Earnings Call: Q1 2018

May 10, 2018

Welcome to the Navigator Company Conference Call. I will now hand over to Joanna Apleton. Please go ahead. Thank you. Ladies and gentlemen, welcome to the Navigasas Company conference call and webcast for 2018 Q1 results. Participating in the call are Diego Silvaire, the company's CEO Fernando Rouge, CFO Antonio Glorme, CCO Nuno Sanch, responsible for New Business and Forest and Jean Pablo Vida, responsible for Industrial Areas and R and D Departments. We will start with a brief presentation of the main achievements of the quarter, and we'll follow with a Q and A session at the end. The presentation can be accessed through links available on the website and questions may be addressed also through the webcast platform. Bjorg will start with the main highlights of the quarter and Antonio will follow with an overview of the pulp and paper market. Fernando will focus on the main financial issues and Nuno Fransch will give an update on the tissue project in Kaseya. I will now hand over to Diogo. Diogo, please? Good afternoon and thank you for joining us today. I will be brief on my comments on the results and take the opportunity to share with you some key messages. So let's start with the pack we've prepared and go over to Slide 3. 2018 did start very positively for the pulp business, continuing the upward trend registered throughout 2017 with additional price increases announced during the current quarter. As for Paper, market conditions also improved with strong order books in Europe and overseas and uncoated woodfree prices finally improving. Navigator led 2 price increases in Europe during the quarter and recently announced increases in the U. S. And in other international markets. In this context, the group's performance in the quarter reflects higher prices for both pulp and paper, while registering a decrease in sales volumes due to several production stoppages, which affected not only, but mainly the pulp business. The Q1 was also impacted by the conclusion of the sale of our pellets business in the U. S. As previously announced, we were presented with an attractive opportunity to divest this business for a total transaction value of US135 $1,000,000 The deal was closed on February and impacted our quarterly figures. There was an upfront payment of around €68,000,000 This was translated in a capital gain of approximately €16,000,000 which deducted of several adjustments and an impact in EBITDA of around EUR 9,000,000 So excluding the impact of the Palace business, excluding the positive impact of this business, our EBITDA for this quarter would have been €101,000,000 and would reflect an 8% improvement year on year and an EBITDA over sales margin of 26.4%. This cash inflow and the strong operational cash flow generated in the period allowed for a significant reduction in the group's net debt, lowering our ratio net debt to EBITDA to 1.3. Some of our key concerns over the last years have been focused on improving efficiency and reducing costs, and we did continue our program during the quarter, which translated in an estimated impact of €3,800,000 year over year. Finally, after the closing of the quarter, we received some positive news regarding the anti dumping process in the U. S. We were informed by the authorities that the provisional anti dumping duty to be applied retroactively for paper sales in the U. S. For the periods going from August 2015 to February 2017 will be 0%. We are very happy with the decisions as it confirms the position consistently defended by Navigator, which was and is and will be that there were no grounds for applying measures of this type to our products sold in the United States of America. It should be recalled that the rate initially applied between August 2015 January 2016 was 29.53 percent, then revised downwards to 7.8%. And now, we have the confirmation that it will be 0 for this 1st period under review, which ended on February 2017. Unfortunately, as you can see, there are very long and burdensome procedures, which lack fundament and only exist to defend uncompetitive producers. I will now ask Antonio to share his views on the pulp and paper markets. Antonio? Thank you, Diogo. Going to Slide 4 and after the year of 2017 where prices for hardwood pulp increased during the year an impressive 51% in U. S. Dollars 33% in euros, the momentum continued during Q1 2018. As a result, hardwood pulp prices in Europe were on average $65 higher than in Q4 last year and USD 3.27 above Q1 2017 levels. We believe this is the result of a combined number of factors as shown on Slide 5. We try to summarize what we think might be a quite conservative view of 2018 pulp market. Q1 actually proves that, and we believe we'll continue to enjoy a healthy demand that will absorb the new capacity available in the market. Regarding the Q1, Iucolito's pulp delivers increased in the periods by an excess of 4% in Q1, additional 250,000 tons in 1 quarter only for Eucalyptus. Actually, if we count hardwood, the increase was 340,000 tons, which implies an annual volume close to 1,400,000 tons. Together with this good demand evolution, supply disruptions continued over the quarter, removing an estimated over 500,000 tons of effective production capacity. AMCO 2 23 papers continue to be one of the best performing printing and writing grades globally, as you can see on Slide 6. With a marginal positive demand evolution, year to date February on a year on year basis after another positive demand evolution for the whole 2017. In more detail, turning to Slide 7, we can see that Europe, our main regional market, experienced during Q1 a planned demand decline of circa 4%, primarily in office papers, which can be attributed mainly to a pipeline stock decrease across Europe since November last year and up until late Q1 this year. Despite this decline on upper end consumption, mills operated at high levels and There was also some adjustments in supply in paper this year as some machines were stopped during at least part of the period. Conditions in the paper market in the U. S. Improved from the last couple of years with upper end demand declining around 2%. Up end consumption was negatively impacted by another steep reduction of imports into the U. S. Of approximately 18% yesterday in February, and deliveries from U. S. Mills into the U. S. Were actually flat in the period. In a moment marked by capacity reductions, which will accelerate as we're moving to Q2. We estimate that less than 25% of the total capacity that will be reduced during the year in the U. S. A, 640,000 tons, was actually reduced in Q1. So the majority of the volume is still ahead of us. This has enabled U. S. Mills to operate at quite good levels, and prices have moved up in January, February and are moving up again during the month of May. Demand continues positive in other regions of the world, including Asia, Middle East and Africa. The major Asian players announced significant price increases during Q1 on top of the more than US200 dollars than during 2017. Some new capacity is expected for 2018, which will probably offset by the closures of the ongoing policies around the Chinese supply side reform, namely by shutting down cluting capacities. So as you can see on Slide 8, prices have increased again in the beginning of the year in the context of record low papermakers margins, representing an increased pressure on non integrated mills. This has led to another price hike in ENCOTOD3 in Europe in late March early April, as you can see on Slide 9. On average, paper price benchmark improved over €40 year on year on Q1 in excess of 5%. Now back to you, Diogo. Thank you, Antonio. In this context, let's turn to Slide 10 with the overview of Navigator's paper business performance. Volumes came down year on year to 361,000 tonnes, even though the group continued to enrich its product mix during this period, with another improvement of the premium share of the paper business of 6 percentage points year on year and a growth of 8 percentage points on the share of mill brand sales. And you know how relevant this is, how core it has been for the strategy of Navigator for the past 20 years. As stated previously, Navigator took the lead in 2 price rises in Europe, announced in January and in March for implementation in April. And announced other price increases in the U. S. And other international markets. The group's average price improved by 3.1%, but of course, with quite different developments depending on the end markets, and this was mainly due to the negative impact of the euro, U. S. Dollar exchange rate. Let me just remind you that approximately 30% of our paper sales are dollar denominated and therefore directly impacted by the dollar euro exchange rate. So clearly, our paper prices recovered significantly in Europe, maybe more than 5%, also growing in markets besides the U. S. Despite the evolution of the dollar. However, you should note that the average exchange rate for the quarter was 1 point 23 versus 1.06 in the Q1 of 2017. This, of course, caused a sharp erosion in sales prices in the U. S. Namely, where actually price evolved year on year negatively. The increase the overall increase in the average sales price combined with a slight decline in the volume available for sale resulted in a modest increase in the value of paper sales in euros with a total of $283,000,000 So going now to Slide 11, Navigator's pulp business, which was affected by the reduction in the volume of pulp available for sale, due both to the planned maintenance shutdown at the Setubo Pulp Mill. There was no such stoppage in the same quarter 2017, but also due to the stock buildup to prepare for the Figueres de Forres shutdown required to complete the expansion of the mills pulp production capacity. As a result of those 2, pulp sales stood at 53,000 tons, which compare poorly to 95,000 tons in the Q1 of 2017, where no stoppage occurred and where the group recorded its highest quarterly figure ever. The upward trend in pulp prices observed in the previous year continued And the average peaks of BHTP index in euros was up 28% in the quarter versus the average benchmark price in the Q1 2017. The group's average pulp price also gained 28%, and this partially mitigated the drop in sales volume with total sales standing at a value of €33,000,000 which still represents a drop of 24%. We continue to improve our sales mix in pulp as well, increasing namely the weight of Decor and Special Paper sales in Europe quite significantly from 64% to 84% year on year. Going now to the tissue business on Slide 12. The market suffered quite an increase in production costs in the Q1, namely as a consequence of pulp prices. Despite the efforts of the main manufacturers, this significant cost inflation has not been yet reflected in higher prices for sales of tissue products, namely to retailers. At Navigator, Tissue grew in volume to approximately €19,000,000 benefiting from an increase in the average sales price due essentially to an improvement in the mix. We're here talking of a smaller proportion of sales with reels versus finished goods, But also to a step by step implementation of end consumer price increases, which started in October and the second rise taking place last January. In terms of channel sales mix, Away From Home segment increased to 64 percent and at home segment consumer segment was at 31%. Rios decreased to 5%. So in this context, our EBITDA in the quarter totaled €111,000,000 comparing to €90,000,000 in 2017, as you can see on Slide 13. This clear increase was due essentially to price improvement as well as to the positive impact of the sale of the pellet business. Without this last impact, EBITDA would have stood at $101,000,000 still increasing 8% year on year. As for costs, we, of course, continue to be extremely focused on improving our production efficiency and have managed to offset some of the main impacts registered during the quarter, namely decreasing the price of several chemicals, in particular, caustic soda, for which unit prices increased by more than 60% over the quarter. I repeat 60%. Also significant was the increase in personnel costs due essentially to the growing workforce because of the new tissue project in Kaseya, but also to some severance pay and pension fund costs associated with the ongoing rejuvenation program. So Navigator continues to press ahead with its M2 program, as you know, the name we give to our overall cost reduction program, improving operational efficiency through sustained reduction of production costs as can be seen on Slide 14. This program has had an estimated impact of €3,800,000 year on year on EBITDA, thanks in particular to successful saving initiatives in consumption of fibers, roughly €1,300,000 and Chemicals, EUR 600,000. In addition to this effort and these reductions, the group, of course, is also active in many renegotiations, namely the renegotiation of its electricity and natural gas contracts, which are quite large, as you know. This quarter, we managed savings estimated against market prices of around €7,300,000 which of course add up to the €3,800,000 we've just mentioned before. I will now ask Fernando to comment on the next slide. Thank you, Diogo. Going to Slide 15, we have some detail on the evolution of our free cash flow, which stood at $134,000,000 a very strong figure for the quarter, which was positively impacted by the sale of the pellets business. CapEx stood at $29,000,000 and working capital invest during the Q1 was significantly lower with a crucial contribution from the improvement in balance receivable payable to the stake. Thanks to the high number of VAT refunds in the period. The group record a balance received from the state of approximately EUR 3,000,000 to EUR 1,000,000, which more than offset the increase of EUR14 1,000,000 in the value of inventories. So at the end of March, as you can see on Slide 16, the group's net debt stood at EUR 559,000,000, representing a significant reduction in relation to year end 2017, where the amount was €693,000,000 and reflecting the first inflow from the sale of the pellet business, euros 68,000,000 as well as strong cash flow generation over the period. Going now to Slide 17, financial results show a loss of €5,500,000 as compared to a loss of €3,900,000 in 2017. This increase was caused essentially by the recording a loss of ERL 3,300,000 resulting from the recognition of the difference between the nominal and present values of the deferred amount related to disposal of the pellets business. As you recall, the payment was done with upfront payment of 67% of sales value and the remaining US45 million dollars will be paid over a 5 years period. It should be stressed that nominal interest receivable shall be interest at the rate of 2.5%. Finally, our CapEx is detailed on Slide 18. The group's capital expenditure in the Q1 of 2018 was around €29,000,000 The project to expand capacity in Figueira de Forche represent investment of EUR 4,200,000 and the new tissue mill in Cassia around €11,000,000 Recurrent investment in Pulp and Paper Business totaled €11,500,000 as well €1,900,000 in the current tissue operation in Villaverde Groven and other projects. The CapEx in the next quarter should accelerate, namely associated with Figueira de Forche and Tissue projects as we maintain our guidance of around EUR 200,000,000 for overall CapEx during 2018. Back to you, Thiago. We see that demand in the market remains robust and has been able to absorb the normal pace of operations at pulp mills and the production ramp up of the new capacities. The tissue market will remain under strong pressure on the high level of pulp prices, And it is absolutely critical that the tissue producers succeed in passing on part at least of this increase in their sales prices for the rest of the year. In Encoated Wood Free Paper, order books remain strong and the group continues to take the lead in price increases, announcing already this month in May, a further price increase in Europe taking effect as of July 1. So there are currently no foreseeable signs to a significant change in conditions in the pulp and paper market. And our main concerns and real concerns remain the exchange rate evolution and certain production costs, namely chemicals. It should also be noted that the group's pulp business performance in the second quarter will be affected by the maintenance stoppage at the Figueres de Forges Mill, which will also be used, of course, to finalize and start up the project of the expanded pulp capacity. But first, we lose capacity because of the maintenance shutdown, then we gain capacity because of the increase. On Slide 20, we have an update on this Figueres de Forche expansion project, a project internally we call P03 for Optimization Project 3. As this is a debottlenecking that will allow not only to increase pulp capacity from roughly 580,000 to 650 1,000 tons per year, but also to increase the overall efficiency of the pulp production process. We are namely implementing a new oxygen de liquinification line with significant environmental advantages in terms of flue gas and liquid effluent emissions. We're also investing as we did in Casilla in the reduction of other gases. As known, total CapEx was kept on budget at €81,500,000 and the project was completed in April and is currently as we speak in the startup phase. I will ask now Nuno Senge to comment on the updates of the ongoing tissue project in Casilla. Nono? Thanks, Diogo. We thought this would be a good opportunity to give you a more thorough update on the project. As some of the key dates are approaching, so let's turn to Slide 21. So the project continues on time and on budget. EUR 120,000,000 overall CapEx in the paper machine will start production of rims in August, while converting lines have already started production this week. We have been working very actively on the commercial front, reinforcing our teams and progressing successfully in our client book building. We are expanding new clients not only in Portugal and Spain, but also in France and in the UK. I will quickly show you some pictures of the mill sites on the next slide, but also of the new converting lines, which are due to start as I said, which have started production this week. On page 22, you see the sites. On the left hand side, you see the converting part of the operation. On the right side, the place where the future paper machine will be operating. Based Slides 23 and 24 show our first Gambini production converting line with capacity of 15,000 tonnes per year. You see on Page 25, the first Robles toilet paper that came out last week on the left, and you see the first pallet produced already this Monday of the first product. And finally, a flavor so this meal is an important step in our growth path towards the tissue business as we estimated Navigator, as we can see on Slide 26, will become number 2 player in Iberia once this project is concluded. So this is all back to you, Diogo. So just a final word on the dividend proposal for our AGM on Slide 27. The Navigator Company Board of Directors proposes a dividend of EUR 170,000,000 to be paid in June, which does correspond to €0.2 371 per share. Our main shareholder has proposed distribution of reserves totaling €30,000,000 which reflects into 0 point 4184 per share. In total, this means €0.28 per share or a total distribution of €200,000,000 which do represent an implicit dividend yield of roughly 6%. Thank you. Thank you, Diop. This concludes our comments on results. We are now ready for the Q and A. Ladies and gentlemen, the Q and A session starts now. The first question comes from Toni Salades from Intermani. Please go ahead. Good afternoon, everyone. I have three questions. First one is related with, if you can explain a little bit better the difference between the impact from the pellets business, euros 17,000,000 and the impact at EBITDA level, so euros 7,000,000, euros 8,000,000 plus. And if you can explain what was staff expenses and what was external supplies and services? Second question is related with the €30,000,000 that are in the U. S. Account. I think it's a captive amount. So it's still in your balance sheet, but is a captive amount, just to confirm it. And third question is related to the volumes on the Q2. From the presentation, I understood that volumes will go down sequentially on pulp and paper, if you can confirm it or not? Thank you very much. [SPEAKER JOSE HUMBERTO ACOSTA MARTIN:] I shall repeat just to be sure that I understood. I guess I understood the first question. You'd like to get a better understanding on the impact of the pellets business, what was EBITDA and what was not EBITDA? Second question, you want to understand a little bit better what's the situation for the €30,000,000 that we have already paid as anti dumping viewpoint. But I'm not clear exactly on your first question. If you could repeat, please. The first question is related with the impact activity day level of the pellets business sales. So at top line, it was €17,000,000, 1.7,000,000 and at EBITDA level it was around €10,000,000 So that's a difference of €7,000,000 €8,000,000 In terms of costs, if you could do the breakdown, namely between external supplies and service and staff expenses. And the last question were volumes on pulp and on paper for the 2nd quarter. From the presentation, I understood that volumes are going down sequentially from the Q1, if you can confirm it, please? Okay. So I'll start with the third one and then yes, so maybe on the volumes, we don't expect volumes in Q2 to be lower to volumes in Q1, neither in pulp nor in paper. So it's an easy answer. Your second question on antidumping is I will ask Fernando to address it as well as the pellets impact the 17% overall versus the 10% that went through the P and L and the EBITDA. Fernando? Okay. The first one, the pellets, the impact on the EBITDA includes the capital gain. The net impact is €9,100,000. This is the net impact. And we start with €15,800,000 on capital gain. On that, we should deduct 2 items. 1, related with the possible liability after the deal has been concluded. Our thought now is that liability will not arise, but the amount considered in the accounts were €5,000,000 In addition to that, we have the normal running business from 1st January till 15 February, including the expense on the deal, and that amounts to EUR 1,800,000. Regarding antidumping, like we have said, we have this is affecting our balance sheet, not our profit and loss account. Since the beginning, we thought that we are in conditions to prove that we have no liability on anti dumping. This means that the accounts, the profits and loss since the beginning were not affected by this, but the balance sheet was because we have to render some deposits and those deposits amounts now more or less EUR 30,000,000 and we expect to recover that beginning next October. I hope I have answered your questions. Okay. Thank you very much. Thank you. The next question comes from Nuno Stacio from Heitung Bank. Please go ahead. Hi. Good afternoon, everyone. Just wanted to clarify, if possible, in terms of the volumes, when we look at the full year, do you expect to recover this lower this drop of 3% in terms of paper sales? So do you expect to arrive at full year with the same level of an potable 3 paper sales stable at least or even up year on year? And in pulp, I imagine that this decline in the first quarter will not be fully recovered. Can you give us an indication of how much do you expect to sell this year in terms of volumes? Thank you. So I will ask Antonio to address this with, as you will hear, a different perspective on paper versus pulp. Antonio? Thank you for the question, Uno. Starting on paper, yes, we do expect to recover part of the volumes lost due to the shutdown, the plant shutdown through the rest of the year and to recover, if not all, the very large majority of what we have lost, which will imply that by the end of the year, we expect to have volumes in 2018 above volumes in 2017. On the pulp side, it will be tougher because as you know, we have made a major overall in our million figure out the force. So we need to be quite careful with the start up and start ups after major overalls always might have surprises. So we do expect to recover a good part of what we have lost due to the shutdown. It's yet uncertain how much we will be able to recover. Okay. And just on this shutdown and the reinitiation of the mill, I imagine that this includes higher cost than a normal shutdown. Can you give us an indication of how much your EBITDA this year could be affected by this event? Thank you. So I will ask Jean Paul Olivier, as you know, in charge of industrial operations, to give you some more inputs on the stoppage, even though we will not be able to yet to share the numbers on the EBITDA, but so that you get a better feeling of what type of stoppage we're talking about given the expansion projects. Jean Paul? Okay. So thank you very much. We have combined the stoppage of a 18 month period. That's the period of stoppages between 2 events at Sierra Mill. We have combined that normal, let's say, stoppage with a capacity increase of approximately 70,000 tons, which will increase our total capacity to 650,000 tons. Concerning your cost question, I'm not able to give you a specific answer at the moment because we have just concluded the stoppage. So we are still looking at the cost. But I can tell you that it will be within the expected figures. So we will not have a surprise. Okay. Thank you. Thank you. The next question comes from Jose Rito, Caixabank. Please go ahead. Yes. Hi. Good afternoon. So just a follow-up on the pulp volumes evolution in the quarter. And you mentioned that you also have the stoppage in Q2 related to its expansion. Could you give following this decline in Q1 and expected shutdown or lower production in Q2, what is your expectation for the full year in terms of volumes? Just for us to have an idea in terms of pulp volumes, how much should we start to consider? And the second question on the list of paper prices, which currently stand at €860 per ton in Europe. What is your expectation for the second half of this year? Thank you. I mean, it is not yet obvious to have a clear view, but to put it simple, by the end of the year, we should have produced more pulp than last year. So that's the floor currently. Then it will depend a lot on how we work in the very coming weeks, how does the plant react to this capacity increase. So as a floor, we will be selling contrary to Q1 very clearly. At the end of the year, we will have at least reduced the same amount of pulp than we did in 2017. Okay. Thank you. Thank you. The next question comes from Jose Martin Suarez from JB Capital Markets. Please go ahead. Hello. I hope everyone is well. I have two questions, and they're both on inorganic growth. There is apparently a pulp producer for sale in Brazil. We've heard that through press reports. Is there something that could be interesting for you? And if so, do you expect any decision to be taken in the short term? And then the second also on consolidation. What we're getting from other tissue producers is that they haven't been able to pass on the increasing costs to their clients. And I suspect there's going to be a few non integrated players struggling. Do you see any imminent acquisition opportunities arising from this scenario too? Thank you. Very good. So very two questions very easy to answer. So on the first one, we have also heard that there is such an opportunity in the market. I am unfortunately unable to comment whatsoever regarding that opportunity. On the tissue, certainly, there will be several tissue producers as also other paper producers non integrated, actually that does not only impact tissue that if the prices continue as they are, we'll be up for sale. Never in the past has the difference between the average selling prices of both tissue, uncoated, coated and pulp being so small never before. So for sure, it must be very difficult for non integrated producers. However, as we have said previously, we consider we don't know yet well enough the overall tissue market to embark in an acquisition. So mid term, something that could happen. Short term, even though we recognize there will be opportunities, we don't see ourselves sizing those opportunities. That's very clear. Thank you very much. Thank you. The next question comes from Carlos Jesus from Caixa. Please go ahead. Hello, hi. Good afternoon. First of all, a specific question. Can you provide some visibility on the timetable of the payments of the remaining amount of the pellet sale in order for us to know how to distribute the amount over the 5 years that come? And the second one, more generic, how do you see the performance of pulp prices, namely in the second half of this year, given the current market balance? And also, if you can provide your view on the pulp prices also for 2019? Thank you. So thank you for your question. I will start by the second one by the view on the pulp prices. And we see the market quite strong at the moment, probably stronger than everybody was expecting a few months ago. We do believe that this strength in the hardwood will sustain, will continue. The strength on the soft tools, it will very much depend, I think, on what will happen in the next summer with the startups of soft tools that are on the pipeline. So this will affect the soft tooth prices. And obviously, this will affect as well because of the interchangeability in some grades. This affect as well the ARPU dilution. So far, ARPU, I will say, is likely to be stronger than soft goods, but we need to see what is going to happen after the summer. An important remark, I think, on the Q1 is that namely on our boots, this time, it was not China that was the main driver of demand. Other regions of the world, including Europe, posted significant growth year on year on the demand of hardwood. Thank you. Very good. So now Nuno will share with you the almost bullet payment scheme we have for the remaining part of the pellet business. Nuno? Okay. So there's 45,000,000 dollars of course. The $2,500,000 will be paid every year over the next 4 years and the last payment of $35,000,000 paid on year 5. And this will be an interest bearing debt and so there will be interest paying on these amounts. Okay. Thank you. Thank you. The next question comes from Luis de Toledo from BBVA. Please go ahead. Hey, good afternoon. Two questions from my side. The first one with regards to the anti dumping next regulatory period, the way you will proceed, I don't know if it's changing and what future impact are you expecting and if you will continue the same level of deposits? And what's your perception there? And the second one, it's related with costs, but the price of chemicals. I would like to know if you have suffered the full extent of inflation of those costs in the Q1 or you expect some lag on impact on future quarters as well as the ones we can assume for our transportation logistics? And if the renegotiations you're considering on energy and natural gas will be of magnitude, which could offset that impact? Or if that concern that you have on rising costs, I mean, what's your view with in the next quarters? And if you believe that is something that will impact more into second half or first half? Thank you. [SPEAKER JOSE RAFAEL FERNANDEZ:] I shall repeat just to make sure that we understood currently the questions. So the first question is how we view the current periods from an anti dumping viewpoint. We have seen that until February 2017. We have been clear that at 0%. You would like to get our feeling on how we see going forward, and I will ask Antonio to address that question. The second question, if I understood correctly, was to get a feel from our side on a couple of cost items to understand how we view them evolving in the coming quarters, and you referred mainly Chemicals, Logistics and Energy. Is that correct? Correct. So we'll start with our view on anti dumping with Antonio and then Joao Paulo will address the cost issue. So as we said in previous quarters, we do believe that this anti theft in case was groundless and foundered and unfair. So we have been operating in the U. S. Since the anti dumping case was issued as business as usual. So we actually took into consideration the anti dumping to develop our commercial policy. This will be exactly the same going forward. We are very committed to the U. S. Market, and our objective is to develop mill plan business and profitable business. So as far as we are able to develop profitable business in the USA, bearing in mind price evolution and exchange rates, we'll continue to do so regardless of antidumping. Concerning costs and especially on the 2 items mentioned, chemicals and energies. Chemicals, there were some legislation changes in the European Union, which have limited production using lab cells and some chemicals have been there has been a shortage in Europe on those chemicals, especially on caustic soda, as Diogo mentioned before. We have planned a radical increase on those prices, and we now see the situation tending to stabilize more because it also opened the opportunity for American and Asian suppliers to enter Europe. So the situation does not seem as critical from the perspective of today as we have thought it would be in October, November last year. Concerning energy, the behavior of the electricity prices is a little bit awkward. We have all energy purchased for 2018. Therefore, we are not concerned. We are on the safe side. We are at the moment preparing or starting to prepare the year of 2019. And therefore, it's a little bit soon to talk about the future. Okay. Thank you very much. Thank you. The next question comes from Youssef Benito from Caixa. Please go ahead. Yes, good afternoon again. Just the question on the list of prices, paper prices in Europe. Currently, they are at €8.60 per ton. I asked before what is your expectation regarding the evolution of prices for the second half of this year. We had recently a price increase in the markets. Where do you think that prices could reach in the second half? And another question related with the strategic view of investing in pulp because in the past, you had these long term project of investing in pulp mill in Mozambique. This is kind of altered for the moment. Could you be interested in the future from a strategic point of view to have further investments in pulp? Thank you. So on the paper market prices, as you have noticed, has been an effort and slow move so far. So we have implemented 6 price increases since the beginning of last year, and the peaks has improved less than we were expecting it to improve. We are confident that the July pricing days that we have recently announced will be implemented. All the conditions are set on that direction. After that, it's very hard to predict what will happen further than the summer, and this will be very much related, as I said before, to the pulp price developments. Very good. On the question on pulp, yes, we do believe that there will be opportunities for us to invest further in hardwood pulp and namely eucalyptus pulp. And we will be considering certainly additional debottlenecking opportunities as a minimum. Okay. Thank you. So just like a follow-up on these paper prices. Do you think that prices could reach the €900 per ton in the second half? Or this could be too much? Well, we wish. I think it's going to be very hard to have this move on the present with the present data that we have. Okay. Thank you. Thank you. Ladies and gentlemen, there are no further questions. I now give back the floor to the company. Thank you.