Orascom Development Egypt S.A.E. (ORHD) Earnings Call Transcript

Hello, everyone, and thank you for dialing in. This is Sara Boutros from CI Capital Research team. We're happy to be hosting today ODE's 2Q '21 results call. From management's team, we have with us on the line Mr. Omar Hamamsy, CEO; Mr. Ashraf Nessim, CFO; and Ms. Sara El-Gawahergy, who is the Head of IR and Strategic Project Management. As usual, we'll start off with a brief presentation by management, and then we will open the floor for questions. [Operator Instructions] Omar, please go ahead. Over to you.

Okay. Thank you, and good afternoon, everybody. Very good talking with you. This is our first half of 2021 results as well as also Q2. I'll focus primarily on my -- the numbers and the story on the first half because we're looking at this over a longer kind of movie, if you will, cut. But the rationale, the rates, the ratios and the momentum apply equally to the second quarter of 2021 vis-a-vis the second quarter of 2020. So net-net, I think we have a very exciting story of results over the last 6 months and over the last 3 months. We've managed to achieve overall real estate sales of EGP 3 billion in [Audio Gap] 21, 4 billion will actual happen in Q2, where we were 51% over the 2020 results. We also managed to accomplish a very solid increase in our revenue. The revenues were at 3 billion. I apologize. I mixed revenues and sales. So the earlier figure was 40% increase over the previous year. That's the EGP 4 billion of sales. The revenues were at EGP 3 billion with a 56% increase over the same period last year. The even more exciting part for us is the fact that not only are we getting a significant acceleration in sales and revenues, but actually, our margins are also significantly improving. We've managed to increase by 106% our margin -- our EBITDA margin -- our adjusted EBITDA margin in relation to 2021, and the similar comparison for Q2 was 64%. Our cash position continued to remain very strong and, in fact, strengthened slightly from last quarter. We're now up to about EGP 2.6 billion of cash and cash equivalents, and our net profits have significantly improved, about 340% over last year at EGP 744.6 million. We're also continuing a very healthy improvement in our collection -- in our cash collections for our real estate project. So net-net, a story of significant improvement in sales, in revenues, in operating margins and in net profits as a whole. If we look at the numbers at the next sort of layer of detail, again, you can see them all next to each other here, give you a bit of a sense. The other positive story over and above the increase in sales is the fact that we also have a very healthy real estate portfolio receivables standing at about EGP 14.2 billion. That gives us a nice runway over the course of the next few months and years. Now if we take the view from a sector perspective, we obviously see a significant improvement on the real estate side, an increase in our real estate revenues of 112% to EGP 2.3 billion and a commensurate or even larger increase in our EBITDA and operating EBITDA for real estate that indicates or reflects not only a better mix and better pricing that we're doing, and we'll talk about pricing once again in a few minutes, but also indicates our focus on making sure that we're really value engineering what we're building to maintain very solid revenue margins. In the hotel space, you will see that our revenues were almost flat. They're down 8%. In relation to the first half of 2020, I'll remind you that the first half of 2020 included 2 very, very strong months, in fact, 2 record months of January and February. And so for us, this accomplishment is a very positive one. Even more positive is the fact that we've managed to more than double the adjusted EBITDA, the margin basically of operating in our hotel business, which was up 117%. And that's, again, it's through a combination of much better targeting of the customers we're going after, and we'll talk about a lot about how we're bringing in many more direct channel customers, not all-inclusive 5 customers, primarily within the country, within Egypt, where our pricing ability is far better and our margins are far better. And it's a combination also of us running our hotels with significantly -- with a very strong focus on taking out cost where it's unnecessary and making the structural adjustments that we had to make to ensure that our structural margins are much more -- are much stronger going forward, especially when the business starts coming back. And then last but very important for us also is the town management component. We spoke about this last time. You've been hearing about our plans to take these numbers forward because these are going to be our forward-looking recurring revenues. And we managed to take this up by 30% and once again, even more importantly, increased the margins there by a factor of 76%. We'll talk about those, but these are things that are coming from places like extra works, like the Marina revenues that we have, et cetera, and many other retail sources that were drawn. If we take a cut again and compare by segment, you'll see that actually, we haven't -- even more excitingly for us, at least, is the fact that we haven't had to do any land sales. The land component that you see here is related primarily to the schools in O West last year. But this year, we're not touching land at all. This is something we keep in our back pocket on the off chance that we may need to utilize it, which we don't see any need for it for the time being. But you can see the very positive improvement in the town management component, of course, the massive increase in real estate revenue and the sustained level for the hotels despite the fact that we're operating 100% within a COVID environment. Now let's give you a bit of operational highlights. I think you all know about Orascom Development in Egypt. Let's actually take some of the highlights from each of our destinations, and I'll try to go through these very, very quickly without necessarily reading each one of those points for you. The main points around Gouna are, a, strengthening our net sales. So that is driven primarily by a combination of increased volumes of sales in a number of the -- and projects that we have, and we talked a bit more about them here, ranging from Shedwan to the Ancient Sands villas, et cetera, as well as also launching a new inventory like [ Trea ] with what we think is the right mix between stand-alone villas, townhouses, et cetera, or what the customers are looking for. We're coupling this with a 10% period-on-period, so first half on first half increase in our pricing. That's a level that we feel is healthy to sustain the business while at the same time, significantly improving our margins and our overall sales. We continue to have a very healthy pipeline of inventory that we're launching. There's a bunch of new projects also coming down the line, which we'll be launching over the next few months. And so we're very excited about the momentum there. I think it's a clear, consistent story, and we continue pretty much on a similar course and track as we have historically. Also I want to just highlight the fact that we -- in the first half of the year, our hotels at Gouna operated at 40% of the room capacity with, as I said, Egyptian or Egypt residents representing 95% of the guests that we received. And we are in the process of renovating completely one of our hotels, and we're going to be turning what used to be the Bellevue hotel into a Chedi, which is a very strong brand for us that serves -- has been serving us extremely well in places like Andermatt and Montenegro and which we're now bringing to Egypt for the very first time. Numbers. As I highlighted, I think I'll point you to the fact that the net real estate sales are up 66% to EGP 2.03 billion. The average selling price, as I said, is up to EGP 61,000 per meter squared. That's up almost 10%. And I'll point you to the fact that our occupancy for the hotels, despite a very strong first half of 2020, that the first 2 months of the first half of 2020, were pretty much operating at similar levels of occupancy, somewhere around 30%. While our GOP, as you can see here, has almost doubled or almost tripled from what we saw in 2020 for the same period. And again, that was the focus on driving our costs, rationalizing our costs as well as also being much better in our pricing. And you can see it in one of the appendix pages later on where ADRs have actually improved -- quite a bit improved. So that's the story for Gouna, and we maintain a very positive trajectory there and a very positive trend there. O West, an equally exciting, if not even more exciting story, where, if we look at it, we've been continuing a tremendous momentum on our sales. Our actual sales like-for-like, if you exclude commercial or land components, et cetera, are up almost 40% from the same period last year, 37%. We're up to about EGP 1.4 billion. That's extremely exciting for us. Once again, that's driven not only by an increase in number of units sold, that's about 30% increase, but also our average selling price is increasing tremendously. We've increased it by 21%. We're up to now EGP 28,000 -- a bit more than EGP 28,000 per square meter, and it's a number that we're continuing to drive forward because it's a very important sign of the health of the project. Our recent launches have been very successful particularly the launch of Hillside, which has worked very nicely for us. We're continuing actually to accelerate our construction pace over there. We're currently -- we've completed 423 villas, and we're working now on the apartments. There's 185 apartments being built as we speak. And the club itself, the memberships, not only have we increased the pricing in them, and that's been well received, to EGP 180,000, but we've also added another almost 300 new memberships in there to take us to 1,760 members in total for the club, which we're very excited about. So again, tremendous momentum in O West, very good new direction also with our new management over there, and we're seeing very early fruits -- very early results there. We intend to have a equally strong, if not stronger, hopefully, second half of the year with a whole bunch of initiatives related to not only sales but also placemaking, et cetera, in O West, which you should continue keeping an eye on and which will drive our results in a very positive way. Third, in our portfolio in Egypt is Makadi Heights, very strong momentum also, in fact, quite discontinuous momentum, I would say, in terms of just how we've managed to take this destination from an almost dormant destination to one that's extremely not only lively in terms of the people who live there and the activation of a place there but actually also very, very exciting from a sales perspective. So as you can see, our net sales have jumped to almost EGP 600 million for the first half of the year. That's a jump of 400% from the same period the year before, coupled not only from a number of units that we sold but our also tremendous pricing or repricing and re-amortization of the destination. Our average selling prices there are almost at EGP 30,000 per square meter, and it's a project that we're, therefore, very excited about. We're continuing to accelerate the deliveries over there. And so construction is really going very strongly. We have 244 units that we're planning on delivering in 2022. We're also consistently launching new clusters, be it in Cape where we've added a total inventory of EGP 400 million; or in Tokyo, which is also doing extremely well, where we're adding extra inventory. We're also beginning to have interesting commercial lease agreements over there with some retail outlets. You'll be seeing some interesting operations begin in the third quarter of this year, right now in 2021. And we're also beginning to have some long-term partnerships with some of the strategic place-making entities in there and which would start operation also right now. For example, with Ignite Egypt, we're launching a new sporting gym facility over there, but there'll be much more of these type of placemaking, et cetera, initiatives that should we see coming, too. And that obviously has resulted in the very positive results that we've seen. In Taba, as you know, we told you last time and we'll say the same thing for now again, Taba is a phenomenal jewel in our crown. However, for the time being and until we see a healthier traffic from the neighboring 2 countries that primarily feed Taba as well as internally here, and also as we begin discussing and negotiating some potential deals with the Russian tour operators and Russian tourism, for the time being, Taba has continued to remain a cost-management issue for us. You will see it very clearly here. If you look at the GOP line, we've managed to actually reduce our losses in Taba by 50%. Our GOP is operating at 14 -- at minus EGP 14 million, down from EGP 28 million in the first half of 2020, which again included a very strong January/February. So we've done a very strong focus on the cost side there, but we're also beginning the commercial discussions, and we're hoping that we get much stronger outcome once the opening of the borders becomes a little bit more for us and also equally important that the Russians begin actually coming on charter flights to Egypt on a more regular basis. At this point, I will pass it on to Ashraf Nessim, our CFO, who will take you through an overview of the financial statement before we talk about the outlook in a few minutes. Ashraf?

Thank you, Omar, and good afternoon, everyone. Let me go through the main highlights of the income statement. And as you can see, the first point to mention here is our gross profit margin that jumped to 37% compared to 30% during last year. And this is coming mainly from 2 things. The first one is we're starting to see all this coming into play with some revenues, and therefore, the gross profit that is coming in, while last year, it was the first operational year, so it was basically under [indiscernible] even through losses side. At the same time, as Omar mentioned, either in Gouna or in O West or in Taba, the cost cutting in the hotels in general that generated a better margin compared to last year, and both of these, between O West and hotel improvement in the past, led to the increase in our gross profit margin. Also, you can see that the investment income increased, and basically, this is coming from 2 things. The first one is that since now we are collecting more from clients and, therefore, some installment that is really coming in, at the same time, with higher level of cash that we have, then the return that we are using and investing our cash management is starting to give us some fruits here, and therefore, the investment income jumped to EGP 96 million compared to EGP 38 million last year. Cost cutting or cost saving, not cost cutting, but the focus led to also the G&A goes down by almost 10% compared to last year here. And what we -- on the -- and therefore, the adjusted EBITDA is EGP 1.1 billion compared to EGP 560 million, almost double compared to last year. On the other gains and losses, it is mainly a combination of FX losses from one side. But at the same time, we had a nonoperational noncore associated scarcity that we sold totally in the first quarter of this year, which led to a gain of almost EGP 50 million that, therefore, contributed to the other gains and losses. Our share in associates is continuing. As you know, we have a 40% stake in Red Sea, the construction arm that we use, and they are working with other governmental agencies. So basically, the profit is continued to increase, and our share is continue to increase as well. The finance cost here went down because we had taken decision. Since we had some cash, we used to have leasing in Gouna of some of the building there. And as you know, the leasing in general is relatively costly compared to bank. So basically, decided to pay back all these leases, and therefore, we saved a lot on our finance costs. All of this reflected to the net profit of EGP 750 million almost compared to EGP 168 million. The balance sheet is -- there is nothing here. It's straightforward. Everything has continued to increase either the inventory, the receivable because of the increase in the level of activities that we are seeing in the real estate and automatically increased this receivable and also the cash in the bank that automatically increased compared to last year. We'll know that we are spending much more on the construction, but the collection side and the new sales that is relatively much higher than last, last year. Therefore, we -- and the cash at the bank increased to EGP 1.9 billion compared to almost EGP 1.7 billion last year. Looking at -- we always show this slide to give you a perspective about our repayment and refinancing effort that we have done basically last year, and you can see that still, in '22, even we have a relaxed payment in general, and we start to pay back our debts in '23. Hopefully, by that time, even the hotel business will start to generate much more cash, and this COVID effect will be gone, hopefully, by '23. And therefore, we'll have even extra cash coming from the hotels as well to help us in the repayment starting in '23. The cash flow, based on all of this, you can imagine that the cash flow from operation increased dramatically compared to last year, EGP 800 million, compared to almost EGP 400 million last year double because of all of the activities that I mentioned. The interest rate, remember that last year, in the first quarter, there was some intervention from the Central Bank to stop any payment of interest. And this is why last year, it was -- we didn't pay interest -- almost didn't pay any interest. So -- but this year, we are back to normal, and the interest is starting to increase, and the taxes is related to the increased profitability that we have. Payment of PPE because, as Omar mentioned, we are -- we started to renovation of some of our hotels and some of the infrastructure in order to be ready once tourism is back to normal, then our hotels are ready to receive all the international clients with fully renovated hotels. So you will see this number, going forward, increasing to make sure that we are ready by Q4 and next year with renovated hotels. All of this led to, as I mentioned, to increase our cash flows in general to EGP 2.5 billion compared to EGP 2 billion at the beginning of the period. By this, I finish the part of the presentation and go back to Omar for the outlook.

Thanks, Ashraf. So on the outlook, again, I think there's a couple of things to talk about. I'll talk about first the overall guidance, and then I will comment also on the Egyptian Ministry of Environment point in a subsequent point. So first off, I mean, again, we're still in the middle of COVID. As you all know, so you hear this consistently from us as you have for the last 1.5 years or so. We're not going to be able to give you a very hard guidance until we have a lot more clarity on when we exit this whole situation. Having said that, I think there are a few themes that you're now seeing relatively consistently from us every quarter now, and we're continuing to drive those deals. I think theme #1 is improvement on our focus, doubling down on our real estate business, improved significant acceleration in sales, significant [Audio Gap] important for us to make sure that we're doing quality sales, not just pure sales. Second, an overall focus on ensuring that the margins of construction, new margins that we're providing are very solid with also a cost of and maintaining of or managing our overheads in a very cautious manner to ensure that we're having the right profitability levels. Number three, a number of significant bets that we're making on places like O West, places destinations like Makadi and where we're continuing to invest and scale up with behind the leadership that we have in there, leadership that has proven a strong track record of either sales and marketing or destination management and buildup and sales, et cetera. And so you will see us continuing to invest and accelerate our performance. Again, not to repeat what we've shown in H1, but you will see our pace in construction in Makadi is going to continue to be tremendous, and the acceleration will be very positive, and that should reflect very nicely on our revenues and our margins. Also from a placemaking perspective, you will see things like Makadi where we start really putting it on the map with a very prominent music festival. That's going to be coming up sometime early next year and that we create a lot of acceptance for the location, et cetera. And we're already seeing a lot of the town management activities that we're doing there, for example, contributing to our residential occupancy rates being up, in this case, 30% versus the prior period, which is very important for us. So you'll continue to see us making those aggressive bets on the destinations that are going to be continuing to carry the momentum that we already have in a place like El Gouna but start strengthening the multilegged approach of Orascom development in Egypt. That's point number two. Point number three, you will continue seeing us increase our recurring revenue and recurring profit potential, things like town management, like I mentioned earlier, becoming very important for us in Gouna, increasingly will become important to us for other destinations. And there's lots of good reasons for us to continue to be quite excited about that, both at scale and in the diversification of those sources of revenue. So for example, everything that comes from extra work, which is for us extra development of your real estate assets, renovations, et cetera, new standardized offerings, that's been going very strong for us in Gouna, and you'll continue seeing it elsewhere. The Marinas, not only are we adding a lot of extra capacity, but we're also increasing pricing. And we're thinking now of actually going downstream and offering a number of services around marine services, et cetera, that will hopefully generate new revenue. Retail, we're going to -- we're seeing already the fact that not only are we starting to remove the different subsidies that we have put in place during COVID past because the traffic is now much higher, but also we're adding significantly higher-quality retail offerings like [ Gourmet ], for example, that has its nicest and largest, et cetera, out there in all of Egypt in Gouna now. Our rentals business, i.e., our real estate rentals in places like Gouna is something that we're starting to focus on. We know how to manage hotel rooms. And we also now are developing the capability to manage rental units in order to offer them as complementary different product offering in there. And finally, also, we're leveraging a lot of our scale in terms of things like housekeeping and catering, et cetera, in the hotel business, leveraging them for our residential units over there, and that's starting to move the needle for us and will continue doing so. So this whole concept of town management operations, right, finding those sources of recurring revenues with high marginality for us is something that we're going to be continuing to push very aggressively over the quarters and years to come. And hopefully, that will show up. Last, we're also -- one of the big themes that we're driving is generating new sources of traffic in our cities and our destinations in our towns based on specific themes. So everything has to do with entrepreneurship. We want to position Gouna there, and there's a lot of initiatives that we're working on. You'll start hearing announcements. You'll start seeing deals that we're doing with third parties on that, well-being and health, and you'll start seeing a number of things on those sports, et cetera. So we're really optimistic about this whole -- and I'm quite bullish about this whole concept of generating those recurring revenues and recurring profits at much larger scale over the next months and years as we build. One last word on forward-looking on the Russian tourism. As you probably -- as you may know, of the 2,500-ish or 2,700-ish rooms that we have in Gouna, we had very few Russian tourists historic. That's something that we had sort of developed and sort of business was going as it was. However, we actually think now that there is a certain category of Russian tourists that we may want to target there. So that's something that we're working on. So we're just giving you an early indication of this, may or may not make sense for us, but certainly, the return of Russian tourism, if it does return at the scale that we need it to return to, should be a positive overall externality for us on the Red Sea, be it in Gouna or Makadi as a whole. And we look forward to continuing to deliver some results on that. It'll take still another -- I think, at least another 6 months, but hopefully, something positive will come out of it, both for Gouna on the Red Sea as well as Taba in the Gulf of Arkema. So that's all as far as sort of forward-looking statements go. One word on the -- because I'm sure you'll have questions on the compensation claim from the Egyptian Ministry of Environment. And there's not a whole lot new news that we can tell you about this beyond what we've said officially in our release when we received the claim from the Ministry of Environment at this point. We have gone back to the ministry. We are in constant communication with them to try to get further information, particularly technical information and legal information and documentation relating to that particular line item that they have asked us to pay for. And we're doing everything we can to try to resolve this topic with them in the most appropriate manner possible and with the most sort of interest of both the environment, which we, no doubt, hold extremely high in Gouna. And I think everybody who's ever been to Gouna over the last 30 years knows that not only have we worked hard to deserve the only city in Africa and the Middle East that has been given the award -- the environmental award by the UN but also continue to do so. And we take the environment very, very seriously and have a lot of homegrown initiatives around that. So we're continuing to work with the ministry with the government to try to get a better understanding of what the technical and legal documentation that they have are, and we'll be keeping you all updated on a regular basis as we get the information. I think that's it from our end here. We're happy to take any [indiscernible] that you have, any questions.

Sure. Let's open the phone for questions then. [Operator Instructions] Okay. There is -- doesn't seem to be any questions so far in the queue. So I can start off with a few from my end. Sorry to go back to the claim from the Ministry of Environment. I get a lot of questions from investors regarding the way you're trying to deal with it. We understand that you're trying to kind of bring the damage down to the minimum. But in terms of the financial impact, do you think that you might be planning to build provisions against the claim? Are you planning to maybe appeal? Or are we still in very early stages, and you can't really give us more insight into that?

Yes. Thank you, Sara. I think, look, it's early days -- very early days. And until we've managed to get a hold of what the specific claim against us is, so that we can have both our technical and our legal teams be able to review that thing, it is very, very difficult, frankly, to say a whole lot more. We don't know much more than what [Audio Gap] our investors and our public will be, by obligation, the first to hear. At the moment, we have enough substantive information to share. So yes, we don't have much beyond what we've told you already unfortunate.

Okay, then. Understood. Another question also that you might not also have much to share, but we'll be happy to hear your thoughts around the regulatory changes that we're hearing about and all the thoughts around the creation of escrow accounts, requirement of creation of escrow account and the requirement around the 30% construction completion requirement before the launch of any project. Any thoughts around at least the direction where we're going from here?

Yes. So let me make a few comments because we also saw all of these announcements, or at least, we all saw the speech that was given and the discussion that took place between the number of ministers and the presidency [indiscernible] at the same time. The -- let me make a couple of comments on these things. I think, a, the requirement -- or what appears to be potentially a requirement going forward of making sure that all deliveries are fully completed and fully finished is actually, in our ear -- in our minds, music to our ears. As you probably know, in Makadi, in Gouna and, increasingly, in O West, actually, we deliver finished housing -- finished products from start to end. We've been doing this in Gouna forever. We've been doing it in Makadi forever. And since the launch of O West, a big chunk of what we deliver is this way. And actually, we are -- we have, even before any of these announcements, taken a direction and a focus on going the way of delivering finished products also. The reason is very simple. As you all know, one of the secret sauces of our success as Orascom Development is the fact that we build and we develop and we animate true communities as opposed to ghost towns, right? And that's what makes our place special. That's what makes people so keen to come live and/or visit or participate in places like Gouna, Makadi and others and O West. And therefore, for us, this is a very natural extension of our business as usual in what we do. By the way, we do pretty much the same in all other countries where we operate. And we do operate in quite a few countries in the Western market as well as in the Middle East. So a, for us, this whole finished part makes a lot of sense. It's very consistent with how we've always operated, and we welcome it very strong. And b, on the question of the 30%, et cetera. I think here, we're going to have to sit and wait until we understand better how that overall direction, which also makes sense, how this overall direction actually translates into requirements by developers in the real estate market, what we can tell, and I think it's pretty straightforward, is the fact that it's a great initiative to eliminate any speculators, any nonserious developers or any developers that are simply focused on flipping very rapid profits out of their consumers or customers. I think it's safe to say that we've been in business for over 32 years now. It's not the profile of customers. It's not the profile of place that we attempt to do. We're in it for the long run. And all of this sort of quick flips, and small-scale houses are not really what we attempt to do. So again, it will clean up the playing field in many ways. And we think it's actually absolutely the right thing not only for the sector, but also, frankly, for the Egyptian consumer and for the country and the economy as well. So we welcome this. We just don't know yet the details of how it will work, but I'm sure we'll have a very healthy constructive dialogue with the government to shape it in a mutually -- in a way that benefits the economy and protects the consumer and the developers -- the serious developers and best.

Very clear. We have a question in the Q&A box from [ Yousef Silvana ]. He's asking about the momentum in real estate revenue. Is it something that we should expect to continue in H2? Or should we see some slight slowdown in the construction piece?

Yes. No, listen, thank you, Yousef, for the question. No, we don't see any particular reason why this should slow down in any way. In fact, if anything, we're hoping and excited about a potential even acceleration there. So overall, we remain as bullish or even more bullish than we were at the beginning of the year about our second half, and we seem to be quite nicely on track as of beginning of the second half 1.5 months ago.

Very clear. Another question from my side, and a lot of -- I get the same question from a lot of investors as well around the acceleration of raw materials and construction costs globally and whether this would impact the sector as a whole -- the margin of the sector as a whole and OD in particular.

Yes, it's a good question. Look, we're keeping a [Audio Gap] on the question of cost of raw materials, there are a number of things that we were constantly monitoring and trying to do. I think the first one is we're constantly trying to fine-tune when is it that we should accelerate construction versus perhaps slow down construction, all within the delivery periods that we have. And we have quite a bit of leeway because we also own a -- one of our contractors that does a lot of the work for us, but not everything, but -- and that allows us a lot of flexibility and a lot of transparency into the cost and where it makes sense to accelerate or not. We've also started looking a little bit and doing our own estimates, and Ashraf Nessim, our CFO, together with our CTO and the procurement department, have been beginning to look a little bit more closely at the forward looking, if you will, cost of things like steel, wood and other raw materials that do impact us in order to make sure that we're being careful, conservative, but at the same time, that we're trying to benefit from what is currently happening. There aren't -- we're not yet, I would say, hedging in a direct hedge in the market with [ it ] for the time being. But we're trying to really sort of be as cautious as we can here, and we've begun to develop a little bit of a perspective of where we think things might be going. But for now, frankly, we're still okay. And I feel reasonably comfortable that we're -- we have this under control. Maybe Ashraf wants to say one extra word on this, but, Ashraf?