Good day, welcome to the Stora Enso Q3 Earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ulla Paajanen, Head of Investor Relations. Please go ahead.
Okay. Thank you, Odell. Please welcome everybody to the Q3 Earnings call of Stora Enso. I have here with me our CEO, Karl-Henrik Sundström, and Seppo Parvi. Kalle will start the presentation, then Seppo will follow with the numbers. Please go ahead, Kalle.
Thank you, everybody, good morning or good afternoon, wherever you are in the world. I would like just to make sure that we are all on the same page. We had a pre-announcement the 12th of October, we are reiterating the same message as we did there. It is a sale of around EUR two and a half billion, basically flat versus a year ago. However, if you do take away the Corenso divested business and the structured declining paper, we are actually growing with almost 5%. That is obviously mainly coming from Montes del Plata, our part of our joint venture in Uruguay, but also in consumer board. Operational EBIT increased by over 17% to EUR 246 million. Its margin increased to 9.8%, almost 10% in EBIT margin. It's very much driven by the strong performance in our Biomaterials divisions.
I also would like to point out that maintenance costs were about EUR 13 million higher than we indicated at the end of Q2, and we have an impact between EUR 5 million and EUR 7 million of the strike in Finland. We continued the second quarter in a row with a strong cash flow, we managed to reduce our net debt to EBITDA to 2.5x from 2.8x a year ago, actually from 2.7x a quarter ago. Cash flow is continuing. If you go to the next slide. You can actually see in a sequential perspective that the profit improvement in the quarter is basically all coming from Biomaterials.
Of that 41, roughly 50% is coming from Veracel, supported by the depreciation of the Brazilian real. 25% of that 41 is coming from performance of Montes del Plata, and 25% is coming from the performance of our Nordic mills, who's been doing extremely well. I also would like to comment that the sequential increase in consumer board is EUR 2 million. You have to take into consideration of those EUR 13 million in higher maintenance costs, roughly around EUR 5 million is coming from consumer board, but also about EUR 2 million from the strike. The underlying result of consumer board is slightly better. The Packaging Solutions, we have to remember here that EUR 8 million in the sequential is coming from the Varkaus, which was handed over to Packaging Solutions in the month of August. That's about EUR 8 million that we describe in the report.
In there is also a capital loss of selling our unit in Hungary. As you can see, paper had a challenging quarter and basically went down EUR 6 million. It's driven by two things, the strike in Finland, the price, and slightly higher maintenance costs. If you go to the next slide, you can see our journey of our operational return on capital employed since 2012. We have continuously improved the return on capital employed, excluding and including our strategic investments. You can see now we are getting to 11.6%, excluding the Guangxi project, and just above 13% when we exclude the Guangxi project, which indicates we are on the right track of reaching our strategic target. What have we done in the last couple of quarters? We have got Montes del Plata up and running. That's the main driver behind our growth.
The Murów sawmill is supporting the profitable growth in saw milling. We've got the Sunila biorefinery coming up in the first quarter of 2015. We had a Virdia acquisition in 2014. The Imatra debottlenecking was ready as planned in the third quarter of 2016. 2015, sorry. I'm very, very happy today to announce that the production in Varkaus is up and running. We have already produced a couple of thousand tons of sellable quality, which is an astonishing achievement of the team in Varkaus. What do we have in progress? We have the Guangxi mill being according to plan, will be ready mid-2016. We have Wood Products. The second investment at the Varkaus mill to start to produce wooden building elements, which will be ready in the second quarter of 2016.
We have the Biomaterials last part of the payment for the Virdia acquisition, while we have the Sunila demonstration plant up and running, which will be in early 2017. The Guangxi mill is moving ahead very fast. It's less than a year ago when we started the piling, and we are now being at this stage. As you can see here on the slide, that's the main machine building where actually at the moment, part of the board machine is being installed. It's all proceeding according to plan despite having a heavy monsoon a few weeks ago. The transformation journey continues, and if you look upon the sales, the top line. From being 30% of non-paper sales in 2006, we have now in the third quarter 2015 reached 64%. On the EBIT line, we've gone from 38% to 97%.
We did have a bit of a challenging result in paper in this quarter, partly as I explained, because of price, maintenance, and partly of the Finnish strike being down to 3%, which means that 97% of our profits are coming from the growth areas. With that, I would like to hand over to Seppo to go through the financials in a little bit more detail. Thank you very much.
Thank you, Kalle. I start with some key figures and financials on this page. Like Kalle already said, sales at EUR 2.5 billion, flat year-on-year. We have to notice that sales excluding structurally declining paper and divestments went up 4.9%. EBITDA margin reached 14.1%. That's, by the way, highest I have seen through my time in the company, and the same for Kalle, I think.
Yes, Seppo.
That's a nice and great improvement. It's almost one percentage point up compared to a year ago and almost two percentage points up compared to Q2 this year. Operational EBIT at EUR 246 million, 17% improvement compared to a year ago. EPS EUR 0.16 and operational return on capital employed reached 13.1% while when we exclude the burden of Guangxi. Including that our return on capital employed was 11.6%, a significant improvement compared to a year ago when it was 9.7%. Net debt to last 12 months operational EBITDA at 2.5 compared to a year ago at 2.8. Moving forward to next page, where we have a breakdown of the foreign exchange impact per division. Like in the previous quarters also, we can see that the impact is by far largest in the Biomaterials division, where it was almost EUR 40 million for the quarter.
Net impact in the quarter was 59, excuse me, EUR 57 million in Q3. It was EUR 59 million in Q2, year-on-year. Important to notice that it's very much if you look at year-on-year, driven by U.S. dollar and Brazilian real. With the past quarter very much by Brazilian real that devalued during the quarter by 30%. Moving forward to next page where we have a summary of the sensitivities in different items. As a new item there, we have added sensitivity of Brazilian real, and if there's a 10% strengthening against EUR in the value of the Brazilian real, that has an impact of EUR 10 million negative.
Otherwise, if you look at the table, there are no major changes, but I would like to highlight the 10% effect on market pulp on our result, which is EUR 125 million, which I think is less than many people normally expect and speculate. It's worth to notice that we are not so sensitive to that, even though that we have a long position in pulp. On the following page, we have debt maturity profile, and we have been working on prolonging the maturity structure and profile. You might remember we issued 10- and 12-year bonds in total EUR 150 million earlier this year, and that prolonged the maturity structure. We have also reduced average interest rate from earlier 4.7% to 4.4%. Like mentioned below the table, average maturity has prolonged by 0.4 years and is now 4.3 years.
Some comments of the performance of different divisions, I start with Consumer Board. There our sales increased by a bit over 4% due to increased volumes in food service and general packaging. Operational EBIT decreased by EUR 15 million, mainly due to higher pulp and chemical costs. That affected about EUR 5 million. Like we already communicated in the previous quarter, Guangxi project is having an effect about EUR 10 million a quarter as additional cost, and that is, of course, seen in the comparable figures compared to previous year. We have to note that operational EBIT excluding Guangxi project was about EUR 88 million. Operational return on capital at 16%, and excluding Guangxi at 30%. Just to remind that in Q4, we have scheduled maintenance at Fors and Skoghall mills. Moving to Packaging Solutions, where sales decreased 18% year-on-year.
Here we have to remember that divestment of Corenso had an effect, and actually excluding Corenso divestment effect, sales remained unchanged year-on-year. Operational EBIT was down EUR 17 million, but again, it's affected by Corenso, which had an effect of EUR 10 million, as well as Varkaus project conversion of the paper machine to kraftliner had a negative effect of EUR 8 million in the quarter, and divestment of Komárom mill in Hungary, EUR 4 million, which, of course, temporary issues or topics. Taking those into account, we can also see a positive underlying trend in the business there. Like Kalle said already, we are now already producing at Varkaus, which is a great achievement and well done. Maintenance in Q4 at Heinola mill plant. Moving to Biomaterials, the sales increased by 38% due to Montes del Plata volumes increasing and effects foreign exchange movements having an effect.
Operational EBIT went up EUR 76 million thanks to Montes del Plata efficiencies improving, volumes going up there as well, FX driven by both U.S. dollar and Brazilian real development, and also we have good performance in our mills in Nordic countries. Higher hardwood pulp prices helped the performance there. Important to note is operational return on capital improved to 15.5% and meeting our strategic target for the Biomaterials division. In Q4, we have maintenance going on at Skutskär mill that actually started already in Q3 but continues in Q4, and Sunila pulp mill will have the annual maintenance stop during the quarter. Look at the Wood Products, where profitability improved even though the sales declined by 12%, mainly as a result of the lower volumes in North African and Middle Eastern export markets.
It's very positive news and I think a proof point of the improved performance of the division that our operational EBIT remains stable at EUR 22 million. That is thanks to the fact that lower sales prices and volumes were compensated by reduced costs. Operational return on capital at 17.5%, very close to our strategic target of 18%. Finally, paper, where good cash flow continued. Sales declined by 5% due to lower sales prices and operational EBITDA decreased as well due to the sales price development and higher pulp costs. The good news is, and this is very important for us as a group, that the cash flow of the investing activities for sales improved actually from 4.5% to 9.2% due to improved working capital.
That just is again proving the fact that the performance in paper is good cash flow-wise and meeting again our strategic target of 7%. In Q4, there will be maintenance at Nymölla mill, and it's good to notice that the maintenance impact is expected to be EUR 20 million lower in Q4 compared to Q3 this year. Capital expenditure for full year, where we have changed the forecast up a bit from the previously forecasted EUR 820 million-EUR 880 million range to EUR 940 million-EUR 970 million. It's driven by Varkaus and Guangxi projects, their capitalization and the phasing of the capital expenditure payments has been faster than we have previously estimated. Important to note is that the total CapEx expenditure for these projects remains unchanged. It's more an issue of phasing and timeline when it comes to cash flow for the payment of the CapEx.
Just a reminder that this forecast includes about EUR 90 million CapEx for biological assets. Some news on forest valuation that we also came out this morning. It is an issue for Q4, but it's such an important and big change that it's something we wanted to flag already now. There is an approximately, I think there is a printing mistake actually here. It's EUR 435 million, it's correct, increase in the fair value for our part, and it's due to the fact that in Bergvik Skog, where we have 49% ownership, WACC has been decreased from 6.25% to 5.2%. That will be recorded in IFRS operating profit in Q4, but it does not affect our operational EBIT that we report. Comments on the strategic targets.
Q3 follow-up, like we have promised earlier, we continue to follow and track how we are doing compared to our strategic targets. First of all, growth excluding paper at 4.9%, it was 4.8% in Q2. That is sort of meeting our target. Also, like I already commented earlier, net debt to EBITDA at 2.5x. That is again meeting the target. Where we still need to work is fixed cost net sales, where we are at 25% compared to target of 20%. This is of course something we are working on every day with the continuous improvement actions, but also top line growth that we are targeting is of course important to improve this ratio.
Debt to equity reduced to 66%, which continues to be below our target of 80%, and our operational return on capital at 11.6% and excluding Guangxi is actually meeting our target of 13% and was standing at 13.1%. Divisions. Where for the divisions with exception of paper, we have operational return on operating capital as a target level. In Consumer Board we stand at 16.4%, which is slightly below 20% target level, but like I said earlier excluding Guangxi burden, we are already at 30% level. Packaging Solutions at 8.7%, which is below 20% target and actually also lower than in Q2. There we have to remember the effect of Varkaus conversion in the figures of the division as well as the effect of the divestment in Hungary that we made.
Biomaterials meeting the target of 15% and Wood Products at 17.5%, which is actually more or less at the same level as the target 18%. Paper overachieving the cash flow investing activities to sales target of 7% and standing at 9%. About the guidance for Q4, that we are reconfirming what we thought already earlier last week to the market. Q4 sales are estimated to be similar to amount of EUR 2.5 billion reported in Q3. Operational EBIT is expected to be in line with the EUR 246 million recorded in the third quarter of 2015. As a reminder that maintenance impact is expected to be EUR 40 million lower in the fourth quarter compared to the third quarter. Over to you, Kalle.
Yes. As a summary, I would like to highlight sales excluding divested businesses and the declining paper grew nearly 5%. An improvement on operational EBIT of 17%, continuing strengthening the balance sheet and ending up with a net debt to EBITDA of 2.5 times. The transformation continues. kraftliner production has started in Varkaus. The Varkaus wood product investment will be ready in Q2 2016 and the Guangxi project ready by mid-2016. With that, I hand over for questions.
Thank you, sir. If you would like to ask a question at this time, please press star one to take a question. Again, please press star one if you would like to ask a question. Our first question comes from Lars Kjellberg from Credit Suisse. Please go ahead. Kalle, your line is open.
Thank you. Good afternoon. Had a couple of questions. Starting where we ended with Varkaus. How do you see that progressing? It seems as if you've, as you put it very fortunately started this one a bit earlier than expected. What sort of volumes do you see in the balance of this current year and run rate in 2016? When do you expect Varkaus to break even? If I start there.
First of all, it just started a few days ago and they have produced a couple of 1,000 tons. Their quality is of sellable quality. I think that has to do with the experience of the crew. They've been making paper for a long period and they are very enthusiastic about the new life of the mill. We are trying to ramp as fast as we can and I think usually it's 18-24 months to ramp up a mill to the highest yield and that's what we said and that's what we stand for. It will contribute to profit already in 2016. That's what we have said, and we haven't gone into the break-even details.
Okay. If you're looking at the very considerable profits now generated in pulp, I recall from the investor day you had in London that you said you did not really anticipate any maybe outside the China project but other big investments in pulp. Where do you stand on pulp now? How do you think about pulp being now 40%+ of your EBIT? That you share that it's a sustainable level of EBIT and margins as you're now at your target and would you consider to invest more in pulp and also of course with that backdrop how do you view the China prospective pulp mill, yay or nay to that one?
To be very honest, Lars, I didn't think we could reach the targeted 15% this fast.
I think if we take the three pieces, I'm very happy with the differentiation strategy we have had with the Nordic pulp mills, to turn them into something that is slightly different than just commodity pulp. That I'm happy with, and I think that has paid off. When it comes to Montes del Plata, I think they are ramping up better than expected, and they're getting a lot of the processes fine-tuned, the wood consumptions and so forth. The big help out of the Vera cel, which is coming basically two ways. It's the dollar/euro plus the dollar/reais. I think over a longer time, since Brazil is a main producer of hardwood pulp in the world, this might affect the end price. I know it's a lot of capacity coming on stream.
I probably, if I would consider any investments, it's probably more in specialized pulp, not the big pulp project. If you're coming to the big phase 2 in China, we have to repeat that we will not take any proposals, because we don't have any authorization to the board until I get that machine up and running and ramping. That's where I am on that one.
That's fine. Just three more quicker questions, I suppose. First one on the significant impact or increase in capacity in folding box boards that's coming in Europe, starting with Metsä Board, Kotkamills, and various other things, including your own Imatra and what Billerud is doing in Frövi. How do you see that market playing out? Clearly, competitors based in the U.S. that is, are voicing some concerns already about product coming from Europe into the U.S. How do you see this playing out in the European context?
I think what we are actually focusing on is to be a very strong player in basically three board grades. One is liquid packaging board, the other one is food service board, and the third one is what you call CUK and I would call CKB. That's the volume areas where we are focusing on. In SBS, we are focusing on some of the premium segments, and we do the same in some of the, what I will call the folding boxboard. We are not going into the general area of folding boxboard. We are trying to stay in the segments where we are relevant. Did that answer your question?
Sure. Just two technical ones, really, to settle. I guess the very good profitability is generating some tax benefits. Can you share with us what you think for the tax rate in the fourth quarter and what we should view the tax rate as normalized? Also on the working capital side, of course, you are releasing quite a bit of working capital. Where do you see this ending up relative to revenues?
First of all, on the tax rate, Lars, for this year, we expect that the statute and effective tax rate will be around 20%. When it comes to working capital and the effect there, we continue to aim and target to come down towards 12% level. That's what we have said also earlier, and we see that there's potential to go there. There's still way to go. There's of course seasonality between the quarters and typically working capital goes down towards end of the year. I cannot really be more specific than that.
Very good. Thank you.
Thank you. We'll now take our next question from Linus Larsson from SEB. Please go ahead. Colin, your line is open.
Thank you very much. Good afternoon to everyone. First question on Guangxi. What's the situation in terms of permits at Guangxi? Are all permits in place at this stage?
All permits in place.
There's nothing preventing you to start up at any point, as you would wish?
Well, except, of course, normal procedures when you start the production.
Get the final approval.
Get the final approval. Nothing abnormal or something that would be pending as such. It's just normal procedures that you go through in every country.
Those final permits, what does that imply? Could those entail delays? What are the practical?
No, we don't see that.
Okay. On the Varkaus project, could you just maybe talk a bit more about that? There was an EUR 8 million negative impact in the third quarter. As we move into the fourth quarter, you sound pretty optimistic, but should we expect that to be fully reversed or partly reversed or more than fully reversed? Or what's the expectation from your side in Q4? Especially, what's baked into your guidance when you talk about the group guidance in that respect?
What is baked into it?
That you will have some of that in there, and it will be partly compensated by selling the early part of the production, which already on the second tambour we deemed unsellable. Far it's looking good, but some of that will continue into the fourth quarter. Yes.
That's very clear. On the CapEx guidance, for timing reasons, if I understand you right, you are hiking your CapEx for 2015. Could you maybe say something against that backdrop about 2016 CapEx?
No, not really. As you know, Linus, we give guidance in connection to full year results. What we also stated earlier in the calls and also in the capital markets day is that we expect capital expenditure to start to come down gradually towards the depreciation levels.
Are you saying so it will be higher than depreciation next year?
No. What we have said, Linus, is that we have a long term, and we said that very clearly in the capital market. Over time and already next year, reducing the CapEx and getting towards the depreciation level. Obviously, we have not given guidance go in one go. Investment next year will be lower than this year, and the aim is to bring them down towards a more in line with the depreciation.
You're not at this stage committing to capital.
No, we are right in the budgeting process.
Okay. Just finally, if you could repeat, I think you already said something about the strike costs. How big were the strike costs in Q3? If you could just repeat how it was spread, I missed that part of the call.
It's in the release. The strike costs is EUR 5 million-EUR 7 million. I gave it a impact of about EUR 2 million in consumer board. I indicated a value without saying one for paper.
Okay. That's fair enough. Thank you.
The problem is usually a bit because when it's an integrated, you lose three days for one-day strike.
Yeah. No, that's great. Thanks for clarifying that. Thanks.
No problem.
Thank you. We will now take our next question from Tom Burton from Bank of America Merrill Lynch. Please go ahead. Your line is open.
Hi. Good afternoon, everyone. Thanks for taking my questions. I just had two questions, please. The first is on the consumer board side. I wonder if you could talk a little bit more about the pricing environment in Europe in that segment. You obviously announced the EUR 65 a ton price increase. I just noticed yesterday, I think it was one of your larger competitors, the CEO said that he didn't think price increases were likely to be successful in that segment due to the capacity growth coming online. Are you still confident in getting that price increase in November? Just as a second part to that
One question. I would like to say, when you say competitor, is that a competitor competing with us in liquid, food service or CUK?
It's on the liquid board side, I believe.
Okay. We believe that the pricing is going to be stable in the basket for the whole consumer board quarter-on-quarter for us.
Okay. The second question was on the group level EBIT performance. I wonder if it is possible to get a constant currency growth basis. Looking across the divisions, if you were to strip out the FX benefits in Biomaterials, if that is possible, it looks like underlying constant currency EBIT would have been down across the group ex FX. Is that correct?
We have a text which I put in because I do not think you can talk about constant currency in some of these things. We are a euro-based company and krona-based company. We do sell in certain commodities in US dollars, for example. That is obviously linked to the cost structure that we are having. I think it is important to keep that in mind because you cannot separate price from currency. They are very linked. Also important to note is if you look at the Biomaterials division, both performance and sales figure that compared to Q3 last year, Montes del Plata pulp mill is ramping up. Yes. Volumes are increasing. Hardwood pulp prices are higher than a year ago, and efficiencies at the pulp mill are improving. Yes continuously.
Okay. Thank you very much.
I did give you some guidance about it because of the 41 that is coming out of a 50% I said was coming out of Veracel. In that basket there is a performance, yes, but also big currency. The other 50% of the 41 on my slide number two is actually divided by Montes del Plata improvement and improvement in the Nordic mills.
Okay, that's clear. Thank you.
Thank you. We'll now take our next question from Cole Hathorn from Jefferies. Please go ahead. Cole, your line is open.
Good afternoon. Could you give a little bit of guidance on the kraftliner ramp-up with next year? People are a little bit concerned about kraftliner prices. I'm just wanting to think how you're going to be ramping up with price in mind in kraftliner.
In kraftliner, if you're talking about the Varkau s.
Yes
we are handling this in a very responsible manner. You have to remember, the kraftliner we're in is high-quality kraftliner. A lot of those customers, almost somewhere between 70 to 80, we are already dealing with through the fluting business we're having in. We have been talking to them for a long period. We are replacing a lot of imported, with not the same quality. Even in a thing like who might sound like a very commodity, it is a huge difference between kraftliner and kraftliner.
Sure. You would expect broadly stable kraftliner prices next year, even with your ramp-up of capacity.
Yes
in Europe. Okay. The next question I've got is on FX. Can I just confirm that the EUR 57 million you talk about, that's pre-FX hedges, correct?
No, because the report is because that is the net effect in the profit and loss.
Net FX.
After hedges.
Yeah. Thank you very much.
Thank you. We'll now take our next question from Mikael Doebel from Handelsbanken. Please go ahead. Your line is open.
Thank you. Good afternoon, everybody. Most of my questions have already been answered, one question still. In terms of the paper pricing, there are some talks out there in the market of some hikes in newsprint and other grades going into 2016. What's your take on that?
On the paper, we think in general that it's sequentially is going to be kind of stable. It's not the prices we had last year. I don't want to go into grades.
Do you dare to take a peek into 2016?
No. I work with paper and so does here. We basically have reviewed the next quarter.
This was my old division, and I wish I could have a longer term, but it is so many factors moving around.
Okay. Thank you.
Thank you. We'll now take our next question from Harri Penttinen from Nordea. Please go ahead. Your line is open.
Yes. Thank you. Good afternoon. First question is just to confirm on the FX impact that you see in the financial line, the EUR 43 million negative item. That's basically no cash impact there. Also looking at from the cash flow side of things, the financials were a bit sort of higher cost than the previous quarters.
Yeah, Harri, that is correct. It's mainly coming from revaluation of US dollar-based loans in Brazil.
Exactly. Basically, the fact that the cash finance line was a bit higher this quarter, it's just a question of basically timing. Yeah.
We had that big bond that we purchased back from the market that had a cash flow effect on this.
Excellent. Okay. On the Chinese harvesting costs, now you are presuming you're back to the normal after the changes you made in the previous quarter. Could you confirm that and then also what sort of benefit in the cost do you have now compared to before the automation in the harvesting over there?
We are now getting close to 70% automation in the harvesting, we are driving it even further up during next year. This is a very important part for us because it's such a big cost element. This is 100% focus of the whole forest group in the Guangxi. We are working on it, yes.
Okay. Excellent.
Yeah.
The last question, I know it's a bit far away and you probably don't want to go into specifics, given that there's obviously a lot of uncertainty on the Chinese market over the longer term and with the capacity addition you are implementing there. Just get a feel of what sort of off take or understanding or volume commitments there are currently existing that you can base on rather than selling onto the market.
Okay. First of all, China has slowed down its growth, yes.
We are still talking just below 6% in the latest report, which is, for that kind of economy, enormous if we compare to whatever I see in Europe or even in the U.S. It's still growth. I think for me, it's actually the most important part in China, is how is the middle class development in China? The products we are aiming at and the customers that we have worked with, that's their selling group, and so far I haven't seen anything changing that.
Perfect. Thank you very much.
Thank you, Harri.
Thank you. We'll now take our next question from Steven Benson from Goldman Sachs. Please go ahead, caller, your line is open.
Hi there. I just had a couple of questions around the Varkaus expansion. Have you disclosed at all how much of your volume is actually contracted to customers over the ramp-up, or once you're finally ramped up? Are you pushing this into some kind of spot market?
I tried to answer that before. Somewhere between 70%-80% of the customers we are targeting are actually customers that we're already doing business in the fluting business from Heinola.
About 10%-15% we plan to use internally.
Internally. We have some contracts. Because we need to show that we have the right quality. As I said earlier, tambour rule number 2 was of sellable quality.
Okay. Secondly, you push this volume into the market and you displace imports. Where will those imports go, do you think? Maybe it's a bit of a philosophical question here, but where do you think that that import volume will have to go? Are they just going to have to close?
I don't know that. I also tried to make a point earlier. This is top-quality kraftliner, which is very much sought after. We feel good for this, and this was not really available in the market before. I think we are sitting in a very good position. I don't know where it's going to happen to it.
Where does the majority of the import come from at the moment?
It's coming from U.S. as well as from Australasia.
Okay. Okay, thanks.
Thank you.
One last question.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Michael Pfaff from Kepler Cheuvreux. Please go ahead, your line is open.
I have a question regarding the paper market. If I remember correctly, you curtailed some 10% of your capacity in Q2. This quarter, it's 7% of the capacity. How do you see that market developing, given that your outlook and your visibility is rather short, as you point out?
Michael, were you referring to the paper production?
I was referring to shouldn't you really try to take out some capacity from the market instead of having a lot of idle capacity? Basically, your view on that. I know that you cannot give a direct comment, for how long would it be suitable to just have machines idled?
Paper production was curtailed, as you said, 7%. That I agree with you. If the market continues as it does, we will have to take actions like we have done previously. Don't worry that we wouldn't be responsible in what to do. That we will do. I can't go any closer into that, as you understand. We will take what we need to do.
Okay. Fully understand. Many thanks.
Thank you.
Thank you. I would like to turn the call back to the presenters for any further remarks.
No, I just want to thank everybody for joining this call, and thank you for the good questions, and I wish you a very nice weekend. Bye-bye.
Thank you.
This will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.