Earnings Call: Q1 2019

May 10, 2019

Welcome to The Navigator Company Conference Call. I will now hand over to Joanna Abaton. Please go ahead. Thank you. Ladies and gentlemen, welcome to the Navigators Company conference call and webcast for the Q1 of 2019. This conference call is the first one held after the changes in the CEO, which occurred at the AGM of April 9, 2019. So today, we are participating in the call with the following members of the Executive Committee. Jean Castellrain, the company's CEO Sorry for this. We have a problem with the sound, but welcome to the Navigators conference call and webcast for the Q1 2019. This is the first call to be held after the changes in the CEO. So today, we have participating in the call the following of the Executive Committee Jean Castelblanc, the company's CEO Antonio Blonde, CCO Fernando Rouge, CFO, Rune Sanche and Jean Paul Vivala. We will start with a brief presentation of the many achievements in Q1 and follow the Q and A session at the end. The presentation can be accessed through the links available on the website and questions may be addressed also through the webcast platform. Joao will start with a comment on the main figures recorded in the quarter, and Antonio will follow with an overview of the Pulp and Paper markets. Vincent will comment on the Tissue business and Jean Paul Ivarra on cost reduction initiatives and CapEx. Jean will address the main financial issues. I will now hand over to Joao. Joao, please? Thank you, Joanna. Good afternoon, everybody. I will start by making some brief comments on the results for the quarter. So let's start with the presentation and go to slide 3. The Navigator company experienced relevant growth in turnover in the quarter of almost 10% to 442,000,000 This increase was sustained by higher prices and higher sales volumes for pulp and tissue when compared to Q1 2018. We recorded higher average prices in pulp and paper, which more than compensated a reduction in paper volumes sold. There were some production deviations in paper due to the strike in one of our paper mills at the beginning of the year, as well as some adjustments in the heavyweights production at EM3 in Saputo. In the pulp business, production was more in line with previous 1st quarters and was not subject to the output limitations from maintenance stoppages, which occurred in Q1 2018. We also recorded higher production and sales of tissue on the back of the new installed capacity at the Avero Tissue Mill. So the group registered increase in the turnover of all its products and coated wood free paper grew 6% to $300,000,000 Opel registered an increase of almost 22% to $40,000,000 and Tissue 75 percent to $33,000,000 dollars In this context, EBITDA stood at $105,000,000 growing 3.3% when compared to current to recurrent EBITDA of $102,000,000 As you recall, in Q1 2018, the group completed the sale of its pellets business and EBITDA was positively influenced by approximately €4,900,000 sorry €9,400,000 EBITDA margin in this quarter stood at 24.9 percent minus 2.5% versus recurring margin, impacted by higher costs. Our CapEx in this period stood at $32,500,000 almost $4,000,000 above CapEx in Q1 2018. With more than half of this CapEx related to recurrent CapEx, 26% regulatory CapEx, which we will detail ahead and 15% still related to the growth CapEx of tissue, pulp and heavyweights completed last year. One of the highlights of the quarter was the improvement accomplished in our debt profile. Fernando will explain it in more detail. We managed to renegotiate a significant part of our total debt, namely debt maturing in 2020, with a considerable extension of maturities and the diversification of the sources of funding. Finally, I would like to stress the approval at our annual general assembly of the dividend payment in the amount of €200,000,000 a figure in line with previous year implying a 7% dividend yield. Going now to slide 4, we can take a look into more in more detail at the main factors that impacted EBITDA in the quarter. So prices were definitely key to the growth achieved and prices and volumes more than offset the increase registered in costs. The main cost items impacting the quarter were energy costs, dollars 11,600,000 mainly due to 18. Also the cost of fibers had a negative impact of almost $7,000,000 due essentially to the increased acquisition of Longfiber for the new Avero Tissue Mill and the acquisition of Short Fiber in Villaverde dojo. Wood also experienced some inflation to different factors. A larger proportion of acquisition of certified wood in Portugal, which rose from 34% to 49% the price increase of wood chips in international markets and the evolution of the euro U. S. Dollar exchange rate for wood purchased outside of the Iberian Police Peninsula. In fixed costs, personnel costs performed favorably, although there was negative performance in functional and maintenance costs. These costs were influenced by seasonal factors and are expected to normalize throughout the year. Most of the increase registered in costs are related to external factors. Sorry, I will get as I was saying, most of the increased registering costs are related to external factors, which the external factors. This means basically that we aim to compensate these effects that we cannot control with continued strong focus on cost elements that we do control. As a conscious, we have been implementing cost reduction efficient measures throughout the company, such as the M2 program that Juan Paul will refer to subsequently. And we have in the pipeline new cost initiatives, which we'll also talk about later on. With that, I will hand over to Antonio Overdondo, which will talk to us about the pulp and paper market. Thank you, Joao. Good afternoon again, ladies and gentlemen. Please go to slide 6. With evolution of the PIKS Index for BHKP Europe, and we see this is the end of 2018. Pulp remains at historically high levels at the moment. During Q1 2019, market prices for soft tools increased in gross terms $80,000,000 but declined for hardwood around $22,000,000 However, with the evaluation of the U. S. Dollar against the euro, hardwood prices in euros actually increased EUR48 per ton, almost 6% when compared to Q1 2018. Turning please to Slide number 7. We have an update on the market conditions for pulp. The PPBC reported a full in global chemical pulp shipments of about 0.5% in Q1 2019, with shipments to China decreasing 5.4%. In the 6 months up to October 2018, total shipments of short fiber grew by around 1,100,000 tons year on year at the pace faster than structural growth, replenishing stocks in the supply chain. In the final quarter of 2018, as a consequence of an economic slowdown, reduction in Aperam global consumption of paper and cardboard and the downturn in a vast range of commodities, shipments of pulp started to fall gradually, whipping out all of the year on year gains referred to Latolff. The consequences of this downturn was felt during Q1 2019, but there are some signs that may indicate any improvement in the coming months. On the one hand, economic stimulus measures taken by the Chinese government appear to positively impact overall Chinese consumption and should lead to a growth in pulp consumption. On the other, recent figures indicate that China pulp inventories might have started to decline, a positive sign, even though inventories remain at a high level and will take some time to come significantly down. More important recent news that relevant players allegedly plan to take 1,500,000 to 2,000,000 tonnes of downtime at BHKP Mills through year end indicates that supply will work to meet demand and hence inventories will most probably come significantly down in the coming quarters. Going now to slide 8, please. We have an overview of the performance of the printing and writing papers in Q1 2019. The global M. C. To the free market remains once again a benchmark for resilience and stability in the context of slowing economies and sharp downturns in low types of printing papers, having contracted by 2% in the Q1. This contraction occurred in the context of substantial reductions in quarterly papers and papers based on mechanical pulps neither produced or market by navigator and both reducing between 9% 12%. In this context, demand for ENCOTEL3 dropped 1.4% in the U. S. Year on year in Q1 and 2% in Europe, reflecting the slowdown in the main economies in this geographical area. Moving to Slide 9, the evolution of paper prices translate our European and crude oil free manufacturers implemented price increase in 2018 and January 2019 in response to rising production costs. This allows the European and CO2-three PIKS to rise €69 at 8% in Q1 2019 in relation to the same period of 2018 and €15 per ton or up 2 percent in relation to the last quarter of last year. In the U. S, price increases in particular in March 2019 patched up the TPI office paper index in Q1 2019 by US136 dollars per ton, up 12.5% year on year and by US4 dollars per tonne quarter on quarter. If you are so kind to move to Slide 10, we summarize now our views of conditions in the paper market. Pulp prices remain high, namely in euros, and the continued pressure in paper margins is a reality. There is also cost stress from chemicals, fuels, energy and logistics, which will put MCO2-three prices under upward pressure. MCo2 3, as mentioned before, shows the highest resilience among graphic papers, namely in cat size, which has shown 0.2% growth year on year in Europe. With several conversions, shutdowns announced in Europe, Mexico, Asia and North America and Kotutufil markets will be more balanced leading to an improvement in market conditions. I will continue now with some comments on our paper performance on Slide 12. In our paper business and quarterly sales totaled 353,000 tons, 2% down on the same period of last year, due essentially to production deviations, mainly related to maintenance and unexpected shutdowns and also to 4 day production stoppage as a result of the strike in January in 1 of our Sotuba paper machines. However, rising sales prices for paper permitted the group to record turnover of €300,000,000 up by 6% on the same quarter of 'eighteen. In fact, the average benchmark price for uncooked and free paper in Europe was 8% higher in the Q1 than in the same period of last year and also rose over the course of the quarter. The group's average price outperformed the index, driven by implementation of price rises over the course of 2018 and also in early 2019 in Europe, which remained throughout the quarter and also by the favorable evolution of the euro, U. S. Dollar exchange rates. We also recorded again a slight improvement on the weight of our new brands that have reached now 69%. Please let's go now to Slide 13 with an overview of the pulp performance. Output of pulp in the Q1 of 2019 stood at approximately 370,000 tonnes, 7% up on the same period in 2018 when at that time the company was subject to limitations on output due in particular to a number of stoppages in Sotouvos. As a result, the quantity of pulp available for sale in 2019 was clearly above that in the previous year, although in line with the 1st quarters of the previous years, making it possible to an increase in pulp sales to 62,000 tons. The group is working with a higher level of inventories than normal, but below the benchmark, explained in part by a value management play where price is being privileged over volumes. The group's average price moved upwards over the quarter above the peak performance in euros when excluding off grade pulp sales from the startup phase of the new capacity in Figueres de Fosse pulp mill last year. Pulp sales in value stood at around EUR 40,000,000 up by 22%. I will now hand over to Numu Santos for some comments on the tissue business. Thank you, Antonio. Going to slide 14. The Tissue business sales performed very positively during the quarter. There was a significant increase of 76% in the volume of sales to 23,700 tonnes as a result of the startup of the new tissue plant in Avero. The value of sales stood at €33,000,000 up 75% versus the Q1 of 2018. This growth in volume brought 2 distinct changes to the business. On the one hand, sales of finished product grew by around 40% to 18,000 tons. And on the other hand, the group recorded a sharp increase in the sales of rills times 9 multiplied by 9 to 6,000 tons, which did not exist last year. Both finished products and rills benefited from significant price rises in relation to the Q1 2018, approximately 8% in finished products and more than 10% in reels, clearly necessary to offset the increase in costs, especially in terms of pulp, chemicals and energy. However, the faster growth in rials business typically at the early stages of production in the new tissue mill altered the mix of products sold, which had an impact on the average sales price. Looking at the revenue by geography, we can see that there was a significant increase in sales outside Portugal and Spain, with the weight of Extra Iberia increasing to 13% of total sales from 2% last year. I will now ask Juan Pablo to comment on the next slide. Thank you, Nuno. Let's go to Slide 15 on our cost efficiency M2 program. As Joao said, we work a lot on the cost side and we have been implementing cost reduction and efficiency measures throughout the company for some years. The M2 started in 2016 as a cost reduction and operational excellence program with a 5 year target to achieve 100,000,000 euros savings in 5 years, involving the entire areas of the company. Until year end 2018, we recorded accumulated savings of approximately €64,000,000 In this first quarter, Navigator continued with its M2 cost reduction, resulting in a positive year on year impact of €2,900,000 in EBITDA. A total of 82 cost cutting initiatives are currently being implemented in 16 different areas of the company and 56 of these have already made a positive contribution to this year's result. The top performing initiatives in progress illustrating an entrenched continuous improvement mindset in Navigator, include projects focused on speed increase and energy consumption reduction in our paper machines at Figueres de Forge Mill as well as softwood consumption reduction in our tissue machines at Villevele d'Rodle by optimizing several of operational procedures. Likewise, projects relating to wood transportation cost reduction through introducing a new acquisition model or alternative means and optimizing our logistic costs, namely on drayage and on sea transport to the U. S, have heavily contributed to the aforementioned program results. On Slide 16, we have an overview of the CapEx registered in the quarter. Navigator recorded total investment of 32.5 €1,000,000 in the Q1. This amount includes maintenance and current investment of approximately $19,000,000 as well as $4,600,000 relating to completion of the new tissue mill in Avero and the remaining investment in heavyweight production in Stubal. Investment in the period includes a figure of €8,600,000 classified internally as regulatory, directed essentially at improving environmental and sustainability performance at our plants. The main investment made in this quarter was the construction work of a new biomass boiler at the Figueira de Forge mill, replacing the existing boiler and the natural gas combined cycle power stations. This new biomass boiler is part of the group's wider carbon neutrality program and will make it possible to replace the use of fossil fuel by renewable fuel, in this case, biomass, leading to a reduction in fossil CO2 emissions at that mill site. Investment in this area also included sleeve filters on the biomass boilers in Sotubal and Averu as well as the revamping and redesigning of Ifuan treatment in villavalinrhoidal. I will now ask Fernando to comment on the next slides. Thank you. On Slide 17, cash flow from operations generated in the quarter was €88,000,000 as compared to €86,000,000 in 2018. Free cash flow in the quarter stood at $9,900,000 as compared to $134,000,000 in 2018. It should be noted that cash flow in the Q1 of 2018 was affected positively by a cash inflow of $68,000,000 from the sales of the pellet business. In quarter 1, 2019, there was also a significant delay in the January February VAT reimbursements in the amount of $45,000,000 as well as acquisition of own shares in the amount of $4,600,000 In 2019, in view of the operating cash flow generated, the evolution of free cash flow was impacted by a CapEx of $32,500,000 versus $28,600,000 in 2018, as well by the increase in working capital, mainly due to the rise in inventories of 27,400,000 dollars Inventories were higher in particular for tissue due to the development of new business and in the stocks of finished and intermediate products in pulp, tissue and then coated, allowing to improve customer service. So now on Slide 18, as a result, at the end of March, Navigator interest bearing debt totaling $670,000,000 in relation to year end 2018. The net debt to EBITDA ratio remains at a conservative value of 1.5, which is in line with net debt to EBITDA at the end of last year. I would like to spend some minutes on Slide 19 and go over the debt restructuring accomplished in the Q1. In view of the approaching maturity of a substantial portion of our debt, which was due in 2020, we decide to undertake a restructuring process. This process involved contracting for loans and 2 backup facilities with a total value of 455,000,000 dollars The main results of this process were as follows: extension of maturities. The new loans have average lifetime between 5 7 years as opposed to an average maturity of 2.6 years at the end of 2018. Increase in fixed rate component. All the new loans were contracted on a fixed rate basis. Reduction of costs in relation to discontinued operations diversification of funding sources with inclusion of a new international bank in the lineup of lenders and finally, conversions of a backup facility into a green commercial paper facility, the first operation of its kind in Portugal. This last operation in which the pricing terms are linking to evolution of a specific score award by an Environment and Sustainability Governance Consultant is a reflection of Navigator Group commitment to sustainability. To finish the comments for the quarter, I will give the floor back to Jean. Thank you, Fernand. Just a few words on the outlook for 2019. Slide 21. Demand for market pulp should pick up moderately in the upcoming quarters, particularly from September onwards, albeit subject to economic performance, especially in China, in response to government stimulus measures and the negotiations with the U. S. The continuous emphasis on environmental protection in China will likely lead to further substitution of non wood and mechanical pulps by chemical pulps and the increase in tissue capacity between 2019 2020 will be 2 of the main factors sustaining growth in demand for short fiber pulp. With the absence of any significant increase in supply until at least the second half of twenty twenty one, upward adjustments in pulp prices can be expected for both fibers over the second half of twenty nineteen. In tissue, 2019 will be a year of consolidating recent investments with a view to increasing total sales. The main goal will be to achieve sizable gains in sales of finished products. As the industrial operation matures and navigator share of the target market grows. Additionally, the company aims to improve the tissue business margin following the strong effort achieved in price increase. In the paper business, a more balanced market is expected as announced conversions and shutdown in capacity materialized throughout the year, compensating for the new investments in uncoating entering the market. Having said all this, we must acknowledge that the permanent macroeconomic environment is a major factor of uncertainty. The global economic slowdown and the current international framework of protectionist policies are factors that Navigator sees with some concern and may influence in a relevant manner the above described outlook. During Q2, a maintenance shutdown occurred in the at the pulp mill in situ in April and was extended for commercial reasons. Other maintenance stoppages are also scheduled in Avero's pulp mill and at the paper mills in Setubo and Figueira da Foz. Finally, production and operating costs continue to deserve special attention. In this context, the company has continued the cost reduction and operational excellence program M2 and has also started a zero based budget project in April with the objective of defining and implementing a set of fixed cost reduction initiatives, covering operating costs, general and administrative expenses and personal costs of non industrial areas. These efforts should materialize in 2020. Industrial fixed cost efforts will also follow these efforts. Great. The first question comes from Nuno Stacio from Haitong Bank. Please go ahead. Hi, good afternoon, everyone. First question would be in terms of production and sales of uncoated woodfree paper. In 2017, you have produced almost 1,600,000 tonnes. This has reduced this has been down in 2018 and 2019 is also not starting on a brilliant tone. So what can you tell us in terms of production? Is there any problems? Is that why you are doing these extended stoppages? Do you think you can recover production later in the year? This would be the first point. In terms of volume sold, we are also seeing slight negative performance in the Q1. And I think, Joao, now you mentioned that one of the reasons for the prolonged stoppage is for commercial reasons. So are you having problem in or difficulties in shipping the paper? Can you give us a little bit more insight about that? A final question would be in terms of the working capital evolution. Clearly, weak in this quarter. You have mentioned this EUR45 1,000,000 from or I think it was EUR45 1,000,000 from VAT. Should we expect a meaningful recovery in Q2 or is this something that will not be recovered throughout this year? Thank you. Okay. No, no. Thank you for the questions. I will hand over to Jean Paulo, then Antonio and then Fernando to answer your 3 questions, okay? So thank you for the question concerning production issues. We have last year converted our Machine 3 into 2 ball from a normal paper grade machine into a heavyweight machine having full flexibility on the total scope. This was a very ambitious project because it was the first project on a worldwide scale to be done, revamping 1 machine to do the complete grade. And we have been facing some difficulties not in producing the paper. The paper, in fact, the heavyweight paper is produced at a very, very high quality level. But we have not been able to achieve the output that we have planned. And we have also the effect of the strike in Stubal at our machine 4. But besides that, all the machines are running at planned efficiency, and therefore, we are not concerned about that. It's a momentary effect that will elapse over this quarter that we are now in. I pass now to Antonio to explain about the market conditions. Thank you, Bruno, for your question. Very quickly, in terms of sales in Q1, the sales reflect the paper available. So our stocks of paper in value, of course, they are higher because paper has a higher than they had last year. But in terms of tons, they are actually at the same level of last year. The comment made by Joao previously was not related to paper, was related to pulp. Yes, in pulp, we have also participated on the efforts to make sure that supply meets demand and hence we took advantage of already this quarter on the shutdown of 1 of our mills to extend the shutdown for commercial reasons in pulp. I now hand over to Fernando. The answer is clearly yes. We are not very worried with this. The cash flows from the operation are at the same level as the Q1 2018. And on the free cash flow side, we'll do expand less on CapEx this year. There is some structural increase on inventories because we have to expansion of the Figueres de Fage Mill in pulp and new mill in Averro regarding tissue. But there are also some mentioned value play and we hope to end with the free cash flow at the level that you are used to see. Okay. Thank you. Just following up on this on the paper volumes. So should we because paper was slightly down versus last year, but should we end by the end of last year, I remember that in the call, one of the things that Navigator mentioned was that we would have an increase in paper volumes sold in 2019. So should we expect this to next quarter or because of stoppages this is more a theme for the second half? Thank you. We will expect already to see a positive sign on the second quarter, but we expect H2 to be stronger than H1. Okay. Thank you. Thank you. The next question comes from Maxim Michen from JB Capital Markets. Please go ahead. Hi, good afternoon. Thanks for taking my questions. I have 3, if I may. So the first one is, could you please provide us with an update regarding the negotiations with labor unions? I think there was some news in the press saying that these negotiations could lead to a potential strike. Question number 2, could you provide more color on how you expect to tackle higher energy costs going forward? And what do you expect for EBITDA margin in 2019? And finally, I was wondering whether you still plan to present an update of the strategic plan? Thank you. Okay. I'll ask Jean Paul to talk about the labor situation and we'll follow-up with the other questions, okay? Okay. Every year we as you imagine, we negotiate the packages with all our unions and we have done that also this year. Unfortunately, and we have made final agreements with 8 of the 9 unions, It was not possible to achieve a final consensus in Stobo, but we are working on this topic and therefore results will come. Yes. I mean, on the energy cost side, as you know, we are subject to external factors that have to do with the energy markets, which we do not control both electricity prices as well as natural gas prices, which are the main elements. And so we will as mentioned, we will be launching and we're strengthening our cost efforts. Some of them will only have effects in 2020. And on the other hand, as was mentioned, there's been a positive price evolution over the quarter, which we will expect to remain over the rest of the year. So if you put together all these elements, we think we will be able to kind of compensate for the energy cost situation, which as you said, it's a which as I said, is something that we cannot control and we've seen the impact of it on the Q1 already. So overall, we expect EBITDA margins to remain stable over the year. Okay? Thank you. I will there was a question on the strategy plan. So let me handle that one. So on the strategy plan, it is an exercise that we do for we have the discipline of doing every now and then, every 4 years typically, so that the time elapsed and we launched a strategic planning effort as was mentioned in the past recently, okay? So it is a normal effort. It is not that we are on the verge of any major strategic change. Basically, the effort is finished and it has in essence confirmed the orientation that we were taking that has been commented with the market before. So there are no major changes expected from that effort. This is what I would say. I can go into some specifics of it. But first of all, we continue to believe that the fundamentals on the pulp business are solid and will remain so in the foreseeable future, particularly if you take a medium term view. The balances of supply and demand, we don't see any major concerns there. We also the plan also confirmed our belief that we have a very strong uncoated wood free business that is solid and resilient and will remain so for the foreseeable future and will be we are in a good place to face eventually some more stress in the market because given our position and our brands, etcetera. So the plan basically confirmed our hypothesis on this our belief that we are in a very good position and on that critical business for us. It has also confirmed that tissue continues to be a value creating opportunity for us and it is an opportunity to pursue. We are now in the process as we said before of consolidating this bet and bringing the new capacity that we invested into the market in the best possible manner and maturing our industrial operation and perfectioning our integrated business model. That's the priority right now. But strategically, it remains as a value creating opportunity for us. And then the 4th element, which is again not new, it's of course continued emphasis on costs and cost optimization efforts. Again, there are external factors we do not control like energy prices or which prices or whatever or the exchange rate for that matter. So our focus here is going to continue to be particularly the M2 program on specific consumption, what all the things that matter to us. And as I mentioned, strong efforts in fixed costs. We will start now in corporate functions, etcetera, and we will then proceed to the industrial side also with the specific fixed cost effort. So these are the highlights of the plan. And again, they're not new, but we are moving forward with the confidence that we were on the right path before. We will continue on the right path on the same path moving forward. We do have some smaller bets on the table, but they are smaller. And the ones that we have talked that I've talked so far are the ones that really matter. But we will have to pursue smaller studying smaller batches on eucalyptus packaging and biochemicals. But again, they're smaller. The essence of the plan are the 4 the main ones that the 4 initial ones that I talked about. Thank you very much. Very clear. Thank you. The next question comes from Bruno Beza from CaixaBank. Please go ahead. Hi, good afternoon. So, three questions from my side. The first one regarding paper prices in the Q4 conference call. You mentioned that despite the positive trend of paper prices, net prices will be flat, mainly reflecting a worse sales mix. We have seen the opposite trend in Q1 with the net prices inclusively slightly outperforming the peaks and also supported by positive currency effects as you mentioned in the release. And my question is, could this be extrapolated for the coming quarters? Basically, if you could provide us your view regarding the evolution of net prices this year would be appreciated? The second question related with the cash costs. Cash costs increased by €36,000,000 or 13% year on year despite paper volumes having slightly declined in the quarter. You already mentioned that you could see some reversion of the negative external factors that impacted cash costs in Q1. But my question is this kind of what kind of cost inflation could we expect this year? And if you are already seeing any kind of recovery on this front in Q2? Last question, a quick one. If you could provide us an update of your CapEx expectations for 2019? Thank you very much. Thank you. Antonio, do you want to address the price issue? Thank you for your question. As you know, we don't give specific guidance on price evolution, but I'll try to make a few comments. Our view for 2019 was that prices of both pulp and paper will be on average for the year slightly below the previous year 2018. We obviously keep the same view. As I said before, we expect pulp prices, which are the driving factor for paper prices. We expect pulp prices to be stronger on the second half of the year, namely from September onwards. And following that, it might happen that paper prices have a slight decrease over the next few months, namely outside Europe. But going back again to the levels that we are enjoying today or even last year in the 2nd part of the year. Okay. So before I hand over to Jean Paul on the CapEx plan. I mean, on the cash costs, we will I think the landscape our main cash cost items are, of course, external fiber. And these, I think, we talked about already about the outlook for the pulp market. So I guess you can elaborate from that. The wood chip market is also very much linked to the pulp market. So we would expect the context that we've been leaving in the Q1 to remain. And I will not bear kind of elaborating on the energy market outlook because it is a complex one. So what I can tell in terms of cash costs on the fixed cost side, we said we have some elements of those fixed costs that are seasonal in nature and that we expect to normalize over the year as we said. So on the cost side, I think at this point that's what we could say. I will then hand over now to Jean Paul to talk about the CapEx plan. So for 2019, we have a plan between €120,000,000 €140,000,000 This is divided mainly in rough about 35% we plan for maintenance of our mills. We have this year, which is already something that we have planned in the past, a higher investment due to legal and environmental requirements, and that is expected to increase over the years for our industry. And we are also planning some budget to finish the projects that we are still have not yet completed. Therefore, it will be between, as I said, EUR 120,000,000 EUR 140,000,000. Okay. Thank you very much. Thank you. The next question comes from Luis Toledo from BBVA. Please go ahead. Hey, good afternoon. Two questions from my side. And the first one regarding the certified wood percentage, which you have increased not only. I was wondering if the impact that this could have on wood cost inflation. And also if this comes as something you're actively seeking or it's your customer driven orientation? And the second question is with regards Mozambique plants. We know the stage in which it is now. But I was wondering if you could provide an update on the forestry and nursery operations. What minimum contribution are having, if it's negative or if you could provide some update on that? Thank you. So 35 wood costs and Mozambique, I will hand over to Nuno Santos. Okay? So on the certified wood, yes. I confirm your hypothesis. We are the efforts and the increase in the certified wood is driven by our efforts and by our incentives to increase the percentage of certified wood in Portugal. Yes, it is true. You've seen the increase in the wood costs, as Joao was mentioning. Overall, the key factors was, as we said, the increase in the wood chips, the prices of wood chips in the international market, the exchange rate and the increase in the certification. On Mozambique, as you know, we have signed the MoU of government to make sure that the condition precedents are fulfilled and that we are able to go ahead with the project. Right now, we have not yet, let's say, we cannot say that these conditions have been met. And so the project is a little bit in a standstill waiting for these conditions to be met. Currently, our we have 13,000 hectares of planted eucalyptus in Mozambique that we are nurturing well for the future. I hope this answers your question. Yes. Thank you. Ladies and gentlemen, there are no further questions in the conference call. I now give back the floor to the company. Thank you. Okay.