Arcelik A.S. (BIST:ARCLK) Q3 2022 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by. I'm Popi, your course call operator. Welcome and thank you for joining the Archelic conference call and live webcast to present and discuss the third quarter 2022 financial results. At this time, I would like to turn the conference over to Mr. Özkan Çimen, Chief Financial Officer and Mr. Oktem Süleymez, Investor Relations Lead. Mr. Çimen, you may now proceed.

0:26 Thank you. Good morning and good afternoon, ladies and gentlemen. Welcome to our third quarter results webcast. I am with Öktem Söylemez, our investor relations lead. Before we start discussing our operational and financial results, I would like to take this opportunity to thank all of our employees for their efforts in these challenging times. So I will start with the highlights of the third quarter. We have generated 34.3 billion Turkish lira revenue in the third quarter, registering 89% year-on-year and 6% quarterly growth. In a declining consumer demand area, the main drivers of the growth were price increases and Turkish lira depreciation.

1:12 As the macroeconomic environment gets worse every month with inflationary pressure, consumer demand in Turkey and in other regions has further declined. Strong ways of the last two years changing consumer spending priorities were among other important factors of contraction of the demand. Despite declined growth margin in Q3, we posted 8.7% EBITDA margin in the third quarter. Some margin improvement of 125 basis points on a quarterly basis, which was as a result of improved OPEX to sales ratio. compared to a year ago, because pressure was still significant and EBITDA margin had contracted by 107 basis points.

2:00 Networking capital to face ratio decreased to 26.3% as of third quarter compared to 28.3% as of second quarter, mainly due to strong collection during this quarter. The leverage as of September, 2022 decreased to 2.68 times, reflecting around 0.5 times improvement, which is backed by free cash generation and higher EBITDA contribution, which is a result of being translation from higher average exchange rates compared to second quarter. Excluding The impact of shares buyback, the total impact on the leverage will have been 0.29 times, which will take us to 2.38 times.

3:01 If you continue with the next slide. Following a triple digit annual net sales growth in the first and second quarter, we have registered another solid net sales growth of 89% in this quarter. Supported by price increases and positive FX conversion impacts, our net sales have reached to $34.3 billion despite falling consumer demand. On a quarterly basis, we have delivered 6% revenue growth on the back of continued price increases and selfishly red depreciation. Strong price increases on a yearly basis and cheaper raw material prices were main drivers of margin expansion, despite lower capacity utilization rates due to falling demand.

4:00 On a quarterly basis, consolidated growth margin was down by 83 basis points, reflecting the significant depreciation of Euro against Dollar, and minimum wage increase, which is putting pressure on the costs and increased energy costs, despite the eased raw material costs. On the right-hand side, you can see consolidated EBITDA margin figures. In the third quarter of 2022, EBITDA margin was 8.7%, up by 125 points compared to previous quarter, driven by lower marketing expenses and logistic costs. However, on a yearly basis EBITDA margin was down by 110 basis points, which is reflecting significantly higher logistic costs.

4:52 Continue to the next slide. When we look at the domestic market following 8% contraction in the first six months of the year, we saw better wholesale market in Turkey in July and August period. In the first eight months of the year, the contraction in Turkish MDA6 market was slowed down to 6% on a yearly basis. Our performance were also improved compared to previous cartels and the units were flattish in July-August period on cumulative basis year on year, which desolated the contraction to 10% in the first eight months of the year. Despite relatively better wholesale performance, sell-outs were significantly weakened in both July and August. And in the first six months of 2022, the consumer demand was up by 2.5% on a yearly basis, reflecting the impact of pull-forward demand. Starting from June, consumers changing spending priorities such as vacations, social gatherings, increasing trending cost of living and highways led to significant contraction in the sell-outs. For all those reasons, sellers in the first eight months were down by 4.3% on a yearly basis.

6:13 Growth in the first six months turned into contraction in July and August in AC market due to strong waves impact on both quarterly and yearly basis. In the first eight months of the year, AC market was down by 8% while we have outperformed the market with 11% on an annual basis. When we look at the TV sales, TV sell-outs were down by 4%, while our units were down by 5% compared to a year ago in the first eight months of the year. Domestic revenue in the third quarter was 10.1 billion TL, which is registering 88% yearly and 4% quarterly growth, and the growth was mainly driven by price increases despite declining units.

7:01 The share of domestic market in the total business is 30%, which has remained flat on both yearly and quarterly basis. And we'll look at the European market in the next slide. In the third quarter, the share of Europe region in total revenue was 42%, which is flattish compared to a year ago. In Western Europe, consumer demand declined by low 10% on a yearly basis in both July and August as a result of double digit contraction in the major markets like Germany, Great Britain and France. Together with high base impact of last two year, declining purchasing power and changing spanning priorities of consumers were the key factors behind this contraction.

7:49 However, when we look at the value terms, which is a reflection of price increases to offset the cost inflation and higher share of premium segment, the market remains flattish on a yearly basis in the first eight months of the year. Having 25% share in total revenue, our sales were down by 14% in Euro terms on a yearly basis due to lower units. In Eastern Europe, the market continued to shrink significantly in July and August, mainly as a result of accelerated contraction in major markets. However, in value terms, we see the market grow significantly. Having 17% share in total revenue, our sales were up by around 35% on a yearly basis in Euro terms.

8:39 On an organic basis, revenue growth was 30%. In total, lower units were offset by the pricing initiatives and we have posted 1% annual revenue growth in Euro terms in this quarter.

8:57 The next slide.

8:58 The revenues from Africa and Middle East region, which is accounting for around 9% of our consolidated sales in Q3, grew by 48% in Eurotons. This strong revenue growth mainly driven by significantly higher Middle East revenues. Defined in South Africa, units sold in the domestic market remained flat on an annual basis in the third quarter. However, on a quarterly basis, Cycling a low base on the previous quarter due to the flood disaster, units grow at mid single digit percent. And DeFi's export units were contracted at mid to high single digit percent on a yearly basis and grew at low teams on a quarterly basis.

9:44 DeFi posted around 16% annual revenue growth in Euro terms, mainly driven by price increases. And both prices increases and growth resulted in around 11% revenue in Euro turns. We have been able to increase our market share with DeFi in Europe turns and continue our leadership position. Revenue from Beko Egypt were up by 48% on a yearly basis in Euro turns, thanks to mainly high dishwasher and AC sales and price increases. However, on a quarterly basis, the import regulation imposed by the government is negatively impacting the sales and revenue fell by 15% in Euro terms.

10:33 Revenues from APAC region, which generated 18% of our consolidated revenue, were down by 2% on a yearly basis in the third quarter in Euro terms. Pakistan records high level of monsoon rains that followed by a flood disaster High inflation and deteriorated purchasing power reflected onto the consumer demand. As a result of significantly low units, net sales were down by 48% on a quarterly basis in local currency terms and around 52% in Euro terms. On a yearly basis, mainly supported by price increases, net sales grew by 9% in local currency terms and in Euro terms, Net sales contracted by around 7% on a yearly basis due to depreciated Pakistan rupee currency.

11:29 Higher AC washing machine and STA sales in Bangladesh in the third quarter resulted around 13% annual revenue growth in taka terms. In Euro terms, the growth is 17%. We continue with the next slide, raw material price index. In this quarter, both metal and plastic raw material prices declined compared to a quarter ago, mainly as a result of declining demand throughout the industries. Declining consumer demand for various industries has led to production downturn that accordingly put metal raw material demand down and thus the decrease in metal raw materials continued in the third quarter.

12:15 Likewise, plastic raw materials prices also declined in the quarter due to the shrink of demand. Despite the fact that prices went down in this quarter compared to the pre-pandemic prices, the costs are still high. Going forward, demand and energy costs will be the important determinants of the index of raw material prices. If you continue with the sales bridge slide, In Q3, Turkey's sales grew by 87.5% organically on a yearly basis, and international sales grew by 89.3%. And out of this growth, 19.1% was organic, 68.6% was a fixed impact as a result of Turkish soil depreciation, and 1.6% was coming from our latest acquisition.

13:14 On the right hand side, you can see our regional sales breakdown. Arcelet benefits from having announced operating geographies. Turkey's share in total revenue remained same as 30%, while the share of Western Europe declined 25% from 30 compared to a year ago. And total Europe's share remained flat with 4% higher share of Eastern Europe in the third quarter of this year versus a year ago.

13:44 We continue with the summary of the financials.

13:48 Here you can see quarterly financials with yearly and quarterly comparison given on a consolidated basis. We have completed the indecent acquisition at the end of August and in terms of profit and loss statements there is only one month inorganic impact. Excluding this acquisition impact, the growth was 88%. On a quarterly basis, Arcelik consolidated net sales increased by 6%. Organically, revenues grew by 5% compared to previous quarters. Growth margin in the third quarter was up by 54 basis points on a yearly basis to 28.8.

14:38 And on a quarterly basis, growth margin was down by 83 points mainly due to further decline EURUSD parity, wage increase and higher energy costs especially affected due to cost base. EBITDA margin expanded by 125 basis points to 8.7% on a quarterly basis with the impact of effective OPEX management. and on a yearly basis EBITDA margin was down by 110 basis points, which is reflecting significantly higher logistic costs. Excluding one of items, EBITDA margin was 8.6% in the third quarter. We have posted net income of 495 million TL in the third quarter.

15:28 Net profit margin was 1.4%. Contraction of 251 basis points reflects the cost pressure on operations and higher financial expenses on a yearly basis. If we exclude the one of items, net profit margin was 1.3%. On the next slide, you will see our debt breakdown and the leverage ratios. Our net debt was decreased by 1.2 billion TL compared to Q2, mainly to the increase in the cash position. And our cash in the balance sheet was increased by 5.5 billion TL, mainly coming from the positive free cash flow generation in this quarter and also the contribution of cash coming from our latest acquisition.

16:21 As of Q3, we have 20.4 billion TL equivalent cash in our balance sheets, which is well diversified between currencies. 56% of our total cash is in hard currency, while TLA was 11%. As a result, our leverage was down by 0.47 times compared to Q2. On the right-hand side, you can see our loan and bond portfolio. As of Q3, we have 46.4 billion Turkish Lira equivalent debt. 28% of our total portfolio is in Turkish Lira terms, while Euro and Dollar shares was 33% and 22% respectively.

17:10 Our TurkishTRA effective interest rate was 22.1%, up by 65 basis points compared to previous quarter end. We have financed our TurkishTRA needs with issuing TurkishTRA bond, which is used for our working capital requirement. On the next slide, on the upper left corner, you can see the bridge of EBITDA margin. As mentioned previously, due to higher OPEX sales ratio, mainly as a result of significant higher logistic costs, consolidated EBITDA margin was contracted on a yearly basis. On the lower left corner, you can see our CAPEX to sales ratio, which is 5.1% in this quarter. Our investments in Egypt and the factories in Turkey were the main reason as to 170 basis points increase in the ratio. On the upper right hand corner, networking capital space ratio reflects at 26.3% in Q3 compared to 28.3% at the end of Q2.

18:25 Finally, on the lower right corner, you can see our cash flow where we delivered positive free cash flow of 2 billion TL in this quarter. We continue with the next slide of the guidance. To reflect the recent changes, we have made adjustments on our revenue EBITDA margin and CAPEX guidance. Based on our most recent forecasts, we increased our Turkey sales growth expectation from around 70% to higher than 70%. in Turkish tera terms, which is actually reflecting the pricing initiatives in the last quarter.

19:11 We maintain our international sales growth guidance as higher than 20% in Euro terms that incorporates the revenues from our recent acquisition. We also maintain our consolidated net sales growth guidance as being more than 90% in Turkish tera terms. As a result of further deteriorated inflation, Throughout the regions that is putting pressure on the demand and cost inflation, we have revised our EBITDA margin guidance to around 9.5% from around 10% for the end of this year. Our CAPEX guidance is updated to €360 million, with the including of our new investments in Bangladesh and Egypt.

20:00 So that was the final slide of my presentation. So we can go to the Q&A session. The first question comes from the line of Demirtas Kemal with Ada Invest. Please go ahead.

20:18 Thank you for the presentation. My first question is rather about items before the operating line. I see much higher ethics losses below the operating line in third quarter and you know more than maybe compared to previous quarters at least 300 more 300 million more ethics losses there and compared to second quarter we see significant increase in that item and that some hedging costs I would like to understanding because that numbers Just put additional pressure on your bottom line, although your EBITDA is recovering.

21:04 So I would like to understand, is it temporary related to third quarters because of your short position or other position? That's my first question. So what could be the trend in that? Was it just because of some volatility? That's my first question. And the other question is about the trend in fourth quarter. How is the trend for the fourth quarter and the following year? I see some improvement in your working capital. How do you see the market conditions in both Turkey and international? Thank you.

21:44 Thank you, Jamal Bey. When we look at our financing expense, actually, as you mentioned, there's a significant amount of ethics laws impacting our costs. This is related to our position before hedging. So due to the regulations in Turkey, our export revenue needs to be converted to Turkish lira. So therefore, What we have done in the last quarter is selling our ethics, which also contributed to a lower Turkish Lira borrowing.

22:30 So our composition of borrowing has changed, which has increased the net balance sheet position before hedging. And with the increased interest rate, almost with the same cost of hedging position versus getting a loan from the bank. The increase you see in our P&L is actually the switch from interest cost to ethics loss. The impact will continue because unless our position before hedging is improved, we see an improvement compared to two months ago in our position, in FX position. I can say that unless the ratio of interest rates decrease, there will be a similar cost of interest, which is partly constituted of ethics laws and partly Turkish Lira loan interests.

23:47 So this was related to interests.

23:54 And Özkan Bey, related to this question, was there anything about the Eurodollar parity impact in that, because there was a big movement in Eurodollar Could we attribute some portion of that to that factor or it's a general thing?

24:15 Not actually because we are also hedging Euro-Dollar position in our balance sheet frequently. So the euro dollar impact is mainly affecting gross profits and OPEX line that because of the material costs is partially with US dollars, which is a higher percentage of our US dollar revenue share. Therefore, the Eurodollar parity, when we look at our sales breakdown, is negatively impacting us because of the cost space. But in the interest line, it doesn't have an impact. Thank you. Regarding the trend in this quarter, So far, 2022 has been a year in which consumer confidence declined, economic and political environment causing consumers both to delay their purchasing decisions and shifting their purchasing preferences due to rising food and energy prices.

25:25 And in addition to unfavorable market dynamics, we had to overcome with various other headwinds in the third quarter, like continued increased cost, demand impact, and the parity, as we have mentioned. However, the price increases we have implemented and the measures that we are taking to improve our profitability has resulted in slightly better results compared to previous quarters. And then we look at the Turkish MDS6 market, which performs slightly better than in the July-August period on a cumulative basis, registered 2% so far annually. The expectation for the coming months, because of the uncertainty in the market, which is creating a demand contraction, we expect it to continue both in the Turkish market as well as the international markets.

26:33 What I can say is the sell-out, when we look at the sell-out in Turkey, we can say that it is flattish. However, for the coming months, I can say that our growth will mainly come from price increases rather than quantity increases. And the global economic growth is forecasted to slow down to around 2% for next year. So this will definitely impact the demand to our industry, considering all the inflationary pressures and cost pressures that are still on the market.

27:18 Thank you, Özkan. The next question comes from the line of Kilikiran Hanzadeh with JP Morgan. Please go ahead.

27:33 Özkan Bey, thank you very much for the presentation. I have three questions. The first one is about your margins. You are expecting some sort of improvement in the fourth quarter. I wonder what is driving this margin improvement in the fourth quarter. And the second one is what is the duration on your existing cost contracts? So would it be reasonable to assume that a material fall for example in raw material prices may come with a lack on your margins? Because this was the case before and it should be now reversed. So I just wonder when you can feel this raw material decline on your margins.

28:19 And the third question is about your financing. So, will you continue to finance the Turkish Lira loan repayments to bond issuance and what is the current interest rate in the market? Thank you.

28:33 Thank you. For the margin side, we are expecting an improvement as you highlighted in the fourth quarter, which will be for a couple of reasons and one of them being We have been increasing our sales prices for the end of a month in September, which we will see the impact in the last quarter. And the other one is related to your second question of material prices. Actually, we have a three-month contract generally for metal raw materials, but for the chemical side, it's managed monthly. Therefore, we would be utilizing the fall of decreasing metal costs in the coming months, especially the metal side.

29:29 It is coming with a lack since we have three months contracts and also we have inventory in our balance sheet. And for the plastic side, we will be having the benefit earlier than compared to the metal prices. So the third one of the improvement is related to our OPEX management, which we have been able to reduce and we will continue to reduce as a percentage of sales. And all these three impacts combined will lead to a better margin in the last quarter compared to Q3. Your question regarding the financing, we have been financing our Turkish Lira needs with Turkish Lira bond issuance and we will continue to do so.

30:19 The latest ratio is around 25% of the amount of issuance to build in Turkish Lira.

30:28 Thank you very much. Can I make a follow up on the margin performance? So for example if the demand environment stay awake in the fourth quarter and you may not be able to reflect the prices does it mean that actually with no price action the major margin improvement may come in the first quarter of next year actually because of this contract duration?

30:51 It is dependent on the of course the quantities However, what we have assumed is that we have taken into account the demand for the last quarter, which has already reflected the shrinkage of demand in the market, contraction of demand in the market. Therefore, I can say that We have already assumed declining quantities while making our projections. However, if there is, let's say, more contraction in demand, there will be side effects as the, because of the fixed costs, our profitability ratio might be impacted.

31:44 Okay, thank you very much, Özkan Bey. The next question comes from the line of Demirak Kayahan with AK Investment. Please go ahead.

31:54 Demirak Kayahan Hi, thank you very much for the presentation. I have a follow-up on the financing cost and also another question. If you include the hedging cost, what is the rate of interest rate on your SX? loans given the other hedges, the USD, Euro, you said. And the other questions, the theme over the last quarter was that energy prices in Europe are quite high, although we see some normalization. But also the price costs from Shanghai, from China to Europe also is declining quite fast. Maybe you can just elaborate on those things. in terms of impact on your business? Are you more competitive in terms of making exports to Europe compared to European producers? Also, do you see more competition coming from the Asian place?

32:53 Thank you very much. I can answer the first question. Hi, this is . For the Turkish Lira loans, our effective interest rate as of nine months of this year is around 22%. We have still relatively lower interest rate loans in our total portfolio, but going forward, we expect this ratio to be increased at the year end. For the hard currency loans, for Euro, it is around 3% because we have issued a green bond last year.

33:38 The interest rate for this green bond was 3%. We have also Euro denominated loans and the effective interest rate for the Euro denominated loans is around 2%. For dollar loans it is around 6%.

33:58 And is there any additional cost coming from the hedging using hedging instruments on the top of that implied interest rate? Or is it include the 6%?

34:13 As I explained, our net position, which is before hedging is around €300 million for Turkish subsidiary Arçelik. And when we want to hedge it, It is linked with the interest cost of getting loan from the bank almost. That means you can assume that there's a 25% cost of hedging that open position. The cost of hedging is similar to getting a loan from the bank with that rate.

34:55 Okay, I get it. Thank you.

34:58 Okay. Regarding your questions on energy prices and transformation costs, As we have been experiencing in all countries, the energy prices, especially the electricity rates have been going incredibly high, which is quite high impacting all our production costs and it has been doubled compared to previous quarters. And there is no hedging mechanism to balance it. So therefore, we are seeing our total cost increasing around 1% and 2% with the impact of those energy prices. And we are taking pricing actions to balance those increased costs along with all the increased costs.

35:48 Transportation costs, as you have mentioned, it is not that high as we have started This year, it has started to come down and we are utilizing any lower rates. We are following up closely. Our teams are following up closely to make every opportunity possible to minimize our transportation costs, which most probably we will be seeing better rates for the next However, there are operational difficulties that we are facing, not only cost, but the operation is not that easy.

36:33 Understood. In terms of the competition, for instance, the energy prices in Turkey and Europe, are you more competitive? I think your first question is related to whether we are experiencing the same energy cost increases in different factories.

37:11 and whether one of them is in a less unfavorable condition compared to the other. Not actually, because all countries that we have factories, we have been seeing the same trend of increased energy prices, which is impacting almost the same ratio. And I'm not sure about the competition, whether they have a favorable backed up We have a follow-up question from the line of Demetas Cemal with Ada Invest. Please go ahead.

38:07 Regarding your general administrative expenses, you see absolute decline versus second quarter, around 1.2 billion. In previous quarter, it was 1.5. Are there any specific reason behind that, only inorganic or structural change? That's my first question. And the second one is about the effective tax rate. You recorded some tax gain. Should we expect similar trend in the fourth quarter? Thank you.

38:44 For the general and admin expenses, we can provide the breakdown later on. But what I can say is we have been monitoring our expenses to reduce our OPEC space, especially for the fixed cost side. So there are a lot of initiatives taken because we are not only increasing our sales prices to improve our margin, but we are also effectively managing our OPEX and networking capital. So this is a reflection of that, but as I said, we will share the details of the breakdown of those costs after the call. Effective tax rates in this quarter have been impacted with three major impacts.

39:30 One of them is that our tax assets, we have indexed to inflation, so there's a positive impact coming from that part. And also, our new CapEx is coming with additional incentives, so there's additional tax assets created with the inflation. And also our R&D expenses is creating an opportunity to reduce our tech space. So therefore, we are expecting a very low tech space coming from those impacts, which we expect a single digit by the end of this year.

40:11 Thank you.

40:12 Thank you.

40:13 And maybe another question about the strategic perspective. In the previous quarter, Whirlpool had some announcements about their plans in Europe, in EMEA. And you had some transactions with them, Whirlpool. Strategically, I'm sure it's early to talk about anything, but what's your perception about your competitors? in that sense, because they are making losses in the AMA. It was a problematic one for them. And then during their presentations, they were underlying some corporations or deals or anything in the region. I don't know how you positioned yourself to such the moves or strategic perspective, or should we just ignore that kind of cooperation

41:13 And given the recent acquisitions that we have done with Whirlpool and given the size of the business, it is normal Archelik to be thought as one of the potential candidates. However, there is nothing that we can share which is of material right now. We are following Werple's position. And as you said, there are a lot of overlapping countries. But there is nothing that I can comment right now.

41:53 Thank you. The next question comes from the line of Doshi Anzali with Nuveen. Please go ahead.

42:06 Thank you so much for the call today. Most of my questions have been answered. I just have one with regard to your upcoming year bond maturity, 500 million in April next year. Can you talk about what your options are to adjust that given just the current market conditions are? How are you looking to address that? I mean, you have sufficient cash on your balance sheet, but I am curious if you are looking at refinancing options as well.

42:41 Actually, we are considering to have another bond issue at the beginning of this year, but after the economic conditions and the political environment. As you already followed, RaiseSafe has gone to around 10% of issuing a new bond. Therefore, we decided not to issue a new bond. However, we are considering of getting a syndication loan option. We are working on that and partially with the available cash in our hands and partially The loan that we're going to have in the first quarter of next year will be used for the refinancing of our bond.

43:26 Okay, that's very helpful. Thank you. And then just one more question on the cost side. So I understand from your points on the reduction in materials and chemical costs as well as S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S

44:08 Yes, we are constantly reviewing our OPEX and you said there are inflationary impacts or the impacts coming from the minimum wage increases, which is impacting our cost base. But at the same time, we are also creating efficiencies in our operations, which is reducing our cost base down. They are a balancing factor, or sometimes we are able to improve our OPEX as a person to choose sales. In most of the countries that we are operating, we are looking at it from the same perspective. There will be negative impacts coming from inflationary pressures, but we will balance those with our OPEX management.

44:54 Great. Thank you so much. As a final reminder, to register for a question, please press star and 1 on your telephone. The next question comes from the line of Martignoni Eleonora with M&G Investments. Please go ahead.

45:21 Thank you for taking my questions. I have just one, please. Do you have a sense of what inventory is in the channel? Not just at your company specifically, but through your distributors, etc. And if you have a sense of whether that needs correcting or not. Thank you.

45:42 The inventory levels in the market, compared to the previous character, is within the same level. Therefore, we do not see a major inventory problem in the channel right now. However, if we see further reductions in the quantities and decline of demand, That might be at a level which is higher than compared to previous quarters. So we are continuously monitoring not only our inventory, but also the inventory in the channel as well.

46:26 Thanks. The next question is a follow-up question from Demirtas Cemal with Ada Invest. Please go ahead.

46:38 Özkan, the last one question about the inflation accounting issue. It's not very popular nowadays, but in this environment, it just fits that IFRS 2009 could be applied also in Turkey. What's your perspective on that? and you know in IFRS it might happen but Turkish tax accounting is different and it might create some losses for the following years although the balance sheet then you look at the inflation impact what's your perspective on that for the time being thank you thank you as you know our reporting framework is TFRS and public oversight accounting and auditing standards authority is responsible for that framework

47:32 The Authority FT announced one to implement the inflation accounting. However, the expectations regarding that is to implement it by the end of this year. Regarding the impact, we are currently working also with our consultants and with our team. However, as of now, we are not in a situation to mention any amount. For 2020, only the balance sheet will be restated according to inflation accounting to be the base. for 2021 and 2022, both balance sheet and P&L will be prepared according to the inflation accounting if it was to be implemented as of year end 2022. Thank you.

48:20 Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Chimane for any closing comments. Thank you.

48:32 Thank you. I would like to thank all of the participants for joining our Q3 earnings call. Thank you.