Earnings Call: Q4 2017

Feb 22, 2018

right. A very warm welcome to Kemira's Fourth Quarter and Full Year twenty seventeen Results Presentation. My name is Olli Turunen, and I'm Head of Investor Relations at Kemira. Today's presentation will be held by our President and CEO, Jari Rusenthal and our CFO, Petri Kastrein. After the presentation, you have an opportunity to ask questions here in the room and also over the webcast. Let's begin. Jari, please go ahead. Thank you, Oli. Welcome also on my behalf. Maybe summarizing 2017, it was a very eventful year. We progressed the execution of our strategy quite well and our plans. It's good to see growth again, 6% year on year organic growth. We saw a very good recovery on our oil and gas business. I do not call it growth because we're back to a level where we started after 2014. We streamlined our organization from three segments to two segments And second half of the year, after two year price decline, we started to see prices recover. We also started our biggest investment, a new chlorate bleaching line here in Finland that is now fully ramped up. And unfortunately, there were some adverse headwinds during the year. But despite these circumstances like fire at Huntsman in the beginning of the year, We saw two hurricanes, severe winter conditions, lacking raw materials, so not only pricing of raw materials, availability problems and then strongly weakening U. S. Dollar during the second half of the year. Despite these, we were able to grow the business and increase our profitability. First quarter and first half were very difficult for us, but second half of the year started to go better and show better results. I always show this circle on what we are doing on the strategic side and how we focus on developing the business forward. In driving organic growth, we were able to drive last year. On top of that, we launched 11 new products and applied for 52 primary patents. Our CapEx investments proceeded well across the board and completed that one site in Finland. And we also decided to add CER polymer into our European site in Holland, and that will be operational in 2019. In acquisition and integration, you've noticed that we've been very selective and careful and didn't do any acquisitions in 2016 or 2017 sorry, yes, sixteen-twenty seventeen, Axo integration is now fully completed and we reached the targets actually around or a bit over €20,000,000 of synergies. Those are mostly in the run rate in Q4. Integration went well, as I said, so the organization has shown that we can integrate even more complex businesses. The revenue of AXA was only EUR 200,000,000, but it was from a complexity point of view, it could have been much, much bigger. In September, we announced a joint venture, essentially an acquisition on 80% shares of an almost ready built AKD wax site in China. We are to close that one in H1 and then ramp it up during H2. So that's in our focus and going forward. Efficiency. Our fixed costs are quite well under control. One must have to remember that we operate in countries where, for instance, salary increases are much higher than here in Nordics or in Finland. And out of our 4,800 employees, only 800 are in Finland. So that's why keeping fixed cost under control is important. We streamlined the organization, like I said, and our boost program progressed forward. So a good step forward. So let's look at the full year number. I mostly talk about full year, and Petri will then cover the Q4 and more of the financials. So as a summary, organic growth on a good level. Operative EBITDA increased to €311,000,000 at 12.5%. One should remember that first half of the year was not great for us, and we were only 11.9% in the first half, but exceeded thirteen percent second half, which shows a right direction. Earnings per share after the settlement of the old legal case was zero five two euros but excluding that settlement would have been on the previous year level. As a reminder, we settled in September an old legal claim for events that happened in latter part of the 1990s. I can say it's a bit frustrating settling over twenty year old cases and not happy about paying those type of sums, rather put them into the building of the business. But at the same time, I'm quite pleased on how we settled it, took that risk away and shows that sometimes waiting and patience does help. The Board of Directors proposes a dividend of $0.05 3 per share, and that offers a 4.6% yield on the end of the year share price. If I look at a longer term development of four, five years, We've been able to grow in five years 3% average card level, two sixty million. But if I look at comparison to 2014, when we had divested our formic acid business, From there, we've grown EUR $350,000,000, while in 2015 and 2016, oil and gas was down significantly and now back to the 2014 levels. We have improved our operative EBITDA steadily and above our growth level, so profitable growth. And our margins did come down, like I said, but second half was already more normal and going to the right direction. Looking at Pulp and Paper on a full year basis, organic growth was 2%. It would have been on comparable basis 3% if we didn't have a loss of one customer or supplier in the Huntsman fire in January. Volumes also continued to grow about 2% level and the price recovery started during the second half of the year after two years of decline. APAC growth was on a good level and market remains very competitive. We do have work to do to improve our profitability in APAC. Operative EBITDA, Pulp and Paper, 13.4% for the full year and getting close to the 14% to 16% target. Fourth quarter was well in the range, and Petri will open up more of the events in Pulp and Paper in the fourth quarter. Raw material availability and disturb headwinds during the year and Naxo Paper Chemicals was done, I would say, a reasonable year going forward. The longer term development has been positive. We have delivered growth. We have developed EBITDA improvement. The next good step is that JV in China, which I'm looking forward. We obviously have to meet the closing conditions first half of the year and then complete the plant safely and then start it up. We might see some benefit slight benefit for this year. Let's see how the timing goes, but more benefit for next year. Moving on to Industry and Water from a few full year point of view. Industry and Water was a merger of municipal and industrial, anointing mining segments first of June last year. Obviously, any numbers that we show are back stated. Strong organic growth, 12% year on year. Volumes also grew 12%. Strong recovery, as I've said already, in oil and gas. Oil and gas, we're now back to the old levels after two missed years. Water treatment also grew quite nicely. And as a point of interest, our coagulants business grew 4% with volume and prices last year. Operative EBITDA, up €7,000,000 at 6% nicely. However, I cannot be pleased of the operative margin yet, so the work has to be continued on gaining back our price levels to prior good levels. We are not there yet, certainly not in the beginning of last year. And there was some margin diluting business when that oil and gas business grew back to its original level. Also, we had in the second half of the year a bit over EUR 20,000,000 plant equipment delivery for a make down unit of polymers to oil sands. That was a service to a customer and not our proprietary technology. We assisted the customer for that and it came through our books with high revenue with low margin, so it's diluting the H2 and Q4 numbers. Still, we saw 100 basis points improvement in our margin during H2 compared to H1. We need to optimize our polymer capacity and that's what we are working for. We have now sold our capacity essentially full, but it's not fully optimized. So now we start looking at which products to optimize and produce and which value yielding customers do we serve and how we look at that portfolio. So there's more to gain on pricing and optimizing the polymer lines across both businesses. So looking longer term perspective, we can see now good step change in revenue, even if we take out that equipment delivery last year of EUR 20,000,000. And water treatment on top of oil and gas has grown well also. In water treatment, we focus into EMEA, North America and less to South America and rather small Brazil still in APAC. In oil and gas, still shale oil and gas in the fracking stage, oil sands and CEOR. And as I mentioned, we started a EUR 30,000,000 investment for CEOR in Europe and hope to complete that mid next year. We have continued profitable growth and relative profitability improvement. That's what we want to continue to drive. We have ongoing actions, which will contribute into our profitability next couple of years. Markets are looking rather positive at the moment. We get this year the full benefit of the new chlorate capacity in The Nordics. Now I pushed too early a button. In The Nordics, we get efficiencies from the two segment structure. We have the boost program ongoing, including transportation optimization. Although, I must admit that at the moment, transportation prices in Europe and North America are going up, so some of this can be cost avoidance, but still much needed. The joint venture, we need to now close and complete and get it up and running and then reduce some of our pockets of margin diluting businesses that we have. Every business has pockets that are not performing as they should or have sub businesses that we need to think of our business models. So those we will be looking also in the future. On the uncertainty side, no new major uncertainties at the moment. Unfortunately, in the beginning of the year, the U. S. Dollar nor the weather in North America hasn't really helped us, but we push on. So outlook for the year. We intend to increase our operative EBITDA from twenty seventeen level this year. Now I'd like to ask Petri to come and give a bit more insight to the Q4 and our financials. Petri, please. Okay. Thank you, Jari. As Jari was saying and describing really the progress during the year, I will more focus on what took place during Q4. Let me see where we left off. So actually, the three key points that I like, at least from my perspective, the most important in the quarter are: first, it's the continued growth. And it's a volume growth, and I'll give you a bit more data on that one. But 11% at organic growth, very strong momentum, particularly in the bleaching chemicals business and obviously very, very strong continued recovery, as Jari was talking about, continuing in oil and gas. Second key point is improving profitability. We talk a lot about the raw material cost pressure and the sales prices. And here we are we're still sort of behind the curve, if you will, but we are improving in our position. And I'll come back to that when I when we talk about the raw material and prices as we typically do. And the third one, in this quarter, they were largely offsetting items between the quarters. So in my mind, the Pulp and Paper segment profitability in Q4 was perhaps too good, if you allow me to use a single simple term, and I and W, conversely, too low. But I'll come back to that and give you a bit more color on why I say that. So let's look at the numbers. As Jari was saying, throughout the year, but also through Q4, growth was driven by both segments. Obviously, exceptional growth in the oil and gas and also growth in pulp and paper was quite healthy. Jari mentioned the somewhat dilutive equipment revenue that we were delivering to Canada. If we exclude that, the organic growth would have been 9%. So still very, very healthy. One thing obviously worth noting is the currency headwind, which is caused by primarily the U. S. Dollar depreciation. The impact was 4% on sales and also EUR 4,000,000 on EBITDA level on profitability year on year comparison. And a reminder on the foreign currency, the impact comes to us through translation. We have very small transactional currency exposure, but it is the translation impact is quite significant as about onethree of our revenue comes from or is U. S. Dollar denominated. Pulp and paper. Again, nice growth. Growth was very much driven but also helped by the new investment, the new line in Jotunam in Finland. And the second point worth commenting is that on the comparison period, we had a major pulp chemical customer had a longer maintenance break. So that was somewhat of an easier comparison on the revenue point of view. And then the profitability, which was very good, 14.9% EBITDA margin. There are perhaps a couple of positive items that is worth singling out. One is that obviously, throughout the year, we accrue bonus accruals and we realized in Q4, at the end of the year, that the bonus accruals were had been a bit we have been accruing too heavily on the first three quarters, and hence, the bonus accrual on Q4 is lighter compared to the first previous quarters. The second item that is worth singling out is that we received emission trading compensation here in Finland, and that was obviously something that was only in Q4. So if you take those two items out for the quarter, the profitability, I would say, would have been about 14%, which is still going into the right direction and good levels, but not quite we're not quite yet at the 15% mark yet. However, I'd like to highlight that for a full year basis, obviously, the accruals are really from one quarter to another and the emission trading compensation really does not have a material impact, maybe 0.1% the profitability. So I would like to say that on a full year basis, it all evens out. But on the Q4, this was a bit too positive in terms of the result. In for Industry and Water, so the opposite was true. First of all, we had a similar bonus accrual adjustment going to the other direction in I and W, so we had to increase some of these incentive accruals, which obviously evens out for the full year. The second topic is a bit more complicated and a bit also a bit more difficult to estimate. All of our polymer plants are owned by our Industry and Water segment. The polymer plants provide polymers that are sold through both segments, both Pulp and Paper and I and W. Some of the challenges, headwinds, weather related, hurricane related impacts, which are causing disruptions to our operations. The cost of those is borne proportionately higher by Industry and Water because it sort of falls into the plant ownership philosophy. Similarly, the raw material price increases that take place during the quarter that doesn't go into the standard costs. They are sort of variable costs or manufacturing variance costs. They fall solely on industry and water. So there is a tendency that when this sort of abnormal costs happened. And during the Q4, we had two things or several things actually. We had the hurricane impact was impacting the operations and how smoothly those operations were running because we did have some raw material supply issues and secondly, the increase in costs and which particularly hit the polymer business. So the impact on a run rate level or Q4 level is probably one to two points. I can say as precisely as I can say for the Pulp and Paper, probably closer to 2% than 1% of that. And then, of course, there is the normal seasonality. Seasonality in the business, Q1 and Q4, the winter periods being slower in the traditional water treatment business. Still a comment on the growth, which was for the segment organic growth at 20% rate, which you can see on the left hand a bit lower. About half of that was due to the equipment deliveries. So that would have been about 10% for the segment. Okay, so let's move on then to the other item that is typically of very much interest, which is raw material prices and our sales prices. Obviously, we continue to see raw material prices going up, so that's clearly visible on the chart on the right hand side. What's obviously positive on this one, that now we are starting to we're able to offset some of these increases. So like Jari was saying, on the full year basis, first half of the year, this had quite a dramatic impact. You see those Q1 and Q2 numbers, the net impact was really tremendously negative for us. And this negative started to diminish in Q3, and now it's almost even out on a year on year comparison. So this has been the trend. And it sort of follows the longer term trend that you see on the left hand side. Whenever there is a variable cost increase, the pricing tends to follow with a couple of quarters of lag. So now we're seeing that in sort of a microscope or with a magnifying glass in 2017. Going forward, I think there's sort of market indications that we continue to see raw material prices going up, at least as far as we can see them. But like Jari was talking about, now the market is sort of getting starting to get used to that raw material price costs need to be passed on the customers. The 20 or so price increase announcements that we have and our competitors are acting in the same way is sort of the new normal versus how difficult it was to start talking about price increases six, twelve months ago when the market was accustomed to seeing price decreases. So that's the situation there. Some topics on from our from this slide. So our balance sheet continues to be strong. While the net debt increased by some EUR 60,000,000, the gearing remained below just below 60%, which is our guidance. And if you look at the last three years, our leverage ratio has been quite steady in this 2.1, 2.2 range. Regarding net working capital, we'll continue to focus on our net working capital. And for the average net working capital, which for us is perhaps more important than the year end number, which often the analysts and others are looking at, the average net working capital for the year has improved by almost one percentage point to 9.4 versus 10.3% in 2016. Then a couple of comments on the tax rate. U. S. Tax reform is expected to be positive for us long term. Clearly, the corporate tax rate going from 35% to 21%, it is positive for anybody who operates there. In the short term, going to 2018, one should not expect to see a significant reduction in the effective tax rate for two reasons. One is that we currently or last year, we did not yet we didn't show too much of profitable or profit in The U. S. And secondly, some of the so called BEAT provisions, base erosion and anti abuse tax, which is part of the legislation, are sort of limiting the benefits on short term. But again, on the long term, this will be we expect this to be positive for us. CapEx. Obviously, we have been on a capital investment phase sort of 2015 through 2017. We have completed large investments, chlorate plants, plants in Brazil and in Nordic Guerra, this new line in Finland, also invested quite heavily to increase our own capacity to take the full benefit of the actual integration. Added some polymer capacity in Italy and UK, also in The U. S, which is not here. So that has been on heavy investment phase, and you've seen some of the results of that, and we will see more of the results in 2018 and onwards. For 2017, CapEx was EUR 190,000,000, slightly below the EUR 200,000,000 guidance that we had for the year and 7.6% of sales. The 7.6% of sales, I think this is a I mean, it's somewhat higher than what we would still expect to see in the chemical industry. Chemical industry is on average probably around 6%. For 2018, our guidance is 160,000,000 to 160,000,000 to 200,000,000. And again, it's a fairly wide range because it depends on the timing of some of those projects, how they will fall, whether we can finish them on this side of the year or whether they fall into the next the other side of the year. There are also some optionality in terms of our expansion CapEx investments, which we will decide to undertake and which not. The underlying maintenance and improvement CapEx is fairly steady around EUR 115,000,000 to 120,000,000 range. Regarding the guidance, then obviously, if we in the coming years, if we'd take on sort of big projects, which typically would have large significant customer commitments behind that, then that would be outside of that sort of a 6% target that we are heading in the coming years. I'll finish with sort of repeating the dividend proposal that we are that the board is presenting to the shareholder meeting at zero five three. It is consistent with our dividend policy, which is to stay pay a stable and competitive yield. And like Jari said, it is quite attractive compared to HEX or EuroStocks and Chemical EuroStocks. So I'll stop there, and we're ready to take some questions. All right. Let's take some questions. First, here is one question from Ansig. And we have the microphone. Please state your name and company before asking a question. You. Ansig Kiwineme from SEB. Two questions from my side. First of all, you didn't guide for top line for 2018. Could you give a little bit flavor on how do you see your volumes developing during the year? Because we are currently in an accelerating economic situation in Europe and U. S, and you have exposure into end markets that should really benefit from the situation. So how should we read on 2018 growth compared to 6% growth in organic terms in 2017? Okay. Well, you're right that the market seem positive. And now that prices are also going up, volumes are increasing, so that should benefit us. We target over the market growth, and our market is between 13% depending on how it's going. Obviously, Printing and Writing is going slightly to negative territory. But like I said, our polymer capacity is now pretty full, so we're going to focus on optimizing that, maybe debottlenecking that a bit. So we will not see that rate of oil and gas growth anymore as we saw last year. That's why I talk about recovery and not growth. So more less moderate growth than we saw organically last year. Okay. Thanks. Then my second question is on raw materials. In Q4, when there wasn't a huge effect between prices and raw materials, We saw the volume growth really turning into earnings. How does 2018 look like? There was a small negative coming from selling prices and variable costs. Should we expect similar situation okay, now I look into you, so similar situation in 2018 that the price increases will offset the raw material pressures? Obviously, it's a huge, very good question, but it's also a very tough question. Assuming that prices are at current levels on raw materials? We correct it, it was defined correct, please. Because like I said, we're still continuing to see the increase in raw material price pressure. So if again, looking at the historical trends, if the raw material prices were to stay flat, if they would stop increasing, then we most likely would see some of that benefit. And again, I'm sort of looking at the historical ten year data that you have on chart. There's a couple of quarters always before the market adjusts. But I honestly, I don't want to be give a prognosis on this. Q1, which is sort of our best look of what we see raw material prices, we continue to see pressure on raw material prices. Thank you. Hi, Marco, Erwin, Evli. Just getting sort of a bit back to the raw material issue. Do I recall correctly that on sort of H2 of last year, you saw sort of some stability in raw material prices? And now you're, I guess, guiding that raw materials will continue to increase in 2018. So has this situation clearly changed now? Let me take that one. So first half of last year, raw material prices were still coming down. During the summer, they flattened out. And market estimations were that, yes, there will be some increase, but it turned out to be a bit higher than we saw. Now this is nothing dramatic anymore as it has been earlier, so we're not talking of huge numbers. So I feel that we have a good chance of keeping up with that. And then let's see how the summer goes. Now oil price has retreated from the $70 benchmark to back. And many of the crackers that have been abnormally down are soon to be starting up. So probably the market in some areas will stabilize in the big ticket items for us. So yes, some creeping up. Also, we have now promising momentum on the price increases, so taking that into the market. I'm just worried if there are shocks in the system. That's more of the thing. And shocks would mean availability, so we can't produce or then dramatic price increases if we have availability. Those are hard to compensate short term. Obviously, longer term, they're easier to compensate. Okay. Thanks. I have a second question on cash flow. This cash flow in 2017 after investments was €13,000,000 and now you're at gearing of 59%. I suppose how do you see this sort of progressing? You're saying that you'll invest 160,000,000 to 200,000,000 plus the €55,000,000 acquisition. How comfortable are you going above 60,000,000 and how much? I think that we have always said that the 60% gearing is sort of a target, and it's not a covenant. And we can go above that as long as we have a clear path to come down. And yes, you're right that sort of projecting the Chinese joint venture, which is the 55% additional investment, it will be it will most likely go above the 60%. But clearly, we have a clear path to come down that. And the clear path doesn't need to be within the one calendar year, just as long as there's a clear path to come down. And looking at the leverage ratio, we've been at the highest point, I think, 2.4. I've also always said that 2.5 is sort of a pain threshold for me. We're now 2.2. And obviously, the investments and joint ventures, they bring additional EBITDA under the bottom line. So then the leverage the gearing go not fully in hand in hand, but not purpose is not to over lever, obviously, the balance sheet. Okay. If I'm still going to ask about working capital. You came down to 9.4% now. Is that a sustainable level? Or do you expect to move further down this year? We have a target to continue to reduce that. We have actions that we can improve our inventory management, for example. We have similar actions in terms of other components of it. So yes, we target to maintain or improve that. Having said that, we have an opposite sort of impact that as we intend to grow our business in Asia, and there we typically have more net working capital tied to the business because it's somewhat longer shipment periods for some of the products that we ship from Europe to Asia, for example. Also, the receivable turnover tends to be slower in that part of the world compared to Europe and North America. Adding to that, obviously, we're now growing with the added capacity in the bleaching, and that's very well cycling of inventories, so not many days of inventories in that business. So that benefits our net working capital balance. Okay. Thank you. Okay. Before we move on to the webcast questions, there is a question here over the iPad. There's a question from Johannes Krasberger, Nordea, about CapEx. Can you remind us regarding the time line of new capacity expansions coming online? And which chemicals are these? And where are the plants located? I think of the major expansion plans, we have talked about approximately €30,000,000 investment that we are doing to add polymer capacity in Europe, in Netherlands. I'm not sure if we have exactly said when we expect it to come in line, but it will be sometime in 2019. Okay. And then there's a follow-up. Have there been any steps forward in terms of offtake agreements? Well, we are progressing our business in chemical enhanced oil recovery and both areas of oil Sands. So there's been positive development in that area, but unfortunately, we're restricted to talk about more of the details due to our contracts. And then let's move on to the questions over the phone. Operator, please go ahead. We have a question from Tanu Laiyemaki of Danske Bank. I would have three questions. Firstly, still on this raw material issue. If I look at the bridge in your report, you had a €42,000,000 headwind from the variable costs and €5,000,000 headwind from sales prices last year. What is your assumption for the raw material or variable cost headwind for 2018? And how much did you expect to compensate from that of that in pricing? What is the assumption in the guidance? Well, maybe I'll start and let Petri put some meat on the bones. But if you then look at quarter four, it looks a lot different in the table. And so that gives where we were in the beginning of the year and where we were in Q4. But Petri, can you elaborate that? Yes. I think I must say, I already tried to get to that question. Sort of with the market conditions that there are now, I would rather see us somewhere in the range of the last two quarters rather than the first two quarters of the year. And whether that should whether the market conditions would allow us to get to the positive territory, that's really to be seen. But really, not I wouldn't expect with the current market conditions anything as dramatic as we see saw Q1 and Q2. So just a follow-up. Basically, the EBITDA improvement this year should come from volumes and then your internal actions while this promising pricing would be neutral at best, but maybe negative. That's correct. And also then improving our internal efficiency and transportation cost and our processes inside. So three sources of improvement. Okay. My second question was about this. You mentioned as one uncertainty, regulatory changes, for example, in China. And I was wondering what does this refer to? Well, we've reported that, for instance, key raw material, which this joint venture is all about, has been availability issues, and that's been the regulators hampering with our suppliers' operations. So not letting them run because of, for instance, emissions issues and so on. So part of the strategy on this JV is that we are backward integrated and not supplier dependent on going forward. So that's one good example. You can see also that when in China, there are big meetings in Beijing, then they look at how does the year look in Beijing. Thank you. My final question is about this sort of one off items that you mentioned for the both divisions. From a group perspective, what is the net impact if you had positive on paper and negative on the other? So what would it be on the group? Slightly I would say offsetting each other. Sort of the only onetime positive that was there on pulp and paper was the emission trading compensation. The negatives actually that we see on I and W, mostly on Industry and Water, regarding the manufacturing inefficiencies, which are partly caused by the weather and partly caused by the raw material prices, they higher in terms of magnitude. But I cannot say that they will disappear there in a minute. We are working to get there. There are sort of technology transition issues that are causing inefficiencies in our own production that will take two to three quarters to work out. So that's why it's a little bit vague answer, and I cannot precisely give you a bridge answer on that one. But some of the CapEx, for example, that we are investing in Netherlands is to make our currently dilutive business more profitable. So it's not only expanding capacity but to significantly lower the production cost, which will sort of help improve the Industry and Water margins. And also to follow-up on that, Petri's comments. Industry and Water, both in water treatment and in oil and gas in North America, there is seasonality because it's mostly dealing with water, and now it's sub zero degrees there. So many operators can't operate in oil sands and so on. So we have a seasonal component to the winter months also in water treatment in cold areas. So that's natural and expected. That is good to keep in mind. Okay. Thank you. That's all for me. Robin Santavirta of Carnegie. Please go ahead. Robin Santavirta of Carnegie. Please go ahead. Yes. Hello. A couple of questions. First, in terms of you're obviously having experiencing quite good growth at the moment. Are you seeing any bottlenecks in your own operations, perhaps in the Polymer business and especially in oil and gas? And then what about the sort of supply chain that you have? Any bottlenecks there at the moment? What is the outlook in terms of this? I've said already a couple of times, yes, our capacity in polymers are full. So now we focus on optimizing that. And the price optimization, who we serve with the best strategy and yield and what products we produce for best value added. So there are opportunities there. We also are looking at small debottlenecking opportunities to gain additional capacities in the short term. There are some availability issues still for AKD. It's uncertain in China, the fatty acid chlorination. And obviously, the Porri, Venator, Huntsman fire, they have not cracked that plant open yet. They are ramping it up. It will take, and we will have some iron sulfate coagulant raw material availability issues continuing well into this year. But as said, nothing major new dark clouds in the horizon. Good. Thank you. How about the competitive environment? Or I'm just assuming that if the industry, the polymer industry is seeing the issues that you in terms of capacity constraints. Is this sort of a potential price driver in the industry in 2018 in polymers? Well, those I have to be careful how I always comment. But you could look at it from two points of view: the customer segments of Pulp and Paper and the Water Treatment and the Oil and Gas segments that we serve with different portfolio and then the product line portfolio like the polymers. We've been the drivers on increasing prices almost across the board with 20 price increase announcements last year. They will not come into effect with all customers immediate, but when the contract rolls over, that's the point when we renegotiate. And as Pedri was saying, the market is more receptive now to price corrections, price increases than they were in the beginning of the year because they were used to, for two years, or rather dropping prices than increasing prices. It's a push from our sales force, but somehow we see the industry is going to the same direction now. Thanks. And then in terms of Pulp and Paper, you obviously report quite good organic growth there. How much is in Q4 your notes and how much is the other part of the business, I assume, board and the paper business? And what's the outlook there? One could assume that it's actually quite good, the outlook also in the board and paper business for 2018. Well, if you look at one of my Pulp and Paper slides, and you can see how much our business is in pulp, how much in board and tissue, how much in printing and writing. So printing and writing worldwide is obviously 1% to 2% down, our estimate, and the others are up. So it's an up positive. Last year, the growth in the last quarter was somewhat from Jotzeno. But let's remember that we started it up test running in September. We had to shut down a few times to make a few adjustments and so on. So it was not fully contributing in the last quarter. Now in January, we have it ramped up into nominal capacity. All right. Thank you very much. Ben Goldman of UBS. Please go ahead. Ben Goldman from UBS. Just a quick one on water treatment in China actually. Just sort of wondering how you're trying to reposition for this business. It sounded like some of the regulations around water treatment were being more enforced in the demand for your more sort of premium product, quite strong there and where you're talking aftermarket, say, last year. Any update on this? And is there a strategy to be sort of more bold in terms of market share in this opportunity? And just secondly to that as well, are there other areas in emerging markets where water treatment is now becoming a sort of bigger focus and opening up potential new market for you guys? Okay. I'll start from the latter one. So obviously, water treatment is increasing over the world. Europe and North America being mature in that and depends on the industrial side and municipal side, water spend. But regulation is dictating more treatment all the time and enforcement of that. We are watchful around Middle East, some shipments to Africa. We have no intention to at this time, medium term, to invest anything as a production there. So it's an export market for us. Eastern Europe and East of there continues to be growing. They still have infrastructure that they need to be growing. And obviously, as industrial production now is growing in the industrial side, whether it's food or beverage production, whether it's power production, whether it's other than pulp and paper. As they produce more, they have more water to treat. So that's a promising thing. Asia has a big market. We're not only in China, we're elsewhere also in Asia Pacific, Hong Kong, Singapore, other big cities, also industrial water treatment outside of pulp and paper and then obviously, China with bigger city centers. And there, regulation is now more enforced. They are more careful about their raw material base where they come, especially on the drinking water side. So in a sense, that's after many years starting to now looking more positive. We are in the export mode for the specialties. We intend to stay that way for a while and look at how that grows. But let's be also fair that our business there last year was less than EUR 30,000,000 in revenue. So even if you have 10 growth, it's still rather small on the group level. Thanks very much. Michael Doidl of Handelsbanken. Please go ahead. Thank you. A couple of questions. First of all, with regards to the self help actions that you have in place, You have the action of the synergies, you have the boost program, you have the organizational change. You also know What is it that? Is help. How big of a positive impact would you expect to get from all these self help factors in terms of absolute earnings 2018 compared to 'seventeen? We haven't sort of guided on that absolute sort of total number there. But if I take some of the key items separately and give some sort of comments there. First of all, the reorganizational benefits, which we said as EUR 15,000,000 to EUR 20,000,000. We are about halfway on a run rate basis sorry, on a run rate basis, we're almost there, but about half of that was realized in 2017. So there's about another half to be realized, so between €7,000,000 to €10,000,000 more to come in 2018. Axo synergies, obviously, those are fully on a run rate basis, fully realized. On 2018 to 2017 full year comparison basis, there will be some additional benefit coming on. But it's starting to be now relatively single digits and the smallest single digit. I don't have the number on top of my head because a lot of the benefits were already achieved by the first half of twenty seventeen. Jari commented on the transport. We were expecting to achieve EUR 15,000,000 to EUR 20,000,000 savings on the transport side. Now that was against stable, flat market or sort of market conditions. Clearly, what we have seen in the marketplace is an increasing trend of transport costs evident really. It's a truck availability issue almost or not almost, it is a truck availability issue, particularly in North America, but increasingly in Europe as well. So it's not only cost. So that's why on that side, it's really cost avoidance, avoiding the cost increase pressure there. So year on year, perhaps not so much help there. So I think those are the key self help items that on the cost side that we talked about. And then, obviously, the investments coming online and so on. On the transportation cost, obviously, that's one input cost that we are pushing into the sales prices for the customers to carry also. So especially outbound customer direction going costs, we are pushing those through. Okay. And then a couple of housekeeping questions. Depreciation in 2018, what will the level be there? And also, if you could give some comments on the tax rate? Depreciation, I think 2017, if my memory serves me right, was EUR 141,000,000. We have a slightly obviously CapEx is still more than that, so that sort of gives upward pressure. The depreciating dollar perhaps relieves some of it, so I would say EUR 140,000,000, 145,000,000 is my sort of best guess for guidance for depreciation expense for 2018. Tax rate, I mentioned that The U. S. Issue will not, on a short term, help on the effective tax rate. We sort of target on the 22% to 25% range. We were last year on the higher end. We have some opportunities to work to get perhaps towards the lower end, but let's say that we stay within that range and we target to be at the lower end of that range. Okay. That's very clear. Thank you very much. Are there further questions? No? There are no further questions in the queue. This concludes the complete set. Thank you very much for your participation. Thank you. Thank you.