Earnings Call: Q4 2015

Feb 24, 2016

Ladies and gentlemen, welcome to Kemira's Fourth Quarter and Full Year twenty fifteen Results Presentation. My name is Olli Torren, and I'm Head of Investor Relations at Kemira. The presentation will be held by our President and CEO, Jarik Rosenthal followed by the financial section by our CFO, Petrikastren. After the presentation, you will have a chance to ask questions over the phone and also here in the auditorium. Without further due, Jari, please go ahead. Thank you, Olli. Good morning. Looking at the full year of 2015, I'm pleased how the outcome came. We hit our own internal targets and we're able to improve our operating EBITDA. But when I look at the year, how it started, we had really low visibility going into the year. We all know how the oil price was coming down. No one knew in the beginning how fast, how low it's going to go and what impacts it has in various industries. We had also FX rates going drastically last year. Some of them were positive to us, some of them were negative to us, but mostly, we experienced positive gains from FX. Raw materials were strongly on the move also, and we didn't see how quite how that will impact the industry. For us, we had some mostly benefits from that, but there are some negative impacts from raw materials also last year. There were geopolitical upsets going on, directly those didn't affect Kemera, but it could have been that it affected our customer base and the markets much more they ended up doing. And in the beginning of the year, we were not sure when our Oksunobo Paper Chemicals M and A deal would close. We saw that there were no major issues, but we didn't know the timing of the competition official final decisions. Finally, we were able to close in May 1. This volatile environment was adverse in some areas of our business, but beneficial in other areas. And I think our operational execution went well. So the underlying performance of the organization was very good. And therefore, I'm quite pleased of the outcome for the full year. And I'd like to thank all the Kemira people for a job well done. If I now look at about the numbers and go forward from here. So full year basis, we grew top line by 11% and got close to €2,400,000,000 And operative EBITDA grew to €287,000,000 and grew by 14%. So we were able to leverage our fixed costs. I'd like to point out that we guide and we measure ourselves operative EBITDA margin as we are investing into our business through M and A and organic investments, our depreciations go up. And with the structural integration of the industry, we have some one times when we do the integration work. So that's why we focus on operative EBITDA and the margin of operative EBITDA. So we had some small organic growth in Pulp and Paper. Also, municipal and industrial grew organically. Naturally, oil and mining industry came down with the drastic drop of oil price. But all in all, we feel that the progress was good in these volatile markets. Strong cash flow in the second half of the year. So we built up some net working capital in the first half of the year. We took that into a focus during the summer and we're able to release quite a bit from our net working capital and that was a wanted outcome. Petri will open that a bit more in his talk. Pulp and Paper grew nicely. Obviously, FX helped and definitely our M and A and AXA Nobel piece helped a lot, but also we were able to grow the bottom line and increase profitability. The integration of the former AXA business is going very well. I'm really pleased at that. And so I'd like to remind that when we closed that deal May 1, on a full year basis, we were looking to add a bit over €200,000,000 of revenue. And at the start of integration, the EBITDA margin was below 10% and we were looking cost savings of €15,000,000 annually, plus some sales synergies. And we are well on track with that. That's good progress. We continue to reduce complexity. There was a plant in Italy related to the Axo integration, which we closed during the year. And otherwise, we continue to also reduce complexity, though sometimes bring some one times. In APAC, our business continued to improve. The Axo piece gave us four new sites in Asia, one in Australia, one in Thailand, one in Indonesia and one in South Korea, on top of our existing two Chinese sites. Our new China site called Nanjing, we got it up and running full capacity, the main line there, ASA, that was raw material restricted most of the year, but second half of the year, we were able to solve the alpha-eleven availability problem. And now we are running at full capacity and are even thinking of small investments to increase that capacity, but no decisions yet. Pulp bleaching chemicals demand remained high. And you've been seeing how the market has announced new investments debottlenecking projects in The Nordics, in Europe and also in South America. Our new plant in Brazil for Klabin is practically complete. We are doing some test runs and waiting for the customer to complete their project and do a startup. We need some inputs from them like steam to do the final testings of our plant, but we are on time and on schedule to start it up in the coming weeks and months. If you look at the quarter to quarter sequential development or our Pampa Paper profitability, that's where we start to see that the actions that we have taken in 2014 and 2015 are starting now to deliver. 2014, the quarterly margin was pretty flat throughout the year at 11.7%, and now we start to see the good development, and I'm glad that it's now starting to deliver. Looking at our competitive situation and looking at the integration in the industry that we're doing with Akzo, we have won a great deal of new machines, especially in APAC. There are four new machines starting up during this year, one started late last year. And we won all of those total chemical management packages for the wet end of the machine. I was sort of banking that maybe we can have market resistance and we get two or three, but we got all of those. So our teams have done really, really good work and shows the strength of our people and shows the strength of our offering. In total, these deals combined with the European conversions of printing and writing machines to packaging and board, we made a half a dozen new deals there, giving us organic growth. On an annualized basis, these will bring us roughly €25,000,000 of new revenue and that starts from Q2, Q3 onward as these machines start to ramp up and we get that revenue coming in. Oil and Mining saw a difficult year for obvious reasons. Our Mining business continued steady, even some growth there, especially in volumes. And our other verticals through the distributors. When we started this business, we used only distributors, now we use them less and less. That business remained unchanged. But obviously, the oil and gas was hurt. We got some benefit from raw materials. We got some benefit from U. S. Dollar strengthening, but still the top line came clearly down, especially in North America. What we're now looking at is we entered chemical enhanced oil recovery. We could call it polymer enhanced oil recovery, where polymers instead of injection of water only are put into the injection water and they aid out taking oil from existing fields and give a higher yield from the oil fields than they could get otherwise. We entered this business for the first time last summer, and we announced the Kern India deal. We are continuing that. We are working with Chevron. We're working with other people to increase this. We moved our focus from shale because there was no more growth in shale. There was reducing business in shale to EOR. It takes a while for us to get in there and get the revenue there. We're working hard on that to flatten our revenue out and then get back onto the growth path. But this is a good opportunity for us in the future and we're working hard on that. M and I delivered a robust year. Growth of 7%, yes, some help from FX, but still some organic growth, but 22% growth on bottom line, and that's an excellent result and good work has been done. The restructuring taken in 2013 and 2014 is now bearing fruit. We still have opportunities to improve like in North America, but I'm quite pleased of the delivery of M and I last year. If you look at the return on capital development over the last four years, that's quite a self evident story. So we can be pleased with that. And as said, the raw materials helped a bit. We don't expect that raw material tailwind to carry too long. We obviously are fighting to keep the benefits to us, but we have to be realistic that, that benefit also aids our competition and some of it really in the role of new contracts play into the market prices. But it's been stickier than we thought middle of last year. I'd like to point out and remind our targets that we set in September for our segments. Pulp and Paper, we want to grow double the market growth and we continue to look at selected bolt on acquisitions. We did a small one also second part of last year. And on a profitability expectation point of view, meaning EBITDA margin point of view, we want it to be on the corporate target level. As our biggest units last year, Pulp and Paper represented 60% of our revenue. Oil and Mining, we want to get back into growth track. It takes some time to get there that we get these EOR deals in and get them yielding. And therefore, from a smaller basis, we can drive double digit growth over the cycle. And let's look at it that Mining and Oil is a cyclical business. Oil and Mining, when back on track, has a good opportunity to yield better than average profitability on a group level. Municipal and Industrial. Last year, we updated what we're seeking small growth in that. We achieved 1% organic growth. We want to keep small growth there also. And then we realized that this is such a competitive market that it will be slightly below group target on a longer run, the expectation from there. Looking at the dividend, we updated beginning of last year our dividend policy and said that we aim to pay a stable and competitive dividend. Well, if we look at the proposal of €0.53 per share for 2015, one can say that it's stable in the history as it would be 5.5 zero year in a row that it's €0.53 I feel it's also competitive because it's above 5% yield on the share price. That's way above chemical industry average and quite competitive in the Helsinki Stock Exchange. As a summary, our vision is to be the first choice in chemistry for water intensive industries. We've chosen pulp and paper, oil and mining and municipal industries and other process industries that are water intensive as our primary target. We drive both organic and inorganic growth. We're trying to improve profitability by operating improvement, leveraging growth and capturing synergies. And I believe on a bigger picture, we are on track to deliver that growth also in the future. Next, I'll ask Petri, our CFO, to give you a bit of more insight into Q4 and the financials. Thank you. Very good. Thank you, Yari. So as Yari was reflecting on the full year, so let me focus more on the fourth quarter. So summarizing the quarter, we continued good momentum in Pulp and Paper, so with a good profitability improvement. And I already highlighted this, and I'll give you a bit more color There was a dip in M and I, municipal and industrial profitability, but we continued on the good organic growth path. Clearly, the market conditions were very difficult for oil and mining. And I think one of the highlights is clearly good cash flow. So we had we generated good cash flow driven by great net working capital improvement in Q4. So these are the topics I will elaborate in the next ten to fifteen minutes. So let's start with the growth. So in Q4, organic growth for Pulp and Paper was flat. And this has to be put in perspective that in Q4, we had a very strong quarter in Pulp and Paper. We grew actually 6% organically in Q4 twenty fourteen. So against that quarter, the organic growth of flat was, I don't think it was too disappointing, particularly as we had a couple of things. We had some longer maintenance breaks by our customers. Also, we did have some storm damage in one of our sites in North America, which impacted our deliveries of sodium chlorate to customers in North America. This storm damage by now has fixed. M and I, as I said, grew 2% organically in the fourth quarter. And actually, this was against declining sales prices. So we actually, the volume growth in the segment was more like 4%. In Oil and Mining, the difficult market conditions, particularly in the North American shale particularly impacted the business so that the year on year comparison in local currencies was a negative 25%. So the currency impact offset the volume decline and the sales price decline and really the revenue growth was driven by the acquisitions. And it was primarily the ExxonMobil acquisition as the other small acquisitions that we completed 2015 were relatively immaterial in this respect. The Pulp and Paper growth was strong in EMEA and APAC. Jari was already elaborating on some of the new cross wins and cross selling wins that we have achieved in APAC. Clearly, the investment that we have done in APAC, both on the acquisition, which almost doubled the size of our APAC business and also the investment organically into the plant into the new plant in Nanjing, which is now operating at good rate is yielding result. And we're improving our top line and profitability significantly there. And in EMEA, we'll continue on the same path. As Jari said, we win our share of new opportunities in EMEA and continue to grow organically. So that's why we're very optimistic as we look at the market. So the new deals that Jari was highlighting and also we will be getting the benefit of the new sodium chlorate project in Brazil once that gets in line. We expect the startup to take place in first half of the year. Moving on to the Oil and Mining. Clearly, the decline is driven by the North American shale. So the rest of the business has actually performed quite steadily. And we are growing from a small base, but we're growing in the new applications of oil sands, Canadian oil sands and the chemical enhanced oil recovery. But the North American shale is impacting the business most dramatically. If one looks at some of the external data, rig count is the most widely used proxy for activity there. Rig count is down to about a third from its peak. So clearly, this is impacting us tremendously. And right now, this is the new reality that we need to deal with in North America. And we are dealing with the new reality by looking at our costs and have been doing that. And that's why the segment has been able to protect its profitability relatively well, recognizing that the second half of the year has been more difficult. In Q4, we also had some negative surprises and I'll bring out one example. One of our top 10 customers went belly up, I guess is the word. And this is sort of reflecting the dynamic of the business. So this was a distributor into the shale industry. Everything was current. Then one day, the bank closed their credit lines within a week the company was dissolved. This is the dynamic of Shell business cost us about €1,000,000 credit loss. Now €1,000,000 credit loss in perspective of Kemira is relatively minor. And I wouldn't even mention if the numbers for EBITDA in Q4 for Oil and Mining wouldn't have been so small. Actually, just to reflect a little bit on the credit loss so that we keep that in perspective. For the company, we had €2,500,000 of bad debt reserves for the full year. So that's about onetenth of a percent of our revenue. So that's not bad in my mind. The only thing was that €2,000,000 of those credit losses took place in Q4. So in Q4, we did have some extra in our mind, a bit more concentration of the credit losses. I've been sort of looking and reflecting is there something that has happened in the marketplace, in our credit processes, absolutely not. So we'll continue to keep on focus in this area. But sometimes bad things seem to happen in bunches. So we did have a couple of million of credit losses across the company, about 1,000,000 of that was in oil and mining where the numbers become visible. M and I mentioned that the 2% organic growth, actually, like I said, almost 4%, about 4% volume growth. The profitability was impacted, however, in Q4. And there are a couple of things why that happened. It is not the raw material cycle would have changed, no. There was a in North America, was a titanium dioxide plant from which we were getting large quantities of byproduct that we used to sell as coagulant to our customers. That titanium dioxide plant was closed and we have to sort of reorganize our production streams, meaning that we had to source new raw materials to manufacture coagulant, also that meant that we have to reorganize the manufacturing plants. So we temporarily lost the optimal transport efficiency that we have there. So the transport costs increased significantly in this part of the business in North America. This will take about a quarter or a few quarters before it fully sorts out, but clearly the biggest impact of that was already in Q4. There were also some other, what I would call temporary cost increases. One of those was great losses as I alluded to in the group level. There were also some other relatively small, but in combination items that impacted negatively. There are some of them were bonus accruals, holiday accruals, some VAT accruals that we have to take in Q4. So overall, I'm not hugely worried about that the good profitability cycle would have turned in M and I on the contrary, we're quite confident that it continues as it is and also a bit more on the group level raw material versus sales cost chart as I used as I have a habit of doing. And this is actually what I was referring to. So if you look at the right hand side of the chart, and this is the spread is something that we have seen both raw material prices coming down and we have seen sales prices coming down. And so we continue to focus on the spread. So that can we maintain the benefit of the lower raw material prices? And I think last quarter, I said that don't expect it to widen anymore. However, it has remained pretty much stable there. And that's like Jari said that we have been quite this has been quite sticky that we have been able to maintain that position in the marketplace. The marketplace is competitive. So we're doing a pretty good job of doing that. Part of it is thanks to our segment folks who see the customer, part of it is thanks to our sourcing folks who are sourcing at good rates. Currencies, this story has been throughout the year. So the currencies have helped us on a full year comparison or year on year comparison. In Q4, the currency impact helped us some EUR5 million on the EBITDA line, million for the full year. I think now that we as we start looking into 2016, at the currently prevailing rates, I think we can see that the currency positive momentum on the currency is starting to end. Then some additional disclosure on amortization and depreciation and also on non recurring items. As Jari said, we are measuring our operating efficiency and operating sort of on the operative EBITDA as the primary line. I know that many others do follow the operative EBIT and even the reported EBIT as measures. And here are some of the numbers that help guide the bridge from the operative EBIT to or EBITDA to reported EBIT in Q4. So clearly, we have invested, which have resulted in higher depreciation. So the depreciation expense was already a bit more than €30,000,000 year on Q4. And the increase was million euros was due to additional investment. And then this €2,000,000 which is the FX impact is due to the currencies. But the currently running run rate of depreciation is slightly over 30,000,000 This will slightly increase as the Klapin plant, which is now a significant CapEx project, as that will be activated in Q1. So depending so this will increase slightly. So I would expect and I give a number, so I would expect that on a full year basis, the run rate of depreciation will be somewhere between 130,000,000 to €140,000,000 The other thing which we'd like to sort of guide to is the PPA, purchase price amortization. So part of the acquisition price, particularly in the recent acquisitions, we have allocated to intangible items, which we are amortizing on a relatively short timeline, three to five years competition clauses or non compete clauses, customer relationships, This PPA amortization as we call it is roughly €5,000,000 a quarter and this will continue, so annual base €20,000,000 or so. We had €23,000,000 of non recurring items for the full year, 15,000,000 or so was during the Q4. Pulp and paper numbers are restructuring from the to make sure that we get the synergy capture. So clearly, said that when we acquired the ExxonMobil paper chemical business that we will need to go through some restructuring activities to get full benefit of the synergies. The bulk of the synergy restructuring activities are booked now in Q4. Some of it was booked already earlier, there will be some, but bulk of it is now done in Q4. Oil and mining, there were some assets that needed to be written down. And like Jari said, in M And I area, decided to close one site. So we have started procedures, employee consultation process here in Europe to close down one site. And so what we can say is that within in 2015, each segment has closed one site or has started actions to close one site. And this is part of what we have said that complexity reduction and manufacturing footprint optimization that we need to go through. Cash flow, so this is clearly one of the highlights of the quarter and for the year as well. So we released almost $60,000,000 of net working capital in quarter, so great achievement. In fairness, I guess it's fair to say that in anticipation of the Axo acquisition, we allowed inventories to build up to some extent to make sure that there are no disruptions in the supply chain. Similarly, the raw material shortage in Nanjing caused some inefficiencies in the raw material chain. Those we have been now been able to work through to 2015 and get the inventories closer to the level where we actually want them to be. Why I say that way, because I think there's still some ways to improve as we go into 2016 and onwards. One item perhaps also pointing out there is the cash taxes. Cash taxes, so clearly the taxes that we paid this year, 12,000,000 for the full year and €2,000,000 in the quarter is abnormally low. We actually paid some extra in 2014 where we got some refunds 2015. So the ongoing cash taxes rate will be somewhere between those two numbers at the current level of profitability. Yes, One thing is that there is a seasonal nature for our net working capital. So I would expect that there will be some reversal in Q1. Our CapEx tends to be seasonal and there will be some also incentive payments that we will need to make in the first half of year. We are investing into growth. So you see that the 25% increase in capital expenditures and now this is CapEx without M and A is significant. Bulk of it is bulk of the increase is in pulp and paper, where clearly the investment in the sodium chlorate plant in Brazil really approximates the increase there. We're also giving guidance now in numeric terms rather than percentages about our future CapEx plans. And we're saying that in 2016, CapEx will be approximately 200,000,000. So we're continuing to invest into growth. We continue to need to the CapEx investments into synergy manufacturing synergy capture regarding ExxonMobil Chemical acquisition, Paper Chemical acquisition really will kick in 2016, we'll need to finalize the CapEx in Klabin. And then we are reserving capacity to invest into CEOR growth and into pulp chemical growth. We made even a press release earlier or last end of last year that good demand for pulp chemicals is something that will necessitate or allow us to invest in more capacity to prop up chemicals in The Nordics. So market environment, really the way we're looking at the market is obviously we're looking at the market where GDP growth is only modest, volatility will continue. We right now look at input costs, I. E, raw material costs will remain at low level. The activity in shale not immediately picking up. There is a growth driven by regulatory enforcements in water treatment and we see good opportunities to grow in Pulp and Paper hence have positive long term market growth expectations. So against that market environment, we're giving our outlook for 2016, which is simply that revenues and operative EBITDA will increase in 2016. With that, I'll stop my remarks and hand over to Oli. Oli will now manage the Q and A session. We're ready to take your questions. So please ask your questions and before that, state your name and company. Do we have questions here in the auditorium? Marco? If we could start with Oil and Mining. Are you still of the view that the business will grow this year regardless of oil price? Mining business is doing fine and the other verticals is doing fine. So that's the situation. Also, I'd like to remember that after 2014, we said that of that revenue of €380,000,000 less than half was shale business. So now that business has come unfortunately down so much that the half is much smaller. So the impact there is not any more that big. But I believe that having successful EOR deals and starting the deliveries, we have an opportunity to get on back on growth path. Okay, thank you. And further on that, U. S. Business on shale side has been on a declining trend throughout 2015. Sort of from external point of view, it doesn't look like the business is improving going to 2016. What's your sort of experience sort of going from October to December and now to January? Is it weakening further? And do you expect to see more bankruptcies on your client side? Bankruptcies are sort of hard to estimate. I'm actually surprised how little there has been that we experienced one and there hasn't been that many more. In that way, the industry has been quite resilient. We saw decline from Q3 to Q4, but then it starts to be such that we get orders that are quite sizable to the relative monthly sales, so it fluctuates. So we can see a bit decline. I expect it to bottom out at some point and then get these Oil Sands deals that we have now already made and continue the EUR deals and the new EUR deals. Let's remember that it's a €350,000,000 segment. So an EUR deal, we're talking tens of millions or €10,000,000 €20,000,000.30000000 euros a year type of deals. So one deal is already quite a big improvement to the overall segment volume because it's such a small base at the moment. And the segment for Q4 fell to EBIT loss. Is the view now that you can sort of replace the volume that you've lost through EOR and rather than start to sort of restructure or cut costs? Obviously, we have to look at cost and we continue to look at cost. So we did in the second half the closure of one of our sites in U. S. And consolidated that. We did some other capacity adjustments in our remaining three sites in North America and took out cost. Not all of that cost impact is in the full year numbers yet. And then we are growing in oil sands that we know. We are growing in EOR, but obviously, we have pending deals that we need to get active. So that's the outlook there. And Petrie then was alluding to some of those one timers that are not nonrecurring items, but rather things that took it to a negative thing. But yes, while the mining situation wasn't easy in Q4, And I would follow it and I follow it myself rather than how to month on month does it develop because the basis for following Q1 last year and following today's situation Q1, that's not a meaningful comparison at all. Okay. Then still, if I could ask on paper. First, OXO NOBEL, did you sorry, if I start with Nanjing, did you reach breakeven at Nanjing in Q4? And then on OXO NOBEL, I'd like to ask, did you achieve any of the €15,000,000 synergies in 2015? And then third on Klabin, do you expect positive EBITDA contribution in 2016 versus 2015? Well, I'll start from Klabin. Obviously, we only had cost from Klabin last year because we had the manpower already hired and training and prepping up for the startup and testing. No revenue from Klabin last year, but yes, some costs and that's operating costs, so we don't put them into one timers. So definitely, when we start in the coming months and start generating revenue and then ramp up the full capacity on the back of customer ramping up, we expect it to contribute already next year and then the full contribution in 2017. In Nanjing, we were only able to ramp it up to full capacity, the main line of ASA in the last months of the year. So it's going to the right direction. We don't follow Nanjing profitability as say. Let me continue on that one. So we don't disclose planned profitability, simply we do follow it. But we have a wider organization that sells not only Nanjing product in Asia Pacific. So we still bring product from Europe. We still use the OXXO sites that we got from former OXXO sites. So in a sense, our main sort of thing is the APAC profitability for Pulp and Paper and it took a major jump forward during last year. And the synergy number, was it still We were able to gain some single millions of synergies last year, but the main bulk starts coming in this year and the tail end in 2017. What we now are doing is we're investing into our existing sites to in source those 10 contract manufacturing sites that stay in the Akzo Group. And one by one, when we get those investments ready, we move the manufacturing to ourselves. Obviously, when we're buying the services from Akzo, our margins are quite moderate. And when we get to our own production, we gain the synergies. The other thing is that we have this cross selling thing that is now proceeding really well. I'm really pleased about that, how the team is doing. And then we have overlapping products that we combine the product portfolio and then step by step convert our customers to the products that we want to keep and then kill that and get the cost and complexity out. So those are the actions that we are now focusing on. And yes, some single millions last year and then more this year. And on the €15,000,000 we are on track. And on the cross selling, we are definitely on track. Thank you. And then we are ready to take questions over the phone. Operator, please go ahead. Couple of questions. First of all, in terms of the oil and mining business, would you say that in terms of earnings, we have seen quite heavily declining earnings, obviously, in that division now. It came down on the EBIT line to minus 2.4% in Q4. Would you say that this is the low point in terms of earnings for this division going forward? Or do you still see further downside risk going into 2016? I think the first and second quarter still will remain soft. Whether is this, the bottoming out visibility is not very good to be honest. But I would say that if we look at the three or four areas of the business, meaning mining, the other verticals, traditional oil and then shale. The question is around shale and the volumes from there are not huge anymore. The other areas are unaffected. And then we get the oil sense and EOR compensating. But to give a specific answer, it would be looking into a crystal ball at the moment. The drop won't be significant if there is further drop from shale. Okay. That's fair enough. Then in terms of the pulp and paper, what's the timeline on Metza Fibers project? And what's the setup going to look like? So you're referring to the project in Brazil? No, the Metso. The Anacostia project, sorry, I couldn't make it out. I believe they are starting up in 2018, 2017 or 2018 their production. Yes, know that. But in terms of making decision on the chemical supplier, what kind of a timetable are we looking at here? Well, it's we won't comment on ongoing negotiations. But at the moment, we have renewed our contracts to the Nordic players for next couple of years and then the additional capacities are under negotiation as we speak and then their time schedules will dictate our time schedule. But it's self evident that revenue streams won't start up until the new capacity comes online. Question. With regards to your guidance, what kind of visibility do you have for the full year? And what would you say are the key risk or risks to that guidance? Well, I'm quite comfortable on the outlook of Pulp and Paper. And we've indicated that we have quite a few growth initiatives ongoing. We have the Brazilian pulp chemicals plant starting up, bringing growth and especially bottom line growth. We have now APAC running and Nanjing running in China at full steam. The OXXO deal will come in at full year basis. It was held in the eight months last year. And the cross selling growth, which is roughly 25,000,000 a year of the cases that we told about today, those will start kicking in middle of the year. So I feel quite good about how Pulp and Paper outlook is going. The same in M and I, there might be some price erosion coming from the raw material basis. But at the end of the day, like Petri was saying, the volumes went up quite nicely last year. Situation is calm as it can be. There's some changes in the raw material or secondary raw material kind of feed climate or environment relating to the titanium oxide industry. But short term, that can be a thing to the industry. But long term, it takes oversupply away from the industry and that's relative strength for us. So this year, M and I, I feel quite comfortable. Obviously, we need to watch that as we do pulp and paper. So the main question is then how do we improve our operations and how do we improve our operational excellence that continues to be high on our radar, not only in Oil and Mining, but across the board. We want to grow, but we don't want to grow our fixed cost base in the same ratio as the top line grows. And then the question is that when do we get a good grip on Oil and Mining and get to advance then the Oil Sands and EOR deals further and expect that starts to be visible sometime middle of the year and we'll keep you posted as we progress in that. Okay. And just a follow-up or a continuation on that, what would you say are the key risks for the 2017 targets? Obviously, our Pulp and Paper is well on track and I have no concerns there. We do have work still to do and good opportunities. I'd say M and I is ahead of our schedule and now we need to keep that ahead of our schedule. And when we look at the 2.7%, we jumped in one year to 2.1 to 2.4%. We've got two years to go to 2.7%. So I feel that, that is a realistic target. Now we're, for the first time in a long, long time, over 12% in operative EBITDA margin. It's still far away from our level of 50%. But obviously, this oil change hasn't really helped us. I'm not giving up yet. We need to push there and get to the next levels. We have two years to do it. And the oil sands, EOR going into the mining and perhaps maybe some shale at some point, at least leveling off or maybe even coming back. We still have a good chance of getting there, but it hasn't gotten any easier. And the next question comes from the line of Antti Kibineni from SEB. Please go ahead. Your line is now open. Yes. Hi. This is Antti from SEB. Just a couple of questions, mainly regarding oil and mining. Assuming that these oil prices prevail also in 2016, how comfortable are you stating that you will be on a black figures in 2016? Thanks. Well, I said before, we don't expect the oil price to recover this year. We don't bank on that. That's not our plan. We're looking at 30s and so on where it will go. We won't even take an estimate on that because there are professionals that are trying to take an estimate, even they can't do that. So what we now looking is that our mining business is going well, our other verticals are going in, We are investing now into winning more business from oil sands and EOR, and that's the game we want to turn around. I would not this year follow on a versus last year's quarters, I would follow sequentially on how the development is and that's how we will be prevailing the information on that are we turning the boat around and getting back on the growth path. Okay, thanks. Then the growth businesses, have there been any delays on your initial thoughts how you're going to roll out your business or oil sands? Or are there some projects that are postponed Thanks. Actually, they came on last year faster than we thought. Our first focus was because we can't be everywhere that we focus on shale. But when that chip turned, we immediately shifted our focus, also deferred all of our CapEx. So we didn't put any CapEx into the shale market side. And then these deals that we now have, they came on faster than we thought. We are now developing the other deals that are in the working. Some are going in schedule, some are going a bit late. But I would say on average, there is still good potential. And the companies are looking at these on the longer run. They're not looking at the quarter basis. They're not looking at an annual basis. They would be pumping for years or decades. So they look at then longer term. One project we did have that we expected that could deliver a couple of million this year, that was put on hold in Argentina, was it, or South America. So there are projects that are put on hold. And the industry seems to be like so that those projects that are ongoing and are already pumping polymer, they continue. That's at least what they're telling us. Perhaps there's more consideration, are there going to be new ones? And we are more focusing now on those ones that are already doing it and then bringing our technology there. Then my last question regarding municipal industrial. The margins didn't improve in Q4 in a similar way that they have been improving in 2015. And can you give me some kind of a ballpark or indication that how much did the kind of Q4 specific reasons, sales mix and elevated cost affect the margins so that I could get a better feeling of how 2016 and onwards would look like? Thanks. Yes, this is Petri. So if I try to address that and give you some flavor, obviously, Q4 is impacted by seasonality as well. So if you take the sequential view from Q3 to Q4, of memory now Q3 was 14.5 or something like that EBITDA margin, and we dropped to 11.5 or 11.6, so three points of drop. One was clearly of seasonality and then maybe a couple of points of these temporary issues, which like I said, part of it, meaning the transport issues related to this raw material stream will take a quarter or two to sort out. And then perhaps one point of it was really would sort of that should not repeat itself. Underlying strength in M and I hasn't really changed. So this is more of what happened in the matter of ten weeks. Okay, great. Thank you. There are no further questions registered. I hand the call back to you. Thank you. There are no further questions here in the auditorium. So this concludes the complete presentation. Thank you for the attendance and have a good day. Thank you.