9% just have a stable with that margin could have been you've already mentioned that volume is always spread that way could better that.

I want to answer your question so I will tell you it could have been higher.

And the other thing just going back to Jason's question about the fair change from three months ago on well I think you said you were targeting 10% PDG you may not get this year but you are pretty confident you would get to a run rate of 10%. How much visibility do you see out? Could October be a totally different PDG number plus or minus 2% or 3% compared to what you think or do you have a fair bit of feasibility on that how hard is it to guide wise sort of things?

When we talk about PDG we can't talk in months and really talk quarters, so when you get to October could we have a good market momentum and have a better volume count in October even in the similar market were in, the answer is yes or you look back over four quarters which is kind of in appropriate measurement periods of PDG, whatever happens between now and October or November first season is it going to be dramatically change the PDG for the kind of trailing 12 months. So I'm trying to balance to the change here, I don’t want you to think we have a PDG problem that we don’t think that we think is long term, but I'm also acknowledging we don’t have the market momentum that we want in order to get to 10 PDG and that's what we're working on.

Next question comes from the line of Andrew Johnston from CLSA. Please go ahead.

Just a couple of questions Louis and that question on the interiors. So can you give us a number on volume growth in interiors?

No what I can give you is kind of just general update I think about this time last year we told you we are tracking behind even though that market index for interiors was ahead, we started working on deep dive to figure out how much of it's the cement board category itself is been subs 2 to 4 to what degree by math and membranes how much of it was approaching versus the box channel where we have the bigger position in the box channel. So went through all that we went to a positive growth I think I'm going by memory or bit some more in the like November we went to positive growth and we fell by about February we're above the market index and we continue to pick up from there. So you got 4% total volume growth for the U.S. business interiors was actually higher than exterior so interiors was more than 4.

I mean that's always a good new for interiors but also in the catch that the PDG for the exteriors which is what your target -- which is what you really think about on PDG, isn’t it Louis your exterior market?

Yes that’s our calculation interiors is not into our PDG calculation it is just exterior.

And then would you imply that that exteriors number might actually be a bit softer than that 4% from what you can see through the…

If that was higher than 4 by definition and exterior…

And so I have interiors of about 25% of volumes is that about the right figure?

Yes, that’s good estimate.

And just on marketing R&D costs, I was soon expecting those to actually be tracking higher with the sightings coming out of the manufacturing improvements in particular and obviously lower input cost as well. You’d flagged that we should expect to see higher marketing and R&D costs this year. Has your view changed on that, I supposed to -- and particularly the change given the markets now are a bit softer and your volume is a bit softer than where you’re hoping for?

No, I don’t think our view has changed at all. Obviously we have just given you a little bit of guidance we think we’re going to come in above our 25% target for EBIT margin but we’ve always had that, so we have the money to spend but we’ve always had second criteria we’ve got to be able to spend it well. And right now I think the spend it well do we really think if we would have taken that 1.6% EBIT margin put it in the programs if we would ended up a different result this year and the answer is no we don’t. We think we’re funding some of these initiatives at pretty high level when we just got to make sure we give the traction on the spend so we start getting the market share result that we’re looking for. Having said that there is increased spending that’s being put in the business, not so much on the R&D side because that is more project driven but on the market side there is increased spending that will continue to go in the business.

And finally on PDG, do think you it had on the business from the good perspective, as you say you’re focused on primary demand growth in regions, so as you say you’re not losing share in Texas it’s just surrounding Texas and Texas and consequently Texas is a bit weak. But is it possible if that’s actually the rating for your primary demand growth and then is it realistic to be expecting to be getting strong national primary demand growth when you overweight Texas?

Yes I know I mean obviously you only get to look at our national numbers, we look at our regional numbers and I would say there is an opportunity a gap in almost every region as far as our market share programs. So Texas has nothing in due, the northeast that has nothing to do with southwest and it has nothing to do with southeast. And we’re not where we want to be on PDG trend lines pretty much in most of our exterior regions. Again you got to remember, PDG is about taking someone else’s market share. So it’s not when your PDG drops that doesn’t mean you’ve lost market share it’s just I mean it’s just taking less in someone else’s market share. So that’s why I called it an opportunity gap before you actually negative PDG in the regions that means you’re losing market share that’s more of a performance gap in my mind, so it’s an optional thing.

No, that’s great because Texas is growing slowly you do actually be taking share in every particular region but on a national basis your PDG can still be, it could still look like soft. Is that the right way to think about it?

It is the right way to think about.

The next question comes from the line of Peter Steyn from Macquarie. Please go ahead.

Sorry to label a point, I was curious just to come back to Simon’s question and to some extent what has just gone before around Texas and curious if you could just sort of split the actual quarter around the fundamentals of that market in the context of the oil price and what we’re seeing in Houston particularly versus where the impacts I think be useful just to understand some of those fundamentals and how you saw that in the quarter?

I think we’re trying to look at the same information that you are and the rest of the market is. And so a few things that we try to look at we’ve been looking at payrolls and we’ve been looking at just employment in the state. And early in the calendar year, there is obviously some affect with the oil companies announcing layouts tripling for the southern part of Texas. But those seem to have really subsided and we haven’t seen major changes in payrolls and unemployment has stabilized and remains actually fairly healthy. So we haven’t seen really significant employment trend changes in Texas the way that we might have thought given how much lower oil and dependency on that state on oil. Another thing that we watch is how other manufacturers [Technical Difficulty] and others were quiet about it. So our view is Texas is obviously a significant portion of our overall mix in the U.S. it’s not turning up but what we’re trying to understand is what the new construction market did in lot of those indexes still weren’t out yet I think we used Dodd’s that indicator won’t come out until the end of the month, until we get a better sense of what happen in the new construction market it’s bit hard to say, how much did some of the drivers that you’re hearing other manufacturers and builders talk about like leather how much of that really play into effect and if so you could see that in a market data and if not you might see a different turn in the market data. So we’re trying to hold drawing a quick judgment so we get some of data and I’d say it’s been a mixed indicator of that best with what was going on in Texas.

And then perhaps just to ask a question around the new sale segment and some of your developments with the builders, the major builders how that is going if you could comment on it?

Yes, I think as far as a national builders I’d have to say that scenario that we’re pretty happy with our progress on so a lot of national builder obviously you guys know just mostly in the most price gadgets because they get all the volume they got special purchasing organization. But we’ve had some pretty good success. We still have agreements with the top 20 I think we added the 20th one sometime in last three, four months. Plus we’re also getting more inclusive agreements some of them including trim and some of them including backer. So our progress with big builders is good. So no issues there, and that’s not one of the areas that we really have to find that next level we’re pretty comfortable where we are at with big builders and I think they’re pretty comfortable with where they are at with our products I think that’s pretty good situation for us.

The next question comes from the line of John Hind from Merrill Lynch. Please go ahead.

You said you wouldn’t get that 30% target market share on 4% growth, how you’re going to made to adjust the business to get that volume growth and you just said the amount FY17 margins that you got which -- does that imply some cost reductions to get that market share growth given the larger benefit from the manufacturing investment?

Yes, I think I’m glad you bring that up, because it is not going to be price. We’ve talked before when you’re taking market share it’s normally not a price gain, because we cross about twice as much and solve this final on a new construction and about 50% more on an R&R. So we’re already a big gap. So any price adjustments whether it would be on our end or their end these really make much differences because when you’re done with those price adjustments still a big gap. So, you obviously got to sell the value of already house over a final house and in order to do that you get three more market development than sales development you got to be in front of right customers at the right time, the right influence in rest of the market. So now it’s not priced. Remember on our fiscal year ’17 we haven’t really giving you guidance that our EBIT margins are coming down. We have just told you we’re not willing to go out and say, hey, we think our EBIT margins are going to be above range, anything more than the share. And this is pretty unique I think this is the first time we’ve done that. I think in the past we’ve already said we’re going to be in range or we’re going to start stretch up to the range. So I don’t want you to read that as we’re peeling off some money for ’17 and we’re definitely going to use it. It’s kind of like I said we’ll be able to use money, we’ll have some money to use and we use it well, we use it and if input cost stay low and manufacturing performance is good again then you can fall above the ranks and I do expect manufacturing performance to be good again. So I don’t want you over reading what we’re going to do, there is no real switches being flipped it’s just that realty that hey we’ve done a good job on a financial efficiency side of our business model and at the same time we’re starting to lag on the market share growth side of our business model. So to me market share -- there is some product development involved obviously and maybe you could even go all the back and say, hey, there is basic R&D that needs to happen in the next three, four years as well. But really on the market side it is game design, game plan execution. We will have some new price come along but they will not be over board the new product that’s going to change the PDG the game plan design, game plan execution. And we just need to put more of our management time into those two areas and I think the GMs that are running the business probably are in a position now with the manufacturing things that about 12 months of momentum behind it now and they can move away from that a little bit and spend even more down on the market side. They already spend a lot of time in the market side but I think they can spend even more time in the market side

Thank you and just finally you softened your I guess consensus expectations by about 4% this morning in your mind can you advice what are the key risks what risks have you build into those estimates on the upside and the downside and the side from I guess U.S. housing volumes or is it just that I think your consensus was a getting a little bit excited at the top end?

Yes. So we don’t comment on ranges until August of each year so we haven’t changed anything our expectations for the year are a little bit down on volumes from where we started and a little bit higher on margin from where we started. But the actual number you are talking about for the group is we haven’t changed our view it is there is a range we would have been comfortable with three months ago but again we don’t comment externally until August on ranges so the external range was higher than our internal range so that's going to look what we're trying to align.

[Operator Instructions] And your next question comes from the line of Emily Smith from Deutsche Bank. Please go ahead.

Sorry just a follow up question from me on CapEx just wondering what if your guidance that CapEx for the full year has changed?

No change in that Emily we are we still expect for the year to be somewhere in the $75 million to $100 million range kind of a normal maintenance CapEx level certainly a reduced level from the heading levels last year and the year before as we weren’t about that kinds of a normal maintenance cycle for the year.

And I might just ask another question on LP if I may could you well do you think that your programs had you currently have in place are going to put in you in a good position versus LP and this is just a lag but for it actually the forward impacts your volumes you mentioned in the 12 months rolling or do you think that there is more work to do to get there and do you have plans to those sorts of plans in place?

Yes. Certainly there is more work to do but a lot of our a lot of our LP game planning is being build overtime so it's been added to in the last year versus what it was a year before and I would expect that we would continue. I think most people that use LP know what to expect from wood base product and the exterior of a home so I just think we would just need to have that value right for the home owner that's willing to trade one thing for a lower upfront cost now as I said in earlier comment you really can't get there by changing of price because you are still going to have a higher upfront cost so that's always going to be attraction of Vinal that's not maybe being as logic as far as is getting a discount but what's is given up to get the discount and I think we've talked about this before but I think we being a company I was so focused on buying them as market share opportunity, we forgot to continually the message to market about the trade outs your making when you are growing what it wood base products so it kind of goes back to what I said earlier about market pro-rents game plan design game plan execution I would say in game plan design if I had rated one out of 10 where I think were at were probably somewhere between six and eight I'd like our game plan and then execution I think is the same thing now there is more enhancements to program more markets we've been running programs in more resources we could put in the certain markets so that would go more into the execution side of it. Now as you said well why haven’t done that yet and the only answer is we want to do it well so we kind of phase one of the LP we won the pre-route the 100% Hardy value in the market I think we've proved that out so now were a like okay how did you treat that turnaround and break the more on markets and how you resource to that well and all the rest of it so this isn’t a big LP is not consuming us right now our new step it's really we kind of like our reset to position ourselves against both the Vinal and it would make two product so we kind of like the work it's been done there and we got to execute well and let it play out and but I'm sure you will be enhanced store programs and there will be programs run more broadly as we move forward and feel more confident ib their activeness.

Your next question comes from the line of George Clapham from Arnhem Investment Management. Please go ahead.

Louis I was just wondering to get a better feel for the margins in the Australian Asia Pacific business and then obviously the result that of the U.S. but you’ve [indiscernible] investment there, what’s the potential to expand margins?

In Australian dollars the Asia-Pac business EBIT margin is running about or the U.S…

It’s better not to lose so it runs about the same.

It runs about the same but Carole Park capacity should help from two standpoints, one it gives us the sky on productions, lower freight rate on sky on production and then it should get your machine scale and cost advantage as well. But I mean George on the same and U.S. and Australia now don’t tell me what you can -- what you do with your EBIT margin, tell me what you can do with growth because we got lot of capacity down there now and the best way to create shareholder value is sell more of what we do at the kind of same or close to same margin but again division margin per unit so I really don’t think they have any kind of an EBIT margin issue in the U.S. I mean in Australia what I do think they have is an opportunity with a lot more capacity now to really grow the business quicker than we have over the last five-six years which having them back that’s why we built the new capacity is because we’ve grown the business against the market index. Now many guys know your markets been on fire down there so part of it is the market being pretty hot but I think Australia is way forward next five years to grow market share against alternate products.

And just a question on the U.S. [indiscernible] market from where do you see that growing, is it -- how do we…?

And I think and we would have kind of pretty confident in a 4% for cash and I think we don’t see anything that makes us doubt that. So I’d say we think it’s right around 4% based on how we would and based on what we see from our customer base.

Your next question comes from the line of Andrew Peros from Credit Suisse. Please go ahead.

Matt just a quick one on the buyback, you’re obviously more active in terms of buyback stock in the past quarter relative to last year. But I guess even at the current run rate, you’re probably wait and get close to buying back 4%-5% of the impaired buyback. Just wondering what your thoughts are there in terms of whether you anticipate in terms of stepping up the process going forward or were there fewer opportunities to buy back stock over the past quarter which kind of legit I mean buying back a few shares just if you could talk us through that that would be great?

Yes I mean I’d like to think the subsequent quarter we bought more than just a few shares back. We were in the market for about $22 million and almost AUD$30 million. So, it’s not an insignificant amount I think I’ve said in the past that we’re a bit restricted in the summer months because of the various blackout in governance windows and the way in which the buybacks get administered on a daily basis. All that being said, we’re kind of right where I’ve wanted to be at this point in the year I think you’ll know that from the way we do ordinary dividends as an example we tend to want to see how the year is going to play out and so the activity that we do in the beginning of the year is always less than the activity that we do in the second half of the year and you should expect the way that we do special returns like share buybacks follows maybe not an exact pattern but at least the similar pattern obviously with the main subject is that having favorable market conditions to buy at a price that works within our financial framework. So I am pretty happy with where we are and how we’ve executed it’s a more significant amount that we’ve done in the share buyback activity certainly than [indiscernible] several quarters. And it’s kind of heading down the track that we could expect it to just one clarification we do announced that the buyback would be up to 5% so it wasn’t an indicator we necessarily go all the way to 5%. But I feel good about how we executed in the quarter on that and I feel like we’re more on track.

Your next question comes from the line of John Hind from Merrill Lynch. Please go ahead.

Sorry one more from me, just circling back to Louis, you obviously see better volume growth in this quarter. Is this due to some traction in the [indiscernible] following your expansion in the salesforce there or is this going to be little bit more long dated? Can you provide a bit of an update for us?

Yes I don’t think you should care about the quarterly number. So, we obviously follow see we can’t figure out their quarters so the number as you remember the last four quarters they were up 9% we were 9% and I think that’s the score sheet so we’re not losing, we’re not winning but we certainly don’t like -- we don’t like breaking even either. So we’ll see obviously negative 6 comp this year wasn’t bad news at Hardie but it’s certainly not anything celebrate one quarter.

Why don't we try one or two more questions?

So your next question comes from the line of Matthew McNee from Goldman Sachs. Please go ahead.

Just a very small housekeeping one, just on the pods business what sort of contribution was that might be and what should we drop out?

It surrounding here Matt within your model, it’s not even we disclosed in the past. I don’t -- you volume yourselves or your even numbers one or the other. It was less than -- it was single digit contribution that you did.

Maybe one more.

The next question comes from the line of Greg Brown from [Newscore]. Please go ahead.

Just a question on you mentioned, obviously specific business which enrolled because the Australian housing market is doing very well. It’s been some -- particularly developers in their results yesterday and said to have a market you need to pick and the number of people come out and say that this -- DC that's growth of the business in Australia?

The market in Australia has been very good obviously for the last several years and it’s been very hot. A lot of the growth has come from high density and multifamily type as well as single family residential and so we don’t -- obviously our market index is a bit different just given that we’re more waited towards low rise as well as waited towards single family. So we don’t experience the same kind of market index the headline numbers do. I think the other factor is a little bit of regional mix and where we’re stronger in certain states versus other states. But we see from the first quarter a good market for us is the similar market index what we experienced last year and last year we felt good that grow above our market index. And we feel like we’re on the same track and trajectory both within the quarter and further share. So we’d expect Australia to grow above market earlier we saw a growth above market for this year and that market index for the quarter and for this year is pretty similar to where it was last year for us.

So where we see original lighting up there?

Primarily in Queensland and New South Wales is the primary market.

Just going on that obviously the banks delayed the ideas really looking at that sector and a lot of peoples having reduction in the Chinese one could have an effect on new homes as well the amount you invested, did it pause for concern first?

We don’t spend a lot of time reacting to kind of week-to-week or months-to-months macroeconomic news. We tend to look at the data points over the longer period of time similar to the U.S. our game plan in Australia is about market share gain and increasing our market penetration with existing products and new products. We think Australia is a good market. We think our position in Australia is very strong. We think we have opportunity to continue improve that position and we would when react to kind of a short term indicator of what the market may or may not.

Sure, and if you have any business moving into the high density space last quarter.

No, I’d say our mix of addressable market is pretty similar within the quarter as it has been historically.

Sure. Just one more question, I mean there is been a bit of -- you mentioned a bit about the impact in currencies specific pass the business. I was hoping fir just a bit of broad outline of -- would it be fair to expect it to rise rates and the ELG to get down compared to the U.S. I mean what sort of impact we see in the currency have on the business at the moment and so for the rest of the financial year?

On the quarter it obviously having effect and you can see that the way Asia Pacific results were translated into U.S. dollars when you got Australian dollar that’s weaken into extent that it has -- it's obviously going to have an impact just given the percentage of our business that comes from Asia Pacific and from Australia. That being said we don’t really think foreign exchange is strategic component to the company. So we don’t spend that much time thinking about our business strategy with how it's going to get affected from foreign exchange we think that is just normal variation. It is down -- we don’t spend a much time on the speculative statements at all I think we’ve heard everything from the Australian dollars going to dip into the 60s all the way as late as 12 months ago and I think anything herein for two years fed reserves are going to raise rates and I’m sure at some time they will and at some point the pragmatist will be right. But none of those things are things that we can affect, none of those things are part of our core strategy. We think those are things that are going to have normal variance on numbers and at least for the first quarter if had an adverse effect and how that plays out for the rest of the year I think is were as interested and you're going to see how it plays out as many of you are.

We appreciate everyone joining the call and we will see you next quarter. Thank you. Thanks Emily.

That does conclude our conference for today. Thank you for your participation ladies and gentlemen. You may all disconnect.