Earnings Call: H1 2018

Jul 25, 2018

Good afternoon, ladies and gentlemen. Welcome to the Navigators Company Q2 and First Half twenty eighteen Earnings Conference Call. We will start as usual with a presentation on our results. Our CEO, Jurgen Ziveras, will make some brief remarks on the main achievements of the period, and this will be followed by top and paper market comments from Antonio Ronde. The main financial figures will be addressed by Fernando Rauji and we'll finish with the Q and A session where the audience can ask questions to the Executive Committee present here today. The presentation can be accessed through the links available on the website and questions may also be addressed through the webcast platform. I will now hand over to Jorg. Please? Good afternoon and thank you for joining us today. I am very happy to have the opportunity to share with you some key messages regarding our results. So let's start with the presentation and go over to Slide number 3. The company's results for the first half of twenty eighteen reflect the considerable improvement in pulp and paper sales prices, which were partially offset by a reduction in sales volume. The reduction in volume sold was due to production stoppages, mainly in pulp, which did not occur in the first half of twenty seventeen. This happened throughout the 1st semester, impacting both the 1st and the second quarter. Specifically, regarding the 2nd quarter, maintenance stoppages occurred at the Figueira del Forage Mill in April, which was prolonged to complete work on the capacity expansion project underway at that time. The length of these stoppages and the need to build up stocks in the previous months had quite a severe limiting effect on the quantities of pulp available for sale by the group during the first half. Paper volumes were also impacted by some production stoppages, mainly in the figure of the forge mill. Despite these operational issues, the group achieved a record EBITDA figure of €226,000,000 for this first half and also a record €150,000,000 EBITDA level in the quarter. Even considering the adjusted EBITDA figures net of the impact coming from the sale of the products business, those figures are record figures. Another key aspect I would like to highlight is that alongside the improvement of pulp and paper prices, the group continued with its cost reduction and efficiency improvement program. In the context of increased costs of raw materials, mainly chemicals and fibers, both short and long, as well as transportation, we developed new initiatives that did tackle those issues as well as many others and therefore achieved an estimated positive impact in EBITDA through this program of €9,200,000 in this first half. This attitude of constantly looking for areas to improve and become more efficient is even more relevant in the context of growth as the one we are currently experiencing with the top expansion projects starting up and the new tissue mill almost concluded. As we mentioned during the last conference call, we started to operate the 1st converting line in Kaseya last May and expect to be producing tissue rules by the end of August. The development projects represent, of course, a significant amount of CapEx, actually around $36,000,000 in this quarter, but also increased overhead and consequently additional personnel costs. So we need to permanently address efficiency measures throughout the entire group in a systematic and coordinated way. Finally, a word on the €200,000,000 dividend payment made to our shareholders in June. After this payment, our net debt to EBITDA ratio remained well below 2x, actually standing at 1.7. And the return on capital employed, our ROCE, at the end of the quarter was at 17.9%, quite an improvement over the previous first quarter. I will now ask Antonio to comment on the pulp and paper market. Antonio, please? Thank you, Diogo. Going to Slide 4, we can see that continuing the airport spend initiated at the end of 2016, prices for ARPU pulp increased an impressive 39% in U. S. Dollars and 25% in euros in the first half of the year when compared with the same period of 2017. As a result, hardwood pulp prices in Europe in the first half of twenty eighteen were on average US290 dollars higher than in H1 last year and $117 above the second half of last year. At the end of the semester, price for Ardu pulp in Europe was $10.50 actually flat for the last 6 to 7 weeks without parallel since 2010. Moving now to Slide number 5, we have a view of the estimated supply demand balance in the pulp market for 2018, and we have seen throughout the semester conditions that support this view. During the 1st 5 months of 2018, the global hardwood market pulp demand grew 4.3% year on year, driven mainly by Encyclopedus with plus 4.5% year on year. China demand for ounces representing more than 1 third of global demand for this fiber increased close to 8% year to date May. World motifs as well, the very good development of ARPU demand in Europe during the same periods. Porto top demand levels were similar to the same period in 2017 with plus 0.1% year on year despite showing a recent positive trend with BSKP growing close to 2% in May. Also, during the 1st semester, we estimate that more than 1,200,000 tons of agro production was lost due either to planned or end planned downtime. Of these, we believe circa 300,000 tons was due to a Turkish strike in Latin America, which literally paralyzed one of the leading countries. Producers would have liked to slow or stop their pipelines at the end of May as a consequence of the spike. In softwood, the amount of downtime was, we estimate, at 200,000 tons in the first half of the year. If estimated downtimes are deducted from the practical maximum capacity of top lines, both hardwood and softwood pulp producers operated at 93% of available capacity, a similar rate than in 2017. Going now please to Slide number 6 and speaking about paper. Figures from PPPC show that Encore to Duluth papers continue to be the best performing printing and writing rate globally, even though with worse than usual negative trend of minus 1% evolution on demand year to date by on a year on year basis. Still is the lowest percentage decline among printing and writing grades. If we now can move to Slide 7, we summarize what we believe are the specific conditions of the end quote to do free market and we can say the global market conditions are improving even though with some differences among reasons. Europe, our main regional market, experienced some cool down in demand for office papers during the 1st 6 months of the year, which we attribute mainly to spend kept size stocking from buyers and also less working days than in the same period of last year. However, figures from June already show a clear improvement. Despite this up rent consumption decline, mills operated at high levels, 93% in H1 and actually 97% in June and carried the highest order book since the peak in 2010, only 2nd to the same period in 2017. So as you can see on Slide number 8, producers managed on price increases during H1 in the beginning of 2018 and again in late March early April, which allowed for a year on year price rise of 6%. So pigs improved €49 per tonne during first half of twenty eighteen when comparing to the first half of 2017. Back to you with the year ago. Thank you. Following on Antonio's words, I would like to go to Slide 9, where we have a long trend for pulp and paper prices for the last 10 years and where there's a couple of thoughts I would like to share regarding these trend. The graphic shows first the high volatility of pulp versus the stability of paper over the past 10 years. This is true for upward movements with steep increases in pulp not followed by with the same amplitude by paper prices as well as for downward movements where sharp drops in pulp prices do not have a corresponding match in paper. Currently, pulp prices are clearly above past trends, while paper prices remain below. This amplifies the profitability differential between pulp and paper. It is very clear when looking at the current and coated wood free and hard wool pulp reference market price differential. For the first time ever, pulp reference price is above the uncoated woodfree reference price. This is something that we have never seen before in the industry and seems difficult to sustain. We want to reiterate that we believe in the paper business, in our integrated paper business model, which always adds value and always protects our returns from the volatility of market pulp. So going over to Slide 10, with the figures for the paper business. We sold 756,000 tons of paper in this first half, recording a 2% year on year decline on volume. As said before, this was mainly due to operational stoppages as we had in our paper mills, which translated into roughly 2 additional lost days of production when compared to the first half of twenty seventeen. Steel, we managed to improve our product mix with a higher share of premium products gaining 7 percentage points year on year as well as new brands with an additional 8 percentage points versus 2017. We also led 3 price increases in Europe as well as several increases in international markets and in the U. S. These actions translated into a net increase of our paper price of 6% year on year. Even considering the negative impact that the exchange rates and specifically the U. S. Dollar versus the euro had on our profitability. Our pulp business on Slide 11 had a more considerable impact of the production stoppages that did occur during the 1st and second quarter. Our pulp mills lost a significant amount of days due to the maintenance downtime and the expansion project at Figueres des Fosse, which actually corresponded to less 19 days of production and roughly 68,000 tons sold. That means 38% volume decrease year on year, the 1st semester of 2017 having been our record semester for pulp. This reduction in volume was partially offset by the sales price increase with Navigator's average sales price improving 27% year on year. Our top sales were focused on our regular clients and the greater weight of sales directed at the higher contribution segments such as Decor and Special Papers, who moved from 52% to 80%. Going now to the tissue business on Slide 12, where we managed to increase global volumes sold by 2% year on year with a growth of 17% in sales of converted products. The reduced weight of reels and the increased, therefore, percentage of finished products allowed for an improvement in our average percent in the average tissue price. Nevertheless, the higher average tissue price is still not enough to absorb the significant increase in production costs and especially the price of pulp, as said before, both hardwood and softwood as well as chemicals. As for the new tissue mill, we saw the start up of the first new converting line in Kaseya in May, actually a couple of weeks ahead of schedule. We now expect to have the wheels production line finished and to start production in roughly 1 month, late August. We have made a significant commercial effort in the last months to place the new tissue production and have been increasing our presence in Spain and in other European countries. We have also significantly increased the weight of the away from home segment where we are traditionally stronger. So in this context, our EBITDA in the first half for the entire group totaled €226,000,000,000 comparing to €198,000,000 in the first half of twenty seventeen, as you can see on Slide 13. This increase was due mainly to the significant price improvement of pulp and paper prices. There was also a positive impact of the sale of the pellet business referred previously that net of costs and adjustments totaled €13,000,000 You should note that this represents a positive adjustment in relation to the figure of €9,400,000 reported at the end of the Q1. That figure over assessed costs, some of which happily failed to materialize. First half EBITDA without this pellets effect would have been €213,000,000 Therefore, the EBITDA over sales margins stood at 27.7%. If you look at net of the pilots business, 26%, which compared to 24% in 2017. Volumes and costs had a negative impact on EBITDA. Cost of chemicals and softwood have continued to increase with logistics also evolving negatively due clearly to higher Brent prices. On the positive side, a better mix in terms of origins has allowed us to register an improvement in wood costs. In fixed costs, payroll continued to show the upward trend observed in the Q1 as a clear result of our workforce expansion, thanks to the new tissue project in Kessiea. The rejuvenation program underway and the increase in performance bonuses related to the improved results registered by the group. So we experienced an increase in these cost items that would have had a greater negative impact if we haven't been working on the cost reduction program that we explained on the next slide. So as you know by now, our cost reduction program is called mSquare, and the program achieved a positive impact of approximately €9,200,000 on EBITDA year on year. Roughly 118 new initiatives have been launched throughout the company since the start of the year to cut costs, with around 85 of those achieving a positive impact. Maybe to give you some examples. 1 of the most impactful initiative is centered on cutting specific consumption of softwood in our figure at the 4 industrial complex with an impact of around €1,000,000 involving a system that had improved control of fiber consumption per type of product. Another initiative with also an impact of around €1,000,000 has to do with optimization of our logistics in key transport to Europe and international markets. Also, we launched a project for greater efficiency in the paper machine production and planning, improving the technical specifications of end products and therefore reducing unit production costs. Besides this program, as you know, we've been renegotiating every year the power and the natural gas contracts. This year, those resulted in avoided costs versus market prices of around €14,000,000 I will now ask Fernando to comment on the next slides. Thank you, Diogo. Going to Slide 15. We have some detail on the evolution of our free cash flow, which stood at $133,000,000 a very strong figure for the first half. Free cash flow was positively impacted by a strong operating cash flow as well as an inflow from the sales of the pellets business, nearly $70,000,000 And on the other way, negatively affect by capital expenditure over the period of €77,000,000 With regard to the working capital, the group record and moderate reduction in the amount invested during the first half. Crucial to this was the very favorable performance in balance receivable payable to the state as a result of substantial VAT reimbursements obtained during the period. This evolution had a very favorable impact, nearly BRL50 1,000,000 in the period, which more than offset the combined effect of increasing inventories, stocks of finished goods above all and of client and supplier accounts. So at the end of Q2 2018, as you can see on Slide 16, the group net debt stood at €740,000,000 at a similar level of debt recorded a year ago at the end of Q2 2017. As we have just seen, the substantial amount of free cash flow generated in the period has allowed the group to pay dividends of €200,000,000 in June, while pursuing its expansion plan of growing in pulp and tissue and investing €77,000,000 in CapEx. Net debt to EBITDA stands at 1.7, which we believe represents a peak for this year and that we should be able to reduce it by year end. Going now to Slide 17. Navigator record a finance loss of $11,400,000 up from a loss of $8,300,000 This increase was due essentially to a nonrecurring factor associated with the disposal of the pellets business of $3,300,000 related to the difference between the nominal value and the present value of the outstanding receivable amount regarding the sale of the Telekrisnos. We resisted a positive impact of currency hedging and exchange rate that was offset by the negative impact of liquidity management. Finally, our CapEx is detailed on Slide 18. The group record capital expenditure of $77,000,000 in the first half with $49,000,000 in the 2nd quarter versus $29,000,000 in the first quarter. The tissue project in Casia represents an investment of $36,500,000 and capacity expansion in Figueres de Force, a figure of around $9,300,000 Capital expenditure into regular pulp and paper business, totally around $30,800,000 The CapEx in the next semester should accelerate, namely associated with the Figueira de Fosse and Casilla Tissue project, as we maintain our guidance of approximately €90,000,000 overall CapEx for 2018. Back to you, Diogo. Thank you, Fernando. Maybe to finish, just a few words on our outlook for 2018 as per Slide 19. So the outlook for the pulp sector remained positive over the course of this first half of twenty eighteen. We've still approached pressures on prices throughout the period, and we believe these trends should continue in the near future. However, with the current high pulp price level, new expansion projects may accelerate. As you've just seen today with the announcement, we start of the MAPA project from Arauco, which will bring a new €1,500,000 of BKP line in Chile, planned to start operating in 2021. In the tissue markets, producers also remain under strong pressure from high pulp prices. And despite the upward trend in tissue prices over the period, manufacturers as a whole have not yet managed to reflect the entire increase of the pulp cost factor in the end price of their products. Navigator will implement further price rises. In parallel, production of rills is planned to start up in Cassia during the Q3, allowing us to double our production capacity over time. Strong sales performance in recent months allow us to look forward to the new output as being successfully accepted by our clients. In the uncoated woodfree paper business, jewelry book is full and the group took the lead during the first half with several price increases in Europe, in the U. S. Markets and in international markets. Navigator announced to its clients in May a price rise mainly in Europe taking effect in July 1st and mentioned that the further hike of similar size is foreseen for October. Externally, the potential consequences of increased trading tensions and the impact on exchange rates remain a cause of concern. Our main challenge at Navigator will be to normalize volumes and to manage the startup of the tissue real line at Kaseya. So on Slide 20, we have a very brief update on that project. Just to again state that the converting line had started production in May, 2 weeks ahead of schedule. And that Rios production almost moved already in July and will start up in August. As said, we've been working quite actively on the commercial front, reinforcing our teams and progressing successfully in our client book building. We're expanding new clients, not only in Portugal and Spain, but as well in France and in the U. K. Namely. Finally, on Slide 21, just the completion and startup of our PO3 projects in Figueres de Forres that has been achieved. I would like to stress that besides increasing capacity, this project also entails a series of important environmental improvements with quite an impact on our Figueira de Forest Industrial Complex. Very relevant, of course, total CapEx, which was kept on budget at €81,500,000 and time for completion was April. Thank you. Thank you, Guillaume. This concludes our comments on results. We are now ready for the Q and A session. Ladies and gentlemen, the Q and A session starts now. The first Hi, everyone. Thanks for taking my question. 3, if I may. So the first one on pulp volumes. Do you believe that you will be able to accelerate pulp implement the price increase. Do you feel that the industry is starting to be successful in passing pulp cost pressures to retailers? And my last question is on pulp prices outlook. Well, we know that prices are mostly driven by supply. Still, the recent depreciation of yuan versus dollar can be a cause of concern for pulp producers. I mean, given the importance of China for global pulp demand, such a ForEx movement could impact their purchasing power or demand is too inelastic to react to that movement? That's all. Thank you. So Antonio Redondo will address the 2 questions on pulp. The volumes you initially mentioned were your first question as well as the last one on the prices outlook. And then I'll take the question on tissue. So but maybe I can start with the tissue so that Antonio gets ready for the pulp volume and prices. So I mean, the one of the big differences between tissue and then coated from price pressure viewpoints is the following. All tissue producers are non pulp integrated. Therefore, the pressure due to the pulp prices is even higher in tissue than it is in uncoated wood feed where maybe 30% only are not integrated. So that is a very positive factor for feeling obliged to pass on price increases. On the contrary, on the negative side, let's say, roughly 70% of the market is consumer market, that's to say goes through the very large retaining stores such as, I don't know, Carpool, Mercadona or Continuent in Portugal, who have such a power that price increases are very tough to obtain. So we don't have yet many years in this market to be able to derive rules on this. But what we can say is that it took us longer in tissue to pass on prices, price increases, but we are now succeeding and we intend to pass on more because we are actually so far also non integrated. As you know, in our Villa Verde Rojada plant, we do acquire the pulp from the pulp producers. It will be very different when we will be supplying out of this year, but currently we feel that pressure. So it takes more time to be successful in a nutshell, but we have also been able to manage and to do so. So I hand over now to Antonio for the pulp volume and price outlook questions. So thank you for your question. Starting with the pulp volume. Indeed, we expect on the second half of the year to be at the level of last year, the second half of last year, which implies a recovery from the first half of this year. And this is because we see quite strong demand for pulp. We see a very healthy demand both in Europe and outside Europe. And this links to your second question. Besides supply and demand, obviously, as you know, exchange rate plays a very important role on price definition. So the evolution of E1, for sure, might have an impact on the evolution. However, we still see the market quite tight and the level of interest we are seeing even outside Europe for our own pulp is a good indicator that most likely supply and demand balance will be more relevant than exchange rate evolution going forward. The next question comes from Nuno Stasi from Heidern Bank. A A couple of questions. The first one is you showed us you tell us about the Figueres de la Roche investments. Can you now give us an idea of how much what level of cash costs do you think you could have in order to reduce like in percentage terms or something following this investment? And the second question would be in terms of the paper prices, you have been in the and quote, food free, you have been announcing several price increases in the last few months. And my question is how much of these increases are yet to be reflected in the prices that we saw in Q2 of 2018? So because this takes time and the price increases are not immediate, how much are you still going to see from price increases that were already announced? 3rd question would be in terms of future price increases. What would be the reaction from clients? And how are nonintegrated paper producers feeling this open price environment? So is it going to be more paper price increases? Do you think this is something that is going to happen yes or yes? Or you are seeing that the elasticity of demand is proving difficult to increase prices more. A final question related to what Joao was asking. In terms of the pulp prices, you have always had probably a more cautious approach to pulp prices. But with these limitations on recovered paper in China, there really seems to be and lack of new supply, there really seems to be a very strong imbalance between demand and supply. How high do you think pulp prices can go until there are there is an effect in demand? What is your opinion about that? Okay. So prices questions both paper, how much is going to be still reflected opportunities for further price increases. And the view on the end balance on hardwood pulp will be addressed by Antonio. So on the cash cost impact of the investments that we made in pulp, I understand that was your first tremendous impact on cash costs. I mean, this investment was mainly to 1, increased capacity and 2, improve environmental impacts. And of course, in that sense, it was marginal. So but it does not move in a significant way, to be fair, our cash cost position. On top, the marginal wood we have to supply is also at the marginal cost, which in this case is negative marginal cost in the sense that we have mostly to import, as you know, given that today there's already not enough wood in Portugal to supply all our needs. So no significant impact on cash costs, I would say. I hand over to Antonio for the price issues. So on the paper and total paper prices, actually your question is probably it's pretty into several different questions. First of all, regarding what has happened so far and the speed of reaction on the price increases. And if we look to our pure price increase, our pure price increase was 9% to 10% year on year. The issue is that exchange rate obviously takes the wholesale exchange rate takes a good part of that price increases. The second comment I'd like to make is regarding what we see and what market index reflects. And we see a much quicker evolution of prices in our accounts than what market indexes reflect. So market indexes typically have a lag vis a vis reality. Our policy is very simple. Whenever we set the price increase, we set the dates and all prices from that date onwards with no exceptions are changed. The last comment that you were referring to is about elasticity of demand and capability to absorption of further paper prices. It's obviously very difficult to answer quantitatively as higher we go, more difficulties to pass new price increases. Having said that, we need to look to prices in a very long term perspective. And if you look in a very long term perspective and we go back to 2,007, 2006, 2004 and we inflate we at rate prices with inflation until today, we still see that today no matter those price increases and cut offs prices in Europe are still in real terms much more on and this will be very much dependent not only in supply and demand, but also on the pulp costs. And now I will move to your comment on pulp costs. I think we share the same view that we have inferred in your question. Until 2021, as per yesterday, until second in our first half of twenty twenty and second quarter, there is no new greenfield top capacity. But the market demands top each and every year. There is a continuous growth for top demand that actually we don't see slowing down, we see increasing this year better than last year. And so very easily by the time of the startup of the new wind fuel project announced yesterday, the demand will the increased demand will be accumulated clearly above 3,000,000 tons. There is no supply to match this increased demand by 2021. So I think we can share your view that we believe that the market is going to be very tight. Already now, it's already tight, but we'll go further. The tightness will further increase until 2021 at the best. And let's not forget that by the time the new project I'm referring to starts up, this project will be less than half of the actual related demand during this 2 years period. But do you think that okay, so if pulp prices keep going up by $100 or $150 a ton per year, At the certain point, this puts such a huge pressure that either all the paper prices go up, the tissue and all that Or there's a huge squeeze in the companies in terms of the margins that are integrated and especially in China. Is the market able to keep growing in terms of the demand for pulpits, dollars 1,000,000 or $1,200,000 and $1,500,000 a year Is prices increased that way? Or that's the $1,000,000 question, you also have no clue? And it's very difficult to have more to what I've just said. But obviously, with the pressure on margins that we see in the Continental III and were expressed by Diogo on this issue, is more than likely that paper prices need to keep oil increasing to absorb at least part of the increase already increased pulp prices. And it's highly unlikely that there will be a significant elasticity especially in the tissue. Can you repeat the last question on the tissue, please? So the logic is, will these price increases that will end up affecting the consumer affect the global volume sold of tissue? Will this block the increase that we are seeing in terms of demand for tissue? Obviously, in Europe and U. S, I don't think, but more in emerging markets? No, we don't think the consumer has any impact on the making it more difficult price increases, which are minimum no, not at all. I mean, the issue here has been much more the retailers. They put pressure, as you know, on this category of products like in others compared to themselves. Then you go to them, they say, I'll increase my price when I'll see the other retailer increase its price. And everybody says that. So it's complex. The consumer we don't anticipate consumer demand to be impacted by those small price variations. If we'd be talking double digit numbers maybe at this level, we don't anticipate that, no. Thank you. The next question comes from Jose Rito from CaixaBank. Please go ahead. Yes. Good afternoon. Two quick questions on when on the net debt evolution, net debt remained flat year on year in H1. How do you see this evolving until the year end? So what is your expectation for net debt year on year for this year? And the second question around new projects. So Navigata just announced a new development for Mozambique, but this is more towards the midterm. Could we see a period of strong cash flow post 2019 onwards with no major project or is the company looking at new investment cycle? Thank you. Let's see if we understood your question. I mean, you would like to understand 2019 from both an investment perspective and a net debt perspective. Is that correct? So in 2018, how do you see the net debt for this year compared with last year? So you mentioned in the release, I think that you had a kind of cash inflow in terms of working capital outflow, sorry. Just to understand if you expect a reduction on net debt for this year? That will be the first question. The second is, well, we have these projects for 20 18, sorry, but post 2018 or from 2019 onwards, we have no new projects. So my question is, if the company is working a new investment cycle, new projects or if we could expect eventually basically cash flow being paid through dividends? Okay. Very clear. So first question, net debt to EBITDA at the end of the year, we anticipate to be quite lower than it is today as we see the EBITDA with an interesting evolution and therefore the cash flow generation as well. So I would say maybe below 1.3. We expect it to be below 1.3. On the new projects for 2019, we currently don't have anything planned on the expansion front, but we will certainly have investments, namely to face regulatory evolutions. We are mainly considering several of our or a couple of our equipments, which we will have to either revamp or substitute and that could amount to several tens of 1,000,000 of euros. But we have not yet finished the plan, so I cannot yet share it with you because it's not finished. But you are right from an operational viewpoint, even though we are considering the several opportunities and trying to understand what we could do from 2019 onwards. We have not yet finalized that work. So currently, we don't anticipate any major investment besides the those coming from the regulation. Okay. Thank you. Thank you. Thank you. The next question comes from Antonio Solates from Intermani. Please go ahead. Hi, good afternoon. My question is related with your energy business. So the government has been saying on the press that it's going to reduce the costs from the system. So I'd like to know if your business will be impacted by the measures Or is it going to be or is it impact already impact? And mainly in terms of prices or related with the profitability mechanism? Okay. Thank you. We don't anticipate any major impact on our energy units besides what is already anticipated because as you know, we are biomass based, so we are a bit different from others. And we at the timing of being awarded the licenses to operate, As you know, we have a specific price for a couple of years. And the next time we will have a revision downwards of some of our prices is 2020. But currently, I confirm that biomass based energy is not discussion on that is not on the table. So we don't anticipate any impact. Thank you. The next question comes from Nuno Stasi from Haitong Bank. Please go ahead. Hi. Just a follow-up on this last risk mentioned by Gior about the scheme of trade war. Do you think there could be some sort of ban or an extra tariffs for the paper, European paper sold in the United States? Will there be enough capacity in the States to supply their own markets? Do you see this as a likely risk or as a possible risk or effectively there won't be this possibility? So I will ask Antonio then to give a more specific answer, but I'll make 2 introductory comments. First, one could argue that these trade war tensions are already in a way impacting a bit the business because in some cases, people mainly in Asia are already maybe delaying some decisions in a preemptive way, anticipating potential trade war. This is just like the financial markets that you certainly know much better than I do. People anticipate everything. So I could argue that some impact we can already feel. The second question is that I will say it is quite difficult to anticipate those types of movements in countries such as the U. S. And with the current President, it seems to be even tougher to anticipate. After those introductions, I hand over to Antonio. Well, I think your question actually is also 2 different questions. The situation in the USA, as far as we understand, is also relatively tight in terms of operating rate for the industry. And also, as you know, further capacity has been already announced to be taken down in the coming months until early 2019. And it's not impossible that even new capacity will be taken down, I mean, taken down converted to other grades, namely to packaging rates. So it's possible that the occupation rate of the industry in U. S. Is becoming even higher than it is today. Regarding your first question about specific duties into the USA, and I'm not a legal expert, but I doubt if on top of the existing duties on the countries that have been affected, new duties can be imposed. Obviously, not all countries have been affected by those duties, and they can be extended to other countries in Europe or outside Europe. But on the countries that are mainly Portugal, that was already affected, I doubt if new duties can be enforced during this period. Okay. Thank you. Thank you. Ladies and gentlemen, there are no further questions. I now give