Earnings Labs

LyondellBasell Industries N.V. (LYB)

Q1 2022 Earnings Call· Fri, Apr 29, 2022

$71.35

+0.46%

Key Takeaways · AI generated
AI summary not yet generated for this transcript. Generation in progress for older transcripts; check back soon, or browse the full transcript below.

Same-Day

+4.61%

1 Week

+1.30%

1 Month

-20.31%

vs S&P

-17.74%

Transcript

Operator

Operator

Hello, and welcome to the LyondellBasell teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. [Operator Instructions]. I would now like to turn the conference over to Mr. David Kinney, Head of Investor Relations. Sir, you may begin.

David Kinney

Analyst

Thank you, Alex. Before we begin the discussion, I would like to point out that a slide presentation accompanies today's call and is available on our website at www.lyondellbasell.com/investorrelations. Today, we will be discussing our business results while making reference to some forward-looking statements and non-GAAP financial measures. We believe the forward-looking statements are based upon reasonable assumptions and the alternative measures are useful to investors. Nonetheless, the forward-looking statements are subject to significant risk and uncertainty. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in the presentation slides and our regulatory filings, which are also available at our Investor Relations website. Additional documents on our Investor website provide reconciliations of non-GAAP financial measures to GAAP financial measures, together with other disclosures, including the earnings release and our business results discussion. A recording of this call will be available by telephone beginning at 1 p.m. Eastern Time today until May 29 by calling 877-660-6853 in the United States and 201-612-7415 outside the United States. The access code for both numbers is 13727006. During today's call, we will focus on first quarter results, the current market and our near-term outlook. Before turning the call over to Ken, I would like to call your attention to the noncash lower of cost or market inventory adjustments, or LCM, in the impairments that we have discussed on past calls. LCM adjustments are related to our use of last in, first out or LIFO accounting and the volatility in prices for our raw materials and finished goods inventories. Impairment charges were recognized to write down assets to their estimated fair value. Impairments include the noncash impairment of $624 million in the fourth quarter of 2021 that reflects our evaluation of strategic options for the Houston refinery. Comments made on this call will be in regard to our underlying business results, excluding the impacts of impairments and LCM inventory adjustments. With that being said, I now would like to turn the call over to Ken.

Kenneth Lane

Analyst

Thank you, Dave, and welcome to all of you. We appreciate you joining us today as we discuss our first quarter 2022 results. Today's teleconference marks my second earnings call as the interim CEO of LyondellBasell. And I would like to thank our Board of Directors for the opportunity to lead the company over the past few months. Our incoming CEO, Peter Vanacker, joined our Board on February 25, and we're looking forward to him assuming his role as Chief Executive Officer on May 23. Peter and I have been talking over the past several months to ensure a smooth transition and a successful start to his leadership of our company. I know that Peter is very eager to engage with our employees, customers, investors and suppliers to help us build upon the momentum we have underway in LyondellBasell. Before we get into the results, I would like to take a moment to address the tragic and unprovoked attacks unfolding in Ukraine. My heart breaks seeing so many people devastated and the resulting humanitarian crisis. At LyondellBasell, we are working to address the impacts of this crisis through our global corporate citizenship program, Advancing Good. The company and our employees have collectively donated more than $600,000 to the United Nations High Commissioner for Refugees and the International Medical Corp. LyondellBasell's presence in Russia and Ukraine is fairly limited. Less than 0.3% of our 2021 revenue came from Russia and a negligible amount from Ukraine. In March, we announced that LyondellBasell will not enter into any new business transactions or relationships with Russian state-owned entities. We also intend to discontinue business relationships with those companies to the extent legally possible. Of course, we are also complying with all U.S. and international sanctions. While we have no manufacturing sites in Russia or…

Michael McMurray

Analyst

Thank you, Ken, and good morning, everyone. Please turn to Slide 9, and let me begin by extending the stepping-up theme to the substantial cash generation from our businesses. In the first quarter, LyondellBasell generated $1.5 billion of cash from operating activities that contributed toward a new record of $8.6 billion in cash from operations over the last 12 months. During the past 4 quarters, our team efficiently converted 88% of our EBITDA into cash. After accounting for sustaining capital reinvested in the business, we achieved a free operating cash flow yield of 23% relative to our market capitalization over the last 12 months. The LyondellBasell team is highly focused on extending our proven track record of efficient cash generation to provide prudent reinvestment in our company and generous returns for our shareholders. Let's continue with Slide 10 and review the details of our cash generation and allocation during the first quarter. With $1.5 billion of cash from operating activities, we funded our dividends and capital investments for the first quarter while continuing to repurchase shares and building some cash on the balance sheet. During the first quarter, we returned nearly $600 million to shareholders through our dividend and the repurchase of approximately 2.1 million shares. We continue to invest in maintenance and growth projects with more than $400 million in capital expenditures. This includes our new world-scale PO/TBA plant starting up later this year. We ended the quarter with $1.8 billion of cash and short-term investments and $5.9 billion of cash and available liquidity. With our total debt at 1.2x trailing EBITDA, our leverage ratios are below our targeted range of 1.5 to 2.5, and we see no need for further deleveraging at this time. Now I'd like to provide an overview of the results for each of our…

Kenneth Lane

Analyst

Thank you, Michael. As I mentioned earlier, last week, we announced our decision to exit the crude oil refining business no later than the end of 2023. While these decisions are never easy, operation of the refinery beyond next year would require significant capital investment. After thoroughly analyzing our options, we determined that exiting the business was the best path forward. Our intention is to safely operate the refinery at full range through the end of next year to meet strong market demand for transportation fuels. During that time, we will continue to consider potential transactions and alternatives for the site. As mentioned earlier, by exiting refining, LyondellBasell will make substantial progress in reducing the company's greenhouse gas emissions. In addition, the refinery is located on 700 acres in the center of one of the world's leading integrated petrochemical hubs. The site's unique location provides LyondellBasell with valuable options for future growth, including further development of our circular businesses. We recognize that this decision affects our employees, their families and the community. Our employees and contractors at the refinery have delivered outstanding performance in safety, reliability, cost improvement and profitability over the past several years. We sincerely thank them for their contributions, and we are committed to supporting our people through this transition. Now let me summarize the first quarter and our outlook with Slide 19. With all of the turbulence in the global economy, LyondellBasell's first quarter results illustrate the benefits of our global business portfolio and how demand for our products is highly resilient. While Asia is suffering from weak markets and historically low margins, demand in Europe and the Americas remains remarkably strong and consistent. Improving margins in our Intermediates and Derivatives segment offset first quarter margin compression in our O&P-Americas business. We expect PE chain margins…

Operator

Operator

[Operator Instructions]. Our first question comes from the line of Christopher Parkinson with Mizuho.

Unidentified Analyst

Analyst

This is Kieran on for Chris. I was wondering if you could just touch a little bit more in terms of what operating rates you're expecting in O&P-Americas in 2Q and throughout the year and maybe how you see that supporting what have been announced price increases throughout the second quarter and throughout the rest of the year?

Kenneth Lane

Analyst

Thank you for your question. We are -- as we've said during the remarks, we are still very bullish on the demand outlook, especially in the Americas. So we see demand being very strong. We had a record sales month in the month of March for polyethylene in the Americas. And we see April actually looking to improve on that. So we're -- our outlook is that we'll continue to see operating rates, effective rates probably in the 90% or higher range. So that's going to be very supportive for the price increases that are in the market today.

Operator

Operator

Our next question comes from the line of Jeff Zekauskas with JPMorgan.

Jeffrey Zekauskas

Analyst · JPMorgan.

Polyethylene prices in China continue to fall. Maybe if you look at the month forward prices, maybe they're down $100 a ton to 13 30, something like that. What do you make of that, in that I would have thought that profitability was pretty poor even at higher prices, and there's been a movement upward in the other regions? And maybe you can also comment on the changing profitability of your Bora cracker.

Kenneth Lane

Analyst · JPMorgan.

Jeff, thank you for your question. I hope you're doing well. Yes. So China, definitely, we've been seeing headwinds there. A lot of that related still to the COVID lockdowns. As you can imagine, the demand profile in China is quite challenging today with the amount of lockdowns that we see. Also, that's going to have an impact on some of the supply chain situation that we've seen. So prices today have basically been moving pretty much with feedstock in China. And when you look across the industry there, you do see all of the crackers, all the operators of crackers, they are cutting back on rates. So even for us at the Bora joint venture, we've reduced rates, and we've got a first quartile asset. So we do expect that in the coming months, what's going to happen is you're going to see a reset around inventory. Inventories are not high in China by any means, and you're going to see the inventory come down. And then I expect you're going to see demand come back. That reopening impact is still to come in China. And so while yes, in the short term, we're seeing some challenges around profitability with the cracker assets in China. As I look out in the next few months, I expect that's going to reverse and you're going to see a snapback in demand.

Operator

Operator

Our next question comes from the line of Steve Byrne with Bank of America.

Stephen Byrne

Analyst · Bank of America.

I have a couple of questions about your Circulen products and perhaps about the Renew, which is derived from the renewable naphtha that you get from Neste. Do you see that as challenged longer term because that feedstock is -- can go into renewable diesel and get lots of credits and why not pursue kind of a carbohydrate path for that feedstocks such as ethanol-sourced ethylene?

Kenneth Lane

Analyst · Bank of America.

Thank you, Steve, for your question. Yes. So we're very proud of the product portfolio that we're developing. As we've said before, we're looking forward to being a leader in the area of circularity and launch of our Circulen brand globally last year, you're beginning to see the fruits of that effort in the products that we've been developing together with customers today. In our portfolio, as we look forward, the CirculenRenew part of our portfolio will probably be the smaller segment for us. We are much more bullish on our ability to develop the advanced recycling and mechanical recycling parts of our business. Those really fit very well with our technical capabilities around developing new processes, but also the application development that we do together with our customers. So we will continue to look for opportunities to develop the CirculenRenew portfolio, where we see that and where customers are demanding lower CO2 footprint products, which is primarily why you want those CirculenRenew products. But remember, when you're doing recycling, people are driving recycled content. So there is a little bit of a different value proposition for those 2 products in the marketplace.

Operator

Operator

Our next question comes from the line of John McNulty with BMO Capital Markets.

Bhavesh Lodaya

Analyst · BMO Capital Markets.

This is Bhavesh Lodaya for John. So in the I&D segment, clearly, very impressive results, especially in the first quarter. Now within the first quarter, a lot changed in March with the spike in crude. So could you describe or maybe break out the earnings seen in March versus the rest of the quarter? And then you mentioned that you expect oxyfuels earnings to return to more of a normalized earnings level this year. What would that new norm be?

Kenneth Lane

Analyst · BMO Capital Markets.

Thanks, Bhavesh, for the question. Yes. Look, Intermediates & Derivatives really had a very strong quarter, record first quarter for that segment. We did see, as the quarter progressed, especially even relative to the fourth quarter, margins recovered, strong demand pretty much across the portfolio. We got a little bit of relief on butane and the feedstock in the feed slate there. So all of those things are going to be very constructive as we go into the second quarter. Demand for all of the product lines that we have are continuing to look very good, and margins are going to continue to be above average. So as Michael said in the prepared comments, we do believe that we're going to get those businesses back to a more normal level, but I would expect that they're going to be above mid-cycle for the foreseeable future just because we have very strong demand. And even in some of those businesses, we're seeing pretty supportive supply-side impact as well. Some of our competitors in these markets are also having issues with production. So all of that is going to lead to, I think, a very strong performance for I&D in the second quarter

Michael McMurray

Analyst · BMO Capital Markets.

And Ken, what I'd also add specifically around oxyfuels, if you look at the decade kind of before the pandemic, the oxyfuels business kind of consistently delivered $400 million plus of EBITDA. So a very consistent generator of earnings.

Kenneth Lane

Analyst · BMO Capital Markets.

Great. Thanks, Michael.

Operator

Operator

Our next question comes from the line of Vincent Andrews with Morgan Stanley.

Vincent Andrews

Analyst · Morgan Stanley.

I'm just curious about the decision in the quarter to build cash. It looks like $300 million of cash build versus $200 million of stock buybacks. Is there any particular thought behind that?

Kenneth Lane

Analyst · Morgan Stanley.

So listen, thanks for your question, Vincent. We're absolutely committed to continuing to be very disciplined around our capital allocation. And, of course, returning excess cash to our shareholders is going to be a priority. Michael, maybe you can just comment a little bit on that.

Michael McMurray

Analyst · Morgan Stanley.

Yes. I mean, listen, I mean I'd say a couple of things. I mean, one, I think we've established a track record and a reputation of converting EBITDA into free cash flow. No need to further delever, and the balance sheet is in great shape. Our growth investments are paying dividends. Working capital this year should be flattish versus last year consumed almost $600 million. CapEx year-on-year is going to be flat. We'll grow the dividend. And then we're going to return a meaningful amount of cash to our shareholders. There's no message in the first quarter that we built a little bit of cash on [indiscernible].

Operator

Operator

Our next question comes from the line of Hassan Ahmed with Alembic Global.

Hassan Ahmed

Analyst · Alembic Global.

Ken, a question around natural gas and ethane supply and the current sort of pricing moves that we've seen. I mean, it just seems that there are a bunch of cross currents, right? Production levels seem to be rising, be it this year and beyond. But we're obviously also seeing a lot of LNG export opportunities popping up, right? I mean if my numbers serve me right, I mean we have approximately 14 LNG export terminal approved. So how should we think about the extreme near term as well as the longer-term natural gas and ethane side of things?

Kenneth Lane

Analyst · Alembic Global.

Thanks for the question. Listen, a lot of -- there's been a lot of talk about what's happening, especially around natural gas. And of course, ethane is going to be following that. It's -- there are very much short-term impacts that are driving natural gas higher. If you look at just the energy complex, the alternative with coal is very high. So you don't see the switching, although production for natural gas is coming up. So normally, this time of year, we would see a bigger drop-off in natural gas pricing. I think that's delayed just a little bit because of a couple of things. You've got colder weather in the northern part of the United States. So demand is continuing to be high -- the higher coal prices. Of course, we still are maxed out on LNG exports. Until the inventories get refilled in Europe and in the U.S., which I think will be sometime in kind of mid- to late summer, I think you're going to see a lot of volatility and elevated prices for natural gas, but I do expect it to come back into a more normal level sometime in the back end of the summer. Now longer term, these export facilities take a long time to develop and build. So while those things are being constructed, I think what you're going to see, and we're seeing it even currently is that the production rates are going to accelerate. So you're going to see more production of the natural gas coming on, more production of oil coming on. Both of those, I think, production are up about 10% for both oil and gas since a year ago. All of that is going to be supported by generating more NGLs in the marketplace. So we still believe that longer term, the United States or the American position around ethane advantage is going to continue to be very durable.

Operator

Operator

Our next question comes from the line of P.J. Juvekar with Citi.

Prashant Juvekar

Analyst · Citi.

Yes. Ken, some people believe that integrated polyethylene margins in the U.S. are depressed somewhat because we can't export as much and given that there's logistical issues. Do you agree with that assessment? How does China COVID play into that? And have you seen any export sort of improving over the last few months?

Kenneth Lane

Analyst · Citi.

P.J., thanks for your question. Look, no doubt we've talked about the headwinds around the supply chain and of course, there have been some constraints in rail movements in the U.S. and being able to move volume offshore even since the fourth quarter. That's not anything new. So I think I may have commented on this at the fourth quarter earnings call. That volume is already sold. So it's really not weighing on -- it's not like we can sell that twice. We are really focused on watching the demand trends. The demand continues to be very supportive. We have been successful in being able to manage our shipments of products offshore to really minimize any impact to our sales. And I mentioned just a few minutes ago that we had a record sales month in the month of March, and we continue to see that being very robust. So what I expect to see is pricing in polyethylene in the U.S. started to turn back up and increase in the first quarter. That's going to continue as we go into the second quarter with higher demand, and I expect that we'll see some change some chain margin recovery in Q2.

David Kinney

Analyst · Citi.

And P.J., this is Dave. I would just chime in that in March, we did see an increase in exports. It's up to nearly 40% of production in the month of March. And so we think that trend will continue into April once we get the numbers back.

Operator

Operator

Our next question comes from the line of Mike Sison with Wells Fargo.

Michael Sison

Analyst · Wells Fargo.

Nice start to the year. There's a lot of new capacity in China is supposed to come on stream for polyethylene. Given what you've mentioned in terms of pricing and sort of the profitability over there, do you think that those projects will come on stream, be delayed, maybe in some of you getting canceled? Any thoughts there?

Kenneth Lane

Analyst · Wells Fargo.

Yes, we've talked about this before. I do believe that, that is going to slow down some of these start-ups, and it's also going to slow down some of the decisions, especially when you look at the whole energy policy that's developing in China, all of those things are going to work to slow the development of the new capacity coming online there. But let's not forget, China is still a very big importer of polyethylene. And for us, what we're really focused on is watching the demand development. And as that demand returns and growth in China returns, it is going to absorb that new capacity. It's just a matter of when, it's not if. And so we're watching those trends and really focused on the demand side of the equation today.

Operator

Operator

Our next question comes from the line of Josh Spector with UBS.

Joshua Spector

Analyst · UBS.

Wondering if you could talk a little bit about your view on polypropylene supply demand. And I mean our view is the spreads in that chain remain pretty elevated. So curious how you think about the sustainability of that over the coming quarter years, et cetera. And with the refinery shutdown in the future, how do you think about your internal propylene balance after that? Is that something that needs to be managed? Or do you have options to deal with that?

Kenneth Lane

Analyst · UBS.

Thank you, Josh. Listen, the polypropylene, we're actually very bullish on. The supply-demand fundamentals there are very good, and that's even in the absence of a strong automotive market. We expect to see spreads increasing coming into the second quarter. We've already announced a spread increase for May. The market continues to be very tight. Inventories have been coming down. And I do think that there is room to go up in polypropylene. So we're feeling very good about our position with polypropylene.

Operator

Operator

Our next question comes from the line of Aleksey Yefremov with KeyBanc Capital Markets.

Aleksey Yefremov

Analyst · KeyBanc Capital Markets.

Could you talk about your PO business? What percent of this business is on spot versus long-term contracts was pass-through with sort of semi-fixed margins? And how do you expect those margins to trend next year given the start-up of your PO project in the U.S.?

Kenneth Lane

Analyst · KeyBanc Capital Markets.

Thanks for the question, Aleksey. Listen, we -- propylene oxide is a core business for us, and it's one where we have a very strong position in. Margins have been improving in that business, especially in the Americas. And I expect now with some of the recent announcements around the supply side issues that we see in the industry, that's going to continue to be the case. Demand continues to be good, and it's perfect timing, frankly, for us to be starting up our PO/TBA plant later this year. We're extremely excited about getting that asset online and ramping up production and sales in the first half of next year. So overall, I don't think we could have really timed it any better.

Operator

Operator

Our next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Kevin McCarthy

Analyst · Vertical Research Partners.

Yes. Can you talk about the alternative uses that you're exploring for the refinery in terms of what those are and what might drive those decisions?

Kenneth Lane

Analyst · Vertical Research Partners.

Kevin, thanks for your question. Listen, like we said, the refinery site is located in a very good positioned geographically on the ship channel, and it's got great pipeline connections with our cracker in Channelview. So there's a lot of kit there that we can look at that could be valuable in terms of if you think about circularity and some of the feedstocks that we would be using, a lot of those pyrolysis oil do need some hydrotreating and things like that. So they're fairly straightforward, but could be very synergistic with our circular ambition. So we're going to take the next several years to really study where we think that could go. And we think we can find some good value for that site in the mid- to long term to support our strategy.

Operator

Operator

Our next question comes from the line of David Begleiter with Deutsche Bank.

David Begleiter

Analyst · Deutsche Bank.

Ken, can you talk about Hyperzone? How is that plan progressing and the selling? And what the type of premiums, if any, you're getting on the Hyperzone product?

Kenneth Lane

Analyst · Deutsche Bank.

David, thanks for the question. So we had mentioned before that we had taken a shutdown in the fourth quarter to be able to make some repairs to that asset, and we've been continuing to work through that in the first quarter. So we are still not in a position yet to be, I would say, ratably selling the premium products from that asset. That's something that's going to build over the next 12 to 18 months. but the successful side of the equation there is that we've demonstrated the ability to make differential products that have differential product characteristics, and we have been able to get a premium on some of those, but it's frankly been very small volumes until now. So we view that as some of the upside that we're looking at. When we talk about stepping up, that's part of the upside that we're continuing to see in the next 12 to 18 months for the company.

Operator

Operator

Our next question comes from the line of Steve Richardson with Evercore ISI.

Unidentified Analyst

Analyst · Evercore ISI.

This is Sean on for Steve. Just a quick check-in. In terms of the refinery, what might be the repurposing cost sort of facility if you choose to go in a different direction? And then also with an estimated $200 million in repurchases for this quarter, what might be some of the cadence moving forward for repurchases in light of the strong cash flow generation?

Kenneth Lane

Analyst · Evercore ISI.

Thank you, Sean. I'll take the first question, and I'll let Michael take the second. So listen, it's way too early for us to be talking about any kind of repurposing costs around the refinery site. The focus for now is that we're going to operate that asset safely and reliably. Of course, we're going to keep a separate team that's going to be looking at some of the options for the future. But our priority right now is going to be really to stay focused on taking advantage of what we see in the marketplace today and really achieving a great result there and operating the assets safely. So Michael, do you want to take the next question?

Michael McMurray

Analyst · Evercore ISI.

Yes, sure. Thanks, Ken. While I probably won't give guidance on the level of share repurchase activity that we intend to execute to the balance of the year, what I can say is we expect to generate a lot of free cash flow. It's not our intention to build any meaningful cash balances on sheet. Therefore, the expectation is that you can expect that we're going to return copious amounts of free cash flow to our investors.

Operator

Operator

Our next question comes from the line of Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan

Analyst · RBC Capital Markets.

So yes, I guess a lot of questions have been asked around polyethylene. So maybe I'll ask a question on I&D and one on APS. So for I&D, I think peak earnings in the past, EBITDA has been around 2.1. Looks like you're headed to maybe the 1 6 level or so. And I think you mentioned that as a mid-cycle in the past. So is that still what you're thinking with the recovery in oxyfuels? And then similarly with APS what's it going to take to get maybe to $800 million EBITDA level? Is that a more serious recovery in the automotive area?

Kenneth Lane

Analyst · RBC Capital Markets.

Thank you, Arun. So yes, for I&A, I mentioned before, we are expecting to be above mid-cycle for that business. So I would say I would expect to be above the numbers that you're thinking about would be where we're at. For sure, we've got very strong tailwinds. And I had mentioned we had a record first quarter. So coming into the second quarter with demand even improving, we're very optimistic heading into the second half of the year or the second quarter going even into the second half of the year. Now for APS, one of the biggest things that we need to see there, we've been able to successfully maintain margins and continue to improve on margins. The volume equation is what's really going to be impactful for that business. So as automotive comes back and we're able to really refill that pipeline and get the demand side up, that's going to be what's going to drive our results.

Operator

Operator

Our next question comes from the line of Matthew Blair with Tudor, Pickering, Holt & Co.

Matthew Blair

Analyst · Tudor, Pickering, Holt & Co.

I know you're selling -- or you're closing the refinery at the end of '23, but right now, refining margins are pretty phenomenal looking at $30 Gulf Coast cracks, $70 diesel cracks. How should we think about your margin capture potential in Q2? Are you going to be able to capture these pretty phenomenal numbers? Or is there a reason to be cautious on just overall margin capture?

Kenneth Lane

Analyst · Tudor, Pickering, Holt & Co.

Thanks, Matthew, for the question. Listen, for refining, yes, we're seeing very strong margins. The Maya 2-1-1 today is over $60, very strong diesel cracks, gasoline cracks strongest since 2015, inventories are low. So we're operating the assets very well, very high utilization rates. So to answer your question just very shortly, yes, we expect to be able to capture that margin uplift.

Operator

Operator

Thank you. I am showing that there are no further questions. I will turn it back to Mr. Lane for closing comments.

Kenneth Lane

Analyst

Thank you, Alex, and thanks, again, everyone, for your questions and interest in our company. Before we close the call, I want to emphasize the excitement that's building here at LyondellBasell around our future. We are generating resilient results, and we're going to be welcoming our new CEO, Peter Vanacker, in May, and we have our world-class PO/TBA asset starting up later this year. There is a lot to look forward to, and we're excited about what lies ahead. We hope you'll join us in July as we update you on our second quarter results, and I wish you all a great weekend. Please stay safe.

Operator

Operator

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.