Earnings Call: Q1 2021

May 6, 2021

Hello all, and welcome to follow Outokumpu's Q1 2021 Result Webcast Event. My name is Linda Hekkela, and I'm the Head of Investor Relations here at Outokumpo. With me today, we have our CEO, Heikki Molinan and our CFO, Bjaldoren Forsell. Today, we will first start with our Q1 results presentation. And after that, we are happy to take your questions related to our Q1 result. But now Before we start with the presentations, I would like to remind you about the disclaimer as we might be making forward looking statements. But now I would like to hand over to our CEO, Heikki Malinen. Thank you, Linda. Thank you, and good morning to everybody. Let's get down to it. So first of all, we have had a very good start to the year. We've made good progress on multiple fronts. Let me just first say that we have had an excellent Record high result on safety, something that is of the highest importance for Outokumpu people. We've also had a very strong financial result, and also one of the best quarters overall. I see in the second best Q1 And also one of the best quarters overall in the last decade after the merger that took place a decade ago. Our strategy execution is also on track. We are delivering clear benefits. We have structurally lower headcount And we also have improved our cost base. If we look at the figures in the whole company, As I said, SEK 177,000,000 for Q1, clearly better than a year ago in Q1 of 2020, which was Partially pre COVID times. I'm really proud about the work our people have done during these challenging times. Deliveries were up about 16%, and our mills were running full our mail shops were running full in Finland, Sweden, U. K. And the United States. This allowed us really to maximize the full potential of our business system And really get out the benefits of having this large scale in stainless steel. As you recall, metal prices Rows significantly in the Q1. So our result was also boosted by approximately SEK 42,000,000 of net timing and hedging gains. And Pia will talk more about this when she's when it's her time to be on the podium here. Looking at metal prices so far in Q2, the 1st 4 weeks, the level of net timing and Hedging gains in Q1 will probably not repeat in Q at the same level. But our operational performance In the capital markets update that we will have later today, we will go through the strategy and talk about the impacts of the SEK 200,000,000 EBITDA program. I said, metallopricies were volatile. You can see it in the chart. Particularly nickel had a bit of a roller coaster in April and then Declined again in March. In spite of this, the movement in raw material prices was exceptionally favorable for us in the Q1. We currently have a good order book and long lead times. In Europe, basically our order book takes us almost into the well, into the Q4. In our order book, we have seen price levels gradually appreciating. We have also seen metal price movements Translate into end product pricing. Furthermore, we have seen our customers returning gradually to base price plus alloy surcharge Pricing mechanism. And in our current order book, we have seen a change to approximately fifty-fifty split between We call base price an alloy surcharge and fixed price here in Europe. Demand was strong in Europe in the Q1, and hence import penetration did increase also in the first Quarter compared to the 4th quarter and the share of imports was about 25%. As you can see, the same phenomena happened also in last year between the Q1 Q4 a year ago. However, if we look at absolute imports, you can see from the graph on the left that imports were lower Q1 2021 versus Q1 2020. On the right side of the chart, in the U. S, imports accounted for 14% of share. And in absolute terms, imports in the U. S. Were lower Q1 2021 versus Q1 2020. On the trade front, there has been a lot of activity, and we are close to some very important EU decisions on trade. First of all, I want to note that beginning of March, Indonesia and India have to register their imports. Secondly, a few weeks ago, the EU has communicated a decision that they will apply provisional Anti dumping measures against Indonesia and India on Coal Road in the amount of approximately 20%. And these provisional measures will come into effect, become permanent roughly in about 6 months' time. And in November of this year, we will then get the final decision. If the decision by the EU on antidumping against Indonesia is positive, Then those measures typically are valid then for 5 years. We are also waiting for EU to decide on import quotas, And we believe the decision will go down the wire and we will most likely only hear about the final outcome in the last 2 days of June. Going forward, we are going to be reporting more on sustainability in our Quarterly results. Broadcast safety, which is shown here on this chart, is, of course, Very important for Outokumpu. It's also a very important part of our ESG agenda. At Outokumpu, we believe it is important to focus on total recordables Total recordable industry frequency rate, TRIFR, is the key measure we monitor at Autokumpu. Of course, we also look at LTIs. But we believe this is a better indicator because, for example, in different countries, there are different Ways how people may take time off due to injuries depending on their health insurance, depending on the Social Security system And so forth. So basically TRIFR basically lists every single incident that was worth of a recordable And that is the measure we will monitor, and we will also report to you on the progress. As you can see, 1.4 is the best figure so far at Autohumpur. Our CO2 emissions are well aligned with our current science based targets initiative Targets. And you have today probably seen our release where we have communicated that we are going to even raise the bar further And set even more ambitious targets on climate change. You will hear more about that in a moment later today. I'm also very proud about our recycled content at 90%. We are also going to increase transparency of our supply sources. So with those words, I hand it over to Pia. Please take it from here. Thank you, Heikki. So Good afternoon, good morning. I do hope that you are all safe and well today. So let me start with a bit of updates from the financial side. And let's start with the business areas and the performance there. So first, of course, the key figures. Let's just enjoy the improved figures here that we can see both on the delivery side, obviously also then translating into the top line. And from an adjusted EBITDA perspective, of course, looking back 1 year, The Q1 of 2020, that still was not heavily impacted by the COVID. One of the things I think it's worth mentioning here is that in Q1 of 2020, we still enjoyed a rather good share of the value added grades. That was one of the things we then saw around COVID really going lower and lower and still really not rebounding in the 1st quarter figures. So when you see the comparison here, I think I can really agree with what Heikki said earlier. This has been a particularly strong Q1 with €177,000,000 worth of EBITDA here. Also then translating into 0.20 Scent's earnings per share, which is another good figure. I will come back to the cash flow and net debt figures in my presentation. So let me now turn to the BA figures. And let's start with Business Area Europe. And obviously, here, I think a first point is really to talk about the demand and the volumes in the quarter. So you see From this presentation, as part of the EBITDA improvement from €36,000,000 in the 4th quarter into €78,000,000 in this quarter. Increased deliveries really had a significant impact. So if we look at the demand across The various segments, I think by now we have really seen demand rebound in all of the standard or more classical grades, I think with the minor exception where we still see the sort of catering segment being a little bit weaker than normal, but otherwise a really strong rebound. And as said, value added grades were not yet at a high level. They were actually still quite low in the Q1. And if we now look into our order intake, I think we can clearly see that this more sort of investment cycle driven demand is coming back. So we are also now seeing gradual increases in this value added products more than towards the future. I think still from the demand side what I want to mention because obviously There is an element here of restocking to inventory. So I think looking at where the absolute level of distributor inventories are, as per end of March, still quite on a low level. And actually, particularly looking at sort of number of days in inventory, it really seems sort of clearly below the average level there. Next point here, then looking at other impacts in the result. You can actually see that in the BA Europe result, There is also some positive support from higher prices. And I think that's something I believe Heikki already commented on as well, Sort of looking also into the demand that we've seen through our order intake, obviously, this sort of stronger Pricing environment has enabled us to sort of clearly digest the higher metal prices, which is obviously a very positive thing here. And then finally, net of timing and hedging, I want to comment that for all of the bigger BAs here because, as Heikki said, on group level, it was significant. So just repeating the group level figure of absolute of €42,000,000 in the quarter, It was really a lot about the metal timing gains that we had there. If we really look at the hedging result, it was actually very close to 0 in the quarter. So it was more about sort of other value driven metals, value driven movements there that we could see. But for BA Europe, here we can say that as you see in the bridge, the bridge effect actually compared with Q4 was rather small And the absolute figure was €18,000,000 in the quarter. And I think that well summarizes the main points for BA Europe. Maybe still one more important point. We will revert to the progress that we are doing on our strategy execution in the CMD part of the presentation today. So then we'll go through more of the details of the progress there. But of course, overall, already in the sort of Q1 figures, we already see some positive support here. And from a group It is quite significant. So but let's get back to that. But I want to say that sort of embedded here in the good performance is also progress on the strategy side. Okay. But let me then move over to the BA Americas. And here as well, I mean, 1st of all, obviously, I want to say Really happy to see a record quarter, €54,000,000 worth of EBITDA in the quarter. And obviously, Demand and really much higher deliveries has clearly boosted the result here. So demand across Americas really remains on a strong level. I mean, we see the strength through the automotive. We see it in appliances. But particularly also, we can say that distributors, That is an area with very strong demand. At the same time, obviously, the sort of restocking maybe sort of Momentum should be there, but if we look into the absolute figures of distributor inventories or days, They are still at this point and particularly when looking at end of March figures clearly below the average level. I think both for Calvert and obviously for Mexinox, I think it's well worth mentioning as well that we have long lead times at the moment. So we are sold out, I mean, way through July. And actually, I think this even means a little bit more. As you know, It's a very good demand environment at the moment. And then finally, I want to say that Operating on such good capacity utilization levels clearly has also impacted our ability to operate really efficiently with really good cost structures. And finally, on net of timing and hedging, obviously, we have here a good positive impact of the same magnitude as we saw in Europe. So on an absolute level, it was €20,000,000 really from timing. And at the same time, I think we can also say here that it was quite a change compared with Q4. So you can see that the bridge effect actually is quite significant here. So overall, a really good proof point also of what we spoken about already during some of our earlier presentations that we can clearly see that the turnaround in Americas has taken place and we are now on a much stronger level when it comes to the EBITDA performance. Then I want to say a few words about ferrochrome. And as I know that the changes in ferrochrome pricing have been really rapid during this year. I just want to make sure that we recap sort of the 2 most significant points there. One of them is maybe more forward looking. We know that the European benchmark price has been agreed to the level of $1.56 in dollars per pound, where it was more much lower $1.18 in the Q1. But there's also been another change, which Relates to the pricing in on a spot level then in China. And clearly, here again, the movement was already seen Early during Q1. So we saw the rise sort of starting end of January and then being on that higher level all until the end of March. It has subsequently then, of course, declined, as some of you may very well know. And I think when you then look at the BA Ferrochrome's result here, You can see that we already enjoyed some benefits of the higher pricing in this quarter. So that you can see here as one of the really sort of positive impacts in the result. And then there was something negative that really related to the specific conditions and, I would say, very challenging weather conditions in Northern Finland with really sort of cold, snowy, icy weather throughout the early period of the year here. So you see that compared with Q4, Our production was a little bit down. So this really was sort of more relating to those operating circumstances rather than anything else. And I still want to share a few short comments also on long products. And obviously, really Good to see here the turnaround proceeding. You also can see that really the major positive impact to the result in the Q1 was from higher deliveries. I mean, an increase of 53% sounds extremely remarkable, which, of course, it is. I also want to Say that we do have, as part of these deliveries, also increased deliveries of semi finished goods into BA Europe. So this is also reflecting the better demand then on the flat side. But obviously, a very strong performance here from the BA Long Products team, who have obviously worked really hard with the turnaround progress. So happy to see here the €11,000,000 quarterly figure. And then finally, a few words from the cash flow and balance sheet perspective. So if I just start with the cash flow, I want to say that reaching a €27,000,000 operating cash flow in the Q1 is for me a really good proof point about our ability here to really steer and improve the cash flow. It's obviously driven by the improved EBITDA figure. So that's really the main contributor. But if I think about the first And if I also think about the sort of demand sentiment where we are, also looking at strong volumes in the second quarter, Also looking at the much higher metal prices, it is obvious that this, on top of the normal seasonal development, really drives working capital. So the fact that the increase finally in the working capital here was €80,000,000 is still a testimony to all of the work that we've done in terms of improving the working capital efficiency. We've also had cash outs already relating to our restructuring program. It's CHF 24,000,000 as you can see in out here. And then the usual suspects here, some payments to pensions and also CHF 23,000,000 into financial items as per, I would say, a pretty normal sort of Q1 figure there. So overall, from an operating cash flow perspective, euros 27,000,000 And then when you look at the CapEx figure, that is very much aligned with our plans. And then you can look at the annual sort of CapEx guidance that we have here on the right hand side, you see that we are having the same €180,000,000 CapEx plan for this year, so that's well aligned with our strategy that we launched earlier. And you can also see that we do continue our investments, the strategic investment into Kemi Mine. So that is also according to the earlier plans here. And finally, how does this then translate into the balance sheet and particularly to the debt? So looking from an overall debt perspective, we are, of course, very close to the figure that we had at the year end. We are now Close to €1,100,000,000 worth of net debt. And obviously, then our leverage figure now at 3.3 times. And then translating this into a bit more detail of the debt structure, I think here My most important message is that we continue with a very balanced debt structure. You can see that we have here several different types of instruments. And you can also see from the chart on the right hand side that our debt maturity structure has improved as per the announcements, as per the work that we did also end of last year. So here you can see the maturities into the next years. And obviously, the amount of current debt for this The year is lower than the cash and cash equivalents balance that we have. So with that said, I would hand back over to Heikki, please. Thank you, Piyal. So the outlook for the Q2. Stainless steel deliveries in the 2nd quarter are expected to increase By 0% to 5% compared to the Q1. European ferrochrome benchmark price increased to $1.56 per pound For the Q2, plant maintenance costs are expected to increase by approximately €10,000,000 compared to the Q1. Raw material prices have recently been volatile. With the current prices, the significant level of raw material related inventory and metal derivative gains In the Q1 are not expected to be of the same magnitude in the Q2. And finally, adjusted EBITDA in the Q2 of 2021 It's expected to be on a similar or higher level compared to the Q1. Thank you. Thank you for the presentation, Heikki and Pia. Now we will start the Q and A session and we will be using the next 20 minutes for your questions regarding our Q1 result. Please, operator, we are ready to take questions from the line. Our first question comes from Seth Rosenfeld from Exane BNP Paribas. Please go ahead. Good morning. Thanks for taking our questions and congrats on a very strong first quarter. Two questions specifically on Q1 and on the interim outlook, please. In your prepared remarks, you touched on a recovery or maybe a return to the base Price structure within Europe is very positive to see. Can you give us some context how 50% of sales on base price How it started compared to the trough you witnessed last year. My understanding is that given the contract structure or longer term sales were consistently done in the base price, How big of a delta are we looking at for that recovery? I'll start there, please. Okay. So thank you for that question. So as said, we're at the fifty-fifty split. This is sort of a gradual evolution. I would say that it has only sort of started to migrate in the last sort of months, So to speak. So I don't have an exact figure, but I would say sort of a gradual movement. We're not talking of a massive change, But I think the point here was that we wanted to communicate is that we do find that getting back to sort of a more normal system of pricing where that would just similar in other Geographic markets like the U. S. Is good and it sort of provides some stability to our business as well. Great. Thank you. And when you touched on the outlook for value add grades Coming back into your order book, can you please remind us of the historical mix of value add versus commodity grade? And historically, what was the margin differential No different grades, please. Yes. Seth, hello. It's Pia here. Thanks very much for the question. And I think sort of on a more normal period now, really Excluding the COVID periods, we have communicated that about 30% of our group volume on the stainless side, obviously, has been of more value added grades. And we did see a good growth of that with particularly we used to talk about the pro grades and a lot about the deliveries based on our Swedish system and Avesta in particular. And here, we did see an important drop during the COVID period. And I think what I wanted to communicate and say that Q1 was still Fairly seen on those. And I think what we have seen now in our order intake is that we start to see Even, so to say, within oil and gas, some projects returning and also more generally, of course, sort of from industrial usages, etcetera, The more heavy duty usages here clearly the sentiment is now much better. So I think we are now sort of it is, of course, a gradual improvement. Not like we will suddenly have sort of a peak. I want to communicate a gradual improvement. But clearly now we have sort of more within line of sight a return to the sort of pre COVID levels also in value added grades. Thank you. Just to follow-up, what was the margin differential historically for those value add sales versus commodity? We think about that from their mix shift over the coming quarters. I do understand that that is a really important question. And I mean, I think we have said that it is important. I mean, we are talking, of course, many ex, But I think I would leave it there. Okay. Thank you very much. Thank you. Our next question comes from Carsten Wright from Credit Suisse. Please go ahead. Thank you very much for taking my question. My first question again on the return of customers to the base price plus a lower surcharge during the Q1. In your opinion, is it more short term phenomenon or will it last longer? I believe I get the feeling as long as the alloy elements are favorable and inventory remains tight, customers are happy to return to Base price plus a looser charge. But once this is more normalized, do we see that the customers fall back in the old patterns and Going on a transaction price basis. What is your view here? What kind of customers actually do you see Returning to the base price plus a loiter charge. And the second question I have is on net trade. We have seen quite a substantial pickup in stronger imports, in my opinion, due to the rather big stainless price differences to Asia. And it could have been even bigger if we would have not had container shortage. Is that Something you are getting worried? Or do you believe that with the end of June, the European Commission will actually step in And closes that gap. Thank you. Yes. Thank you. Well, first of all, the question about How our customers behave how have customers behaved? I would just say that, of course, for long term contracts, annual contracts, The pricing mechanism typically is fairly stable and fixed. And of course, we do have a certain proportion Of that sort of traditional OEM business where the mechanism doesn't change. So this, of course, would then apply to new business. It could be distributor business, but it could also be direct business. It is impossible to forecast What exactly will happen in the coming years? I can only say that the trend has been now towards normalization, and of course, we hope that will stay the way, but again, I cannot forecast on that. Then in terms of the EU decisions and also the volume into Europe, Yes, I do think that, of course, indeed, the fact that the freight rates from Asia to Europe have been quite high, in some months probably very high. We had the Suez Canal phenomena. We know that demand for stainless in Asia has also been very strong. So the combination of all of these effects have probably also impacted the volume coming into Europe. It depends on what happens with Asian trade and freight rates. Maybe they will gradually normalize As we head into the next year. But then on the EU Commission, as said, we have been very actively Making our case through Eurofair that the quota should remain in place, We do feel that they are an effective and necessary measure to create a laying playing a level playing field. And let's see, A couple of 6, 7 weeks to go that we will see the final outcome. I really do indeed hope that they will keep the quotas. Question comes from Christian Agarwal from Citigroup. Please go ahead. Hi, thanks for taking my question. I have Two questions. First on the pricing, I mean your guidance for Q2 is sort of now flat to slightly higher EBITDA Was it the Q1? Could you elaborate a little bit more on in terms of pricing as in how much of the price increase you To realize in the Q2, which you have baked into your guidance, particularly in the context that you have seen gradual return of the high value added products. So How much of the benefit you get from the pricing and how much of the benefit you get from better product mix in the Q2? Yes. Thank you, Christian. It's Pia here. I want to say that in terms of Looking at also our Q2 and the guidance that we've given here, I would just reiterate what Heikki spoke earlier first about what we have seen in our order intake. And I think that's sort of the most important fact point that we have here. Of course, there we have seen gradually increasing prices. Obviously then, when it comes to the value added mix, I think here as well, my message would be that we see it gradually improving. So I just don't want to sort of say, a peak or some sort of quick boost? Because typically, these are also projects that have sort of longer lead times ordered sort of earlier on during that project. So therefore, My message would just be repeating what we said before. What we have seen to date in our order intake is this sort of gradually increasing there. Okay. Got it. Quite clear. My second question is Sort of a more longer term in terms of CapEx. Your guidance for 2021 and 2022 has limited the CapEx at €180,000,000 Now given the fact that you have reasonably higher share of ChemE mine development CapEx into that €180,000,000 number, Do you see a scenario or a risk where you may end up sort of underinvesting into the business, especially given that equity levels currently are significantly higher In terms of production volumes. Maybe I can just sort of say there on a very general level that As we've spoken about the Kemi mine, you know that still in 2022, the order of magnitude is still around €60,000,000 €65,000,000 that we have there during the year of 2022 as well. So then obviously, sort of only with a small tail in 2023. So I mean this does create Sort of there is the room when that is completed. But other than that, I mean, we haven't communicated yet sort of the exact figure that we would be looking at after that. But Heikki, do you want to add anything here? I think If you look at the strategy, and we will talk about it a little bit later today, I mean for the second phase of the strategy period, so obviously, We are going to be looking at targeted investments to further open up bottlenecks and increase our productivity. I would though say that if you look at the company in general, we are reasonably well invested and our assets are in fairly good shape. We are investing currently to augment our IT systems. We've been going through a fairly substantial program To further update our ERP systems, and that is still going to go on for some time. So I think that is kind of the color we want to give at this stage regarding Phase 2, years 2023 onward. Our next question comes from Patrick Mahn from Bank of America. Please go ahead. Hi, good morning. Thank you very much for the opportunity. I just wanted to ask on the ferrochrome, can you give us an idea of the proportion that are sold on spot Where prices seem to be coming down and then the proportion sold on benchmark, which is obviously much higher. That's the first question. And then the I'll wait and ask the second question afterwards. Thanks. Patrick, thanks very much. It's Bia here. So first, the thing is that obviously if you look at our long term strategy and the direction that we want to take, I mean we want to go for a structure with more long term contracts. And we've really also worked a lot in that direction when we prepared for this year 2021. So the share of spot price sales is fairly low. I have to say that. Then obviously, There is a business opportunity short term appearing in Q1 because the Chinese spot prices moved up very quickly during the quarter. And I think if you just look at the end result of the quarter, you see that we did benefit some from that. So I mean We have seen a bit of an uptick. It was actually more than €10,000,000 that we benefited in the quarter from sort of having the opportunity of higher prices. But overall, I mean, the direction and you are right, of course, But clearly, clearly, clearly, the majority of what we do is on the longer term sort of contracts where we also then have this European benchmark pricing. I mean, It's the normal way of doing the business. Great. And then maybe the second question, just Going back to the transaction pricing versus base and alloy. What is that doing to the I mean, are you getting very similar prices In terms of the structure at the moment or is the base plus alloy giving you a slightly better or slightly worse price relative to Transaction at the moment, given that you've kind of passed on the alloy risks to your customers. I think the base plus alloy, especially when you have a bit of a longer order book, it gives you a certain amount of, how should I say, protection or hedge To rapidly changing circumstances visavis a very fixed and transactional model. So I can't really make comparison about when the deal is done, the price is the price. But maybe, of course, the base plus alloy, of course, Does allow us then to factor in some of the prospective volatility. And so that's why it's preferable. Yes. Maybe another way to ask it is, is the implied base price in the transaction price Higher or lower than the base price you're getting when you're contracting base plus alloys? I think in today's circumstances, this is sort of A bit of a sort of a, I would say, almost hypothesis here, but I would say that given kind of also what we said about The orders we have been able to capture in the Q1 that probably the pricing on the base plus alloy Could be a bit more favorable, but I don't have a magnitude for that. Okay. Thank you very much. Our next call comes from Bastian Sonderkowetz from Deutsche Bank. Please go ahead. Yes, good afternoon together. I've got two quick questions on Ferrochrome. So last year, you've been talking about not having captured basically the full benchmark price and probably having a higher share Sales into the spot market. I was wondering the Q1, does this now already reflect a pretty normal split of volumes As you would usually ship it and hence, have you basically pretty much exhausted your ability to capitalize on the first Quarter benchmark price of $1.18 That is my first question. And then my second question, you obviously provided the sensitivity For how the numbers move in ferrochrome relative to the benchmark price, we have a very large price move upcoming with obviously $0.38 And hence, I'm wondering whether you could give us a bit more steer as to whether your sensitivity in the ferrochrome business into the second quarter We'll maybe be more, say, towards the lower end of the guidance or towards the upper end of the guidance of, I think, €10,000,000 to €15,000,000 for every €0.10 in the benchmark. That would be my questions. Bastian, thank you very much. And I think that's a really good clarifying question as well. So and I think these 2 are obviously connected because as we've seen these very rapid moves also in the China spot, I mean, obviously, That's sort of something to factor in here. So first, to your first question, which was more about really the structure. And I think I want to be clear here. What we want to achieve is certainly a move towards the sort of longer term contracting. There's also a logistical disadvantage, obviously, if we would consider selling really spot into, for example, Asia. So I mean, it's clearly sort of under normal circumstances more advantageous for us to concentrate on where we can also make longer term contracting. So when you ask then that you know where we're successful with that already in Q1, because obviously last year was quite disruptive, quite different, Then I can say that, yes, indeed, many of these contracts are even sort of for an annual cycle, obviously, not all, but many of them. So I think we have definitely taken a step in that direction in the Q1. But I mean, you also The proof is also there in the EBITDA that you do see that we had a bit of a tick up there because of the spot price increasing. So something we captured still from that which was pretty specific for this quarter, I have to say. And that would then also lead me to your second question, which was how should we think about The sort of regular sensitivities, well, I always have this €0.10, €10,000,000 sort of in my head. But you are right that there are other factors there, could be around U. S. Dollar, etcetera. And obviously, their underlying somewhere is that do we have this sort of normal volume also then into the sort of longer term contracted benchmark business. And I would definitely sort of go when you gave the range, I mean, I would go there towards the lower end. And then I would still say, hey, look at Q1. We did capture a little bit of the benefits there. So maybe sort of to factor that in as well because that is then obviously we are clearly producing as much as we can from the capacity we have. So it's not a matter of that. I mean, we can sell what we produce. But there are, of course, the capacity is the limit there clearly. Okay. Thanks, Pia. So basically, from your comments, do I understand correctly that maybe the sensitivity may be towards the lower end or possibly slightly below the lower end? This what you want to say? Indeed. Yes. Okay. Got it. Very clear. Thanks, Pia. Then one other question, Pierre, probably one for you on working capital. Obviously, it's been like probably a pretty decent performance you did over the last year and then in the context Also very strong volumes and prices. I mean, the well, the uptick probably in the Q1 doesn't even look too dramatic. Is there a further working capital build we should see in the course of the second quarter? Now if I sort of think about the Environment here, I mean clearly now, as we have also guided for the Q2, we see strong volumes also in the Q2 here. And that clearly then led to us trying to have sort of an optimal also inventory level at the end of the Q1. When you then think about the seasonality from Q2 onwards to Q3 and Q4, I mean, usually that implies a somewhat slower season in Q3, 3, particularly in Europe. So from the inventory side, of course, maybe that doesn't request exactly sort of the same sort of amounts there. But and this is the big but, what we have said about the prices, etcetera, and this whole movement that we have, I mean, obviously, that does mean something then on the receivable side, for sure. So I think that sort of towards Q2, just based on the facts that we have today, I still think that depending then exactly on the demand in Q3 still, but this could be still Some further needs for working capital. I am not talking huge amounts, but I can see that there would be still a little. Then what happens towards the end of the year? Here, we are then already more talking about what will truly be the business sentiment into 'twenty two. And I think it's kind of Maybe a bit too early to comment on that. I think we will be sort of very diligently following this up. We'll probably sort of early autumn then Make the plans towards the end of the year. And only at that point can I then be like really specific about kind of how we see there the end of the year turning out? But I can only assure that in terms of working capital efficiency, I mean, we still put a lot of emphasis on that and really focus on that. But we would always adjust to the particular market conditions. Okay, perfect. I actually have one very quick one, If that's okay. And that's basically on the volume outlook. You've been obviously talking about volumes being very strong, I guess, all of the market. Anecdotes very much support that. I think lead times are at a very, very good level, which ultimately means that you probably Has already probably some very early visibility even into the Q3. And clearly, I'm not asking for a Q3 guidance. But Basically from how you read the market at the moment, would you say the Q3 is actually going to be sort of maybe Stronger than usual Q3? I mean, Q3 usually being slightly weaker for seasonal reasons. Do you see that some of this seasonality is actually Maybe not becoming as apparent and pronounced this year? Maybe just one comment that in terms of our Annual maintenance schedule. So we obviously have to take some downtime for maintenance. So usually that happens in the Q3. So just worth understanding also in our own seasonality through the year, how things sort of evolve. But I said, It is quite interesting that certain end use markets, even if we go back to home appliances, Which were very strong already starting October, and they still continue to be strong. So and even now in the U. S, with the stimulus checks, There just seems to be this underlying consumer demand, which seems to be just continuing. So and with positive momentum, People are more confident. I think it just seems to be we're just continuing to see this consumer demand. That's at least many of our customers are saying that. And then in terms of Pia's earlier question about the value added grades. So in the last I would say in March Let's say in January, February, we started to see some clear activity among customers. In March, we started to see sort of the first Really interesting pieces of business on value added rates come in. So if this investment cycle continues Like it typically would happen as the economy picks up, then of course, we hope that we will also see then in the second half Some pickup in value added rates, but remains to be seen. And we'll come to Q3 then later at the appropriate time. Okay. Very clear. Thanks so much, Sheikki. Unfortunately, we don't have time to take any more questions at this point. So I would like to thank you all for your very good questions. Now we will have a short 15 minute break, and we will continue with our Capital Markets