Campbell Soup Company (CPB) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the Cable Company Third Quarter 26 Earnings Question and Answer Session. Todd's conference is being recorded. All lines will be muted during the introductory remarks. With an opportunity for questions and answers afterwards. If you would like to ask a question, please press 1 on your telephone keypad. I would now like to turn the call over to Joshua Levine, Chief Investor Relations Officer at Campbell's.

Good morning, and thank you for joining the Campbell's Company Third Quarter Fiscal 26 Earnings Question and Answer Session. Earlier this morning, in conjunction with today's earnings announcement, the company published its press release, for 10 Q and slide presentation as well as both a written and audio recording of management's prepared remarks. All of these materials can be found on the I section of our website. Shortly after the conclusion of today's live Q&A session, we will post a transcript and audio replay of this call. Joining me today are Mick J. Beekhuizen, president and chief executive officer, and Todd E. Cunfer, our chief financial officer. During today's discussion, management may make forward looking statements, which reflect our current about future plans and performance. These statements rely on assumptions and estimates, and are subject to risks and uncertainties. Please refer to Slide 3 of our presentation or our SEC filings for a discussion of factors that could cause our actual results to differ materially. We also use non GAAP financial measures that we believe provide useful information for investors. Reconciliations to the most directly comparable GAAP measures included in the appendix of our earnings presentation. Non GAAP financial measures are not intended to be considered in isolation from, or as a substitute for the financial information presented in accordance with GAAP. We will now open the call for questions. Operator?

If you would like to ask a question, please press *1 on your telephone keypad. To withdraw any questions, please press *1 again. Thank you. Our first question comes from Andrew Lazar from Barclays.

Great. Thanks so much. Good morning, everybody.

Good morning.

In today's prepared remarks, you discussed some, some tough decisions that will need to be made in Snacks as well. As the potential for an incremental 2% to 3% unmitigated inflation above normal levels, again, potentially. Know we are not getting into specific 2027 guidance at this point, but maybe you can help us with maybe the magnitude of some of these key puts and takes for next year. I the size of potential mitigating actions. I would assume much of your ongoing productivity is going to be used to offset sort of baseline or underlying inflation.

Yes. Sure. Andrew, so base inflation, pre before the Middle East conflict, we were looking at base inflation of around 3%. Obviously, with the price of oil where it is and look, if oil stays around $100 a barrel, we are looking at an additional 2% to 3% inflation on top of the core 3%. Also, as you probably know, there is a driver shortage out there that not only are we having higher diesel costs, but that is causing higher inflation from a logistics and freight perspective as well. We obviously have the reset of our incentive comp as we have talked about before. that is now about $40 million impact to next year. We would love to be able to obviously continue to invest in our brands, so we are some higher marketing investments So with all that as context, elevated productivity is essential for us going into next year. As we had previously announced $100 million SG&A takeout over the next couple of years. You know, we announced an early retirement package. Which was well received. So we will have some significant savings from that. And so we are going to have to get as much of that $100 million into next year as we possibly can. It will not all get into next year, but we will fast forward as much as we can to offset some of those cost pressures. And, obviously, net price realization as needed, as required, we are gonna look really hard at our trade ROIs And if we need to take some pricing, that is kind of a last resort, but, obviously, we will need to do. We will need to do that. So definitely some cost pressures going into next year. We are taking this very, very seriously. We have some you know, elevated productivity. And RGM will be a very, very key component going into next year.

Okay. Thank you for that. And then just a follow-up. You talked about previous tightening your belt around cash flow and sort of capital allocation options. I guess, given all the potential costs and reinvestment coming in fiscal 2027, I guess how should we think about what changes in capital allocation may be needed? And sort of your current thoughts on where the dividend is at? Thanks so much.

Yes. So look, the dividend is extremely important to our shareholders. As we talked about before, no intention of increasing that dividend anytime soon, obviously. The dividend rate is a board decision that we have on a very regular basis. And we are obviously trying to balance that dividend rate with our ability to reduce leverage as quickly as we possibly can. Look, maintaining that investment grade rating is an imperative to the management team. it is an imperative to the board And so we are getting very aggressive on how we can get back down to the low threes over the next couple of years. I will say first and foremost, is we got to we got to stabilize earnings. And ultimately grow the profitability of this business So that is what we are working very hard on that. We will aggressively reduce working capital over the next couple of years. From a CapEx perspective, we are only focusing on the highest priority projects And then as some of our peers have done, we will consider, you know, hybrid debt instruments to try to make the rating a little bit stronger. Than it normally would be. And, obviously, you know, M&A right now is off the table. So these are constant conversations we are having internally We obviously, this is very important to the management team and shareholders, and so we are we are working as hard as we can to get that down to the low threes as soon as possible.

Thanks so much.

Our next question comes from Tom Palmer from JPMorgan. Please go ahead. Your line is open.

Good morning. Thanks for the question. Is the In the prepared remarks, I did want to follow-up a little bit on Andrew's comment. In terms of Snacks and the commentary about rationalizing the portfolio and consolidating nodes in the network. I wondered if you might expand on this Are there brands that you have in mind when you are talking about rationalizing? And then when I hear nodes in the network, should we be thinking manufacturing or distribution as kind of that area of focus? And I guess anything on the timing of when we start hearing, more definitive, action taken. Thanks.

Sure. Hey, Tom. Let me give you a little bit of context. So I am really looking at this in the context of simplification. And you hear us talk about focusing on the core of the portfolio and also the core of the brands. A good example of that is when you hear us talk about Goldfish. And focusing on households with kids. That is proven to be a fruitful strategy. You have seen that over the past 2 quarters, that core part of the Goldfish brand has stabilized and we are going to continue to put incremental fuel behind that. that is the goldfish example. We have other examples throughout the portfolio. So it is really at the brand level, focus on the core. And then additionally, from an innovation perspective, making sure that we support fewer more meaningful innovation. Instead of having a broad proliferation of small innovations actually go bigger on certain pieces of innovation and make sure that we support them. So that they truly become meaningful for the brand. Another area, you know, in the context of brands and the role of the brands, within the broader snacks portfolio are choices that we are making around brand support. And specifically certain brands require more advertising support and are ready for that. Versus others. So we are being very consciously about that allocation. That does not mean that we are going to focus on growth across the broader snacks brand portfolio, however, making very conscious choices across the portfolio. And finally, from a cost perspective, we need to make sure that we have fuel to support our brands. Todd gave a couple of examples of different initiatives that we have across the broader organization. But when I look, for instance, within the snacks portfolio, that there are certain cost savings initiatives that we have implemented in the past. We are going to continue to focus on the broader improvement of margins, that is both on the SG&A side as well as on the supply chain side, and we have made some you know, changes in the past. particularly with continued volume pressures, there is more opportunity there. And then finally, when I look more broadly at the brand portfolio coming back to the top line, and the focus on the core, there is a tail of SKUs in certain brands it is not a lot of sales. However, we believe that the reduction of that tail could actually allow for further simplification and as a result, improve the overall operations. And improve our overall network. So hopefully, that gives you a little bit of context of what we are working through.

It did. Thanks for that, Mick. I had just a quick follow-up. In the fourth quarter, it seems like there is a mention of a tariff refund. I did not see it quantified anywhere, including in the queue. Maybe any framing of that? And will that be isolated to the fourth quarter? Or is there any tail there?

Yes. So the impact we are projecting for Q4 from a tariff refund is about $0.03 to $0.04 a share. That is solely offset by the higher fuel cost, the driver shortage, the impacts of the Iran conflict that we are already seeing so far. So that those $0.03 to $0.04, a good guy and a bad guy kind of offset each other. The tariffs the tariff refunds, there is 2 pieces. there is the direct piece that we are able to get back directly so think about that as the La Regina part of our business. Then there is a piece. there is a second piece, which is a bit smaller, which is our vendors who are getting those refunds for us. That will probably take a little bit more time till they get the money, and then we can get that money back there is a chance we could get some of that in Q4. Some of that might roll into next year.

Our next question comes from Peter Grom from UBS, Please go ahead. Your line is open.

Great. So I was hoping just to get some perspective on just kind of the organic sales outlook for the fourth quarter, which implies a pretty material improvement versus what we have seen year to date. So can you maybe just unpack the 4Q outlook in terms of some of the timing dynamics that are help that will help that you mentioned versus maybe what you were expecting in terms of underlying consumption?

Yes. So, obviously, some noise around the ERP conversion from Sovos affecting Rao's particularly Q3 versus Q4. So that negatively impacted Q3 That $30 million lap comes into Q4. So M&B will have some strong growth from a net sales perspective in the quarter. Their consumption is running right now slightly positive, so that is a good story. We are anticipating it will probably kind of continue to hover in that range as we close out the year. there is also a fair amount of pipeline fill from innovation. M&B has some pretty exciting innovation primarily on soups and sauces, which will help Q4 as well. So M&B from a net sales perspective, we are anticipating having a very solid Q4. Snacks will probably be fairly similar to what you saw in Q3. Might be a little bit worse than that. So all in all, you know, net sales should be flattish to slightly up for the quarter. that is really helpful. And Todd, you know, a lot of moving pieces as it relates earnings as well, which you alluded to your question, but the outlook still embeds a relatively wide range. So can you maybe frame what would get you closer to the higher end relative to the lower end and just you know, given the higher share count, input costs, etcetera, is the lower end more realistic at this point? Thanks. Yes. I would say from a net sales perspective, I think the lower end, minus 2% is probably more realistic assumption at this point. From a gross margin perspective, organically, we should probably have similar results to what we had in Q3 We were down 240 basis points, so somewhere in that range, though. With the acquisition now a partial acquisition now being in our financials as we go into Q4, if you remember. So that Coman margin will come into our P and L. We will get about a 70- to 80-basis-points of a benefit from there for the first time. Marketing and selling, we anticipate will be up slightly. We thought it would actually be up more in Q3. Some of the marketing Shifted out of Q3 into Q4. Originally thought Q4 would be down and it will be slightly up. I taxes, you know, no big impact in there, but the share count because of the way GAAP requires us now, to include approximately 7 million shares from acquisition kind of artificially raise our share count from 299 to 306. So I would say net sales definitely at the lower end of that -1% to -2%. And I would say that EPS, still some moving parts there. But that probably is more 22 to below.

Great. Thank you so much. I will pass it on.

Our next question comes from Peter Galbo from Bank of America. Please go ahead. Your line is open.

Hey, guys. Good morning. Thanks for taking the question. Todd, I just in your response to Andrew's question around kind of the puts and takes for 2027, I just wanted to clarify that. And it would include the stepped up share count from La Regina. I just wanted to make sure that mechanically, that is flowing through next year as well.

Yes. So for the full year, we will have 3 approximately 300 million shares, yes.

Okay. Okay. And then, Mick, my other question is just around the in your comments that the possibility of issuing hybrid debt understanding and maybe I am a little out of my depth here, but understanding it will help more on the leverage side, but you also mentioned kind of trying to stabilize earnings. I would think that you know, a hybrid issuance would come with a higher coupon rate. Just how do you think about reconciling those 2 things of kind of stabilizing the earnings on 1 hand versus kind of the EBITDA piece? I know that they are considered differently by different constituents, but just maybe you can help frame that for us.

Yes. So, the hybrid debt, as you said, tends to be 150- to 200-basis-points higher. So yes, that will be a drag on EPS. Obviously, it would not affect EBITDA. So different people look at it differently. So there is a little bit of a negative impact from an earnings perspective. Depending on what type of hybrid debt you do, what you execute, you tend to get about 50% equity credit. So that is a positive from a rating agency perspective. So that is, you know, that is obviously the consideration there. So look, everything's in balance. We are trying to balance you know, what is best for shareholders, what is best from a from a credit perspective, So we are trying to thread that needle right now, but look, hybrid is can be a very, very useful tool. And as I said earlier in the call, you know, some of our peers have done it very, very successfully, so it is something we will consider.

Thanks very much, guys.

I will pass it on. Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead. Your line is open.

Hi. Good morning, everybody. I just wanted to start on the price increases, or the concept that you might be willing to use price increases as a sort of tool in the toolkit confront this higher inflation backdrop. Can you just expand on how you would think about this given the competitive dynamic right now? And perhaps how you would see net price realization versus RGM and specific areas in the portfolio where you would think you would have the highest cost justification. For incremental pricing?

Yeah. Maybe I will start off. And Todd, so first of all, I mean, Todd mentioned this earlier as well, as we continue to see those inflationary pressures We are going to stay focused on generating elevated levels of productivity incremental cost savings initiatives, and then also focus on that positive net price realization. Todd also mentioned that we are building up the revenue growth management capability that is been something that we have been very focused on over the past 6 months. We are making good progress on that. And as a result, I believe that there is opportunity there. Now as we also mentioned earlier, as a last resort, I would go towards, hey. Is there any need for potential list price increases? But Todd, anything else that you would like to add there?

Yes. Look, the cost pressures remain kind of where they are sitting right now, we could obviously we could actually be looking at 5% to 6% inflation. So the different components of RGM will have to be will have to be utilized There is a big opportunity in just you know, the trade investment ROIs. there is a number of our investments quite frankly, just are not returning terrific benefits for our company, and we are we are adjusting those as we speak. If that is if that is not enough, if we need to do some surgical pricing in different parts of the portfolio, to maintain our margins. We will we will clearly take a look at that. But more to come, obviously, the environment externally here globally is very volatile. It changes day to day. We are going to take the appropriate actions as necessary. Okay. Perfect. Regarding the, the margins in snacking, during the quarter, You know, there was a there was an improvement relative to last quarter, which is encouraging. Obviously, you remain below where you had wanted the business to be over time. Give us a sense of how that fiscal Q3 margin came in relative to your own expectations? Was there any timing dynamic with lower marketing, or are you starting to get your hands wrapped around the margin structure And perhaps we could expect some stabilization at a minimum from here. Yes. Look, the good news is, you know, we went from EBIT margin last quarter a little over 7% to about 10% this quarter. So we said we would have sequential improvement from Q2 to Q3. We did. It was largely in line with our expectations. that is the good news. The bad news is both quarters were still down around 400 basis points year over year, which is obviously not acceptable. The higher margin in Q3 was really driven both sequentially and year over year by lower trade spend. So, again, some of those RGM capabilities are starting to kick in, which is great. And then we had a little bit less marketing. We had more marketing spending year over year in Q2 than we did in Q3. So that really helped the margin structure a lot. And we talked about the bakery performance. The good news is it is getting to be stabilized. We are improving on shelf availability, and to get that improvement in on shelf availability, we basically canceled all promotions in Q3. So that hurt volume in the top line, probably helped margins a little bit because we pulled out the vast majority of the trade. So kind of a mixed story here again. We feel good that we got it up to 10%, but it is not nearly where it needs to be. We will probably see a similar type of profile But as we talked about, look. In Q4. We have significant things we have to go do. The key to improving those margins over the next couple of years is, number 1, gotta grow goldfish. We have stabilized the business, but it is still kind of down 1% to 2%. We gotta get that to growth. that is the biggest and most profitable piece of the Snacks portfolio. Mick has mentioned, simple simplifying the portfolio, which we are in the process of doing, which will improve mix. It reduces the amount of waste we have out there and, quite frankly, makes the plants more efficient. And then we are just gonna have to continue to look at the cost structure of the snacks business, both from a network and from an overhead perspective, and those pro those projects are well underway. Okay.

Thank you very much.

Thank you. Our next question comes from David Palmer from Evercore ISI. Please go ahead. Your line is open.

Thanks. You know, obviously, heading into fiscal 27, you are gonna be dealing with the inflation you talked about and the choices you are you are making around snacks and those things will be, you know, cause for noise and varying degrees of sales or profit pressure. But I am wondering is you are just thinking about your core businesses and the goal of returning those to at least some modest growth, profitable growth. You know, where do you think are the near and medium term potential wins, you know, most improved areas that we will see from a organic sales perspective. Then I have a quick follow-up.

Sure. Even if you look at this quarter, I will highlight a couple of areas, and I appreciate you asking the question because there are very clear proof points in this quarter that we can continue to support. Within the Meals and Beverage portfolio, the at home cooking consumer trend is resilient, and we expect that trend to continue And that is, you know, a big part of our meals and beverage portfolio plays right into that consumer trend. We have seen consistent growth throughout this fiscal year, and I expect us to continue to support our portfolio within that particular area. That is both within cooking soups as well as Rao's And another great brand within that is Pacific as well. So that is very clearly an area within meals and beverage that is working and expect us to continue to support it. And we will have some great innovation going to the next fiscal year. Then from a snacking perspective, you heard us talk about Goldfish. Goldfish is an important part of the snacks portfolio. We are stabilizing the core and we need to make sure that we bring the brand back to growth. We are doing everything, you know, across that brand in order to support that growth and it is also important from an overall profitability perspective. And then within Pepperidge Farm, which is obviously another you know, core part of the snacks portfolio, we are making great progress from an operational perspective, and Todd just described that, which is which is really important. And those are again, if you hear me talk about it, you also hear me talk about how big brands with we now have $4 billion-plus brands with Campbell's, Rao's, Goldfish, and Pepperidge Farm. And we need to make sure that we are set up for success and are growing those different areas.

You know, I guess I had 1 follow-up, and it is just about just that soup and sauces business. You are doing condensed Campbell's condensed sauces. Why is that a big idea, and why is that the right extension? Of condensed? And I wonder, I do not wanna say how hopeless it is for ready to serve in condensed. Or the eating soups, if you will, that part. Is there anything you can do to stabilize that part of the portfolio? And I will pass it on.

Thank you. Yeah. Good. So let me address those in 2 parts. First of all, our condensed soup portfolio, About 50% of that portfolio actually, a little bit over 50% these days, is used for cooking. As an ingredient. So think of cream of mushroom. The other half is the eating part of the portfolio. The cooking part of the portfolio has consistently been growing. And we are seeing consumers go to the soup aisle buy our condensed cooking product in order to make scratch meals at home. that is a consumer trend that is working, that is been around for a little while, and that is what we are leaning into. With the condensed sauces that we are launching. So it is really coming back from a consumer that on the 1 hand, they are already using our condensed cooking products, for that purpose. And then on top of it, what we are seeing, and we have talked about this in the past, is that the consumer is exploring different flavors. And that is exactly what these different products lean into. So it is really the combination of on the 1 hand, that continued cooking resilience. People go to the condensed cooking aisle and are buying as a result some of our products, and we are combining that with incremental flavors. And I am very excited about that innovation that is gonna come out in the next fiscal year. Then with regard to ready to serve soup, ready to serve soup is an area where we got some work to do. So on the 1 hand, we have part of the portfolio is working. So the premium part of that ready to serve portfolio is working. that is about 20% of the RTS portfolio. that is Rao's and Pacific. They are growing. However, that mainstream part of the portfolio is under pressure. So what do we, as a result, are gonna do? We gotta make sure that we support that premium brand growth because that is working. And then additionally, we need to increase the relevance of our mainstream portfolio. So on the 1 hand, we are looking at within the existing portfolio, at the tail and that is where we see a disproportionate headwind. So we need to address that. And we on top of it, we need to make sure that we increase the relevance of some of that part of the soup aisle, which is the ready to serve soup aisle, and that comes back with some exciting innovation that we are launching next year. it is really focused on better for you and some of the positives of the product. So, more to come on this.

Thank you.

Our next question comes from Megan Klatt from Morgan Stanley.

I wanted to come back to some of the comments on the 2% to 3% additional inflation that you cited as we look ahead to fiscal 27 if oil stays around $100 a barrel. And I appreciate you giving that number I guess maybe just to dig into it a little bit more, can you just maybe help us understand how the inflation cadence might flow through the year, presumably given where you were hedged, I would think it might be a little bit more back loaded as hedges roll off. So maybe you can just give us some context on where you are hedged today for fiscal 2027 and maybe bucketing kind of the biggest pockets of pressure just as we think about tracking given oil is very volatile. Thank you.

Yeah. So I mean, obviously, we are almost fully hedged for our fiscal year 26, which ends in July. So it should be very little noise around that area. We have we do have some hedges in the first half of the year. Given the elevated cost environment we probably have a little bit less than we would normally do because we are anticipating things calm down a little bit and prices, which are extremely elevated right now. Will mitigate. But, obviously, there is a risk in that. Look. Just given where prices are right now, the 1 thing that is looking more and more clear every day is that the first half inflation will be pretty high. Those prices are kinda set even if the war and conflict ended today, it would take a while for oil prices to come down. It would take a while for fertilizer to start moving and for aluminum to start moving out of the region. In a way that would bring prices down off their hives. So we will have elevated inflation for sure in the first half of the year. The question mark is what does the second half look like? Do things calm down when we get more closer to the 3% versus the 5% to 6%? If the war continues, for several more months, we could be looking at a full year of elevated inflation So that those are some of the kind of moving parts right now. And as we said, we are looking aggressively at cost savings We are the RGM team is looking aggressively with optimizing our trade spend and then pricing as necessary.

Okay. Thanks, Todd. that is helpful. And then and then maybe just to a follow-up on Snacks, Mick, just to put trying to put the pieces together. there is been a lot of helpful commentary Goldfish core seems to have stabilized. Bakery, although we have not talked about it much, I think, in their prepared remarks, some of those self inflicted headwinds seem to be abating. And so the real question mark just feels, salty, and I know we have talked about it a lot. But the question is, could things get worse before they get better on the salty side just in terms of you are talking about SKU rationalization and simplification. So as we go through that, Is there any way to kind of help us understand the trajectory of Salty and maybe what a realistic timeline in your mind is for that business to stabilize? Thanks.

Yes. You are right. Is on the positives, Goldfish working, making sure that we maintain momentum. On the Fresh Bakery side, as Todd mentioned, feeling better, from an operational perspective, which allows us to start reintroducing some of the promotional activity. Which would allow us to start to better on that front as well. And from a salty perspective, and you also saw this in my prepared remarks, really focus on the simplification with, strengthening the core. It comes also back to some bigger, bolder innovation and we need to improve overall in market execution. that is gonna take a little bit longer. So I would see that in the near term, we are going to continue to feel some pressure on Salty, And then as some of these plants take shape, that should start to improve the trajectory But you are right. that is gonna take a little bit of time.

Understood. Thank you.

Next question comes from Robert Moskow from TD Cowen. Please go ahead. Your line is open.

Hey, thanks for the question. Todd and Mick, you both talked about improving your RGM and finding those opportunities. To eliminate trade programs that were not working. Is there any further detail you can give or anything thematic there Are there any types of promotions that are proving out to be, you know, more effective than others. And maybe in terms you could break it out in terms of, like, hey. We need longer duration deals or we need deeper deals. Is there any theme to this? Thanks.

Yeah. So I will I will I will start off. Look. The most-- and this is fairly obvious. But something we just need to get a lot better at. Look. When we run a TPR, just on the shelf, you do not get a great return. And we gotta limit those as much as we possibly can. When we get feature and display, the ROIs are really, really impressive. And so we need to work from both the marketing and the sales organization to make sure we are getting as much feature in display as we possibly can, and that is where we focus our investment. And TPRs if we cannot, you know, we cannot get a feature in display, we are probably gonna walk away from some of those TPRs. Because the returns, you know, we feel good, but the reality is the returns are not there.

So I would say that is the biggest thing that we are working on. Yeah. The couple of other pieces that I would add is from a seasonal, from making sure that we have the right price point when it really matters. And there are certain drive periods that are obviously critical and making sure that we support those And to Todd's point, whether it is feature display, whether it is also broader brand support. So that the whole package works. Then the other piece that I would add, and this is maybe a little bit of a nugget around Goldfish, If you look at it from a price pack perspective, you see that multi packs are growing. So in the last 13 weeks, actually, multipacks are growing 6%. So it is areas like that even within the brand, that making sure that we have the right price points that we have the right price pack in the marketplace is absolutely critical.

Okay. Thank you.

Our last question today comes from Max Gumford from BNP Paribas. Please go ahead. Your line is open.

Hey. Thanks for the question. First off, with regard to the tariff refunds, it seems like you are able to hold them. Commentary from retail would suggest, you know, there is potential that they are looking to give back tariff refunds to the consumer. So do you see any risk that you know, the retailer puts pressure on you to give them back some of these funds as well?

I guess there is always a risk there. We have we have no intention at this point to give any of that money back. Look. We, if you look at our gross margins, we obviously have not we have not been able to offset those tariffs and just the normal inflation. We took some minimal pricing this past year. So right now, our intention is not to refund any of those tariffs.

Yeah. And the only thing that I would add to it is there is obviously always a lot of puts and takes And per my earlier comments, we are very focused to making sure that we provide value to the consumer. that is something that we think about every day. We talk about every day. And there are obviously a lot of different considerations that are taken into account when we work through that. Those decisions.

Great. And I just wanted to clarify that the 2 to 3 points of incremental inflation that you have called out for FY 2027, that is a holistic number beyond just oil and commodities related to oil. Correct? it is, you know, your best guess at this point in time based on every input that you are procuring.

Yeah. So, again, we are prior to the conflict, as we were looking at our initial planning for FY 2027, we were looking at inflation close to 3%. The incremental piece from oil and the things around the strait being shut down, we will add another 2 to 3 points which gets you to the 5 to 6 points. So it is just not oil. Directly but it is in everything that oil obviously gets into products whether it is packaging, whether it is logistics, And then we are seeing some, you know, aluminum which comes out of that region, is very, very elevated at this point. Fertilizer, which could have an impact on, you know, the farming community, this year could have an impact as well. So everything that conflict is impacting goes into that incremental 2 to 3.

Okay. Thanks very much. I will leave it there.

We are out of time for questions today. This will conclude today's conference call. Thank you for your participation. You may now disconnect.