Good day, ladies and gentlemen, and welcome to the Sappi Limited Q3 2015 Results Teleconference. All participants are now in listen only mode
and there will be an
opportunity to ask questions after the presentation. Please also note this call is being recorded. With that,
I would like to turn
the conference over to Steve Binnie. Please go ahead.
Thank you. Good afternoon, everybody. Good morning and to the listeners on the U. S. Similar to prior quarters, I will I will read through the slides.
I'll call out the slide numbers to to make it easy to follow. I'm gonna start on slide 4. Which has our key highlights for the quarter. Firstly, earnings per share excluding special items was 2 US cents. That's the same as last year.
This, as you know, is a typically lowest quarter for the year, and we did have, significant shots. So I think taking that all into account, being flat on last year is a reasonable performance. Profit for the period taking into account all the special items, was $4,000,000 versus $17,000,000 last year. EBITDA excluding special items was 109 versus 140 last year. And we did indicate in our results announcement that the effect of the CapEx projects, the one off incremental effect was about, $27,000,000.
So you should deduct that from the one party to, compare the underlying operating performance. Pleasingly, our net debt continues to come down. You can see, at the end of the quarter, it was 1917. $1,000,000. That's, over 300,000,000 down at on the same time last year.
Slide 5 has the hit 3 of our EBITDA and operating profit. And you'll see that, Q3 is typically always the smallest quarter. And this year was no exception to that. In Q4, which is normally our strongest quarter, you will see a significant bans from from these levels. Slide 6 contains the earnings bridge EBITDA earnings bridge.
Between Q3 of 2014, and and versus Q3 of 2015. Just to call out a few highlights. Volumes were were down on last year. That's a combination of switching from, dissolving pulp to craft pulp. Cloquet.
We also took some curtailments because of the weak U. S. Graphic paper markets, which had about a 10,000,000 impact on EBITDA for the quarter. Then on price and mix, we we we see some positives there firstly, the dissolving pulp prices have risen. And then also in Europe, because of the higher exports on the back of weaker euro, we saw some benefits of that coming through.
On the cost side, variable and delivery costs were under a little bit of pressure, mainly because of the higher pulp and energy costs, Europe, as you know, is short of pulp. And hardwood pulp prices remain very high. And they're also obviously dollar denominated, which adds to the challenge. The fixed cost is is up and that's as a result of the extra shuts that we had relative to last year. And then you can see exchange rate had a significant impact we've put that all together on the far right hand side and had a negative $14,000,000 relative to, last year.
Slide 7, we are showing the product contribution splits between specialized sailors and paper. We've done this on a 12 month rolling basis because, you do have the seasonality of our business, and we feel that this gives you better insight to the relative sizes and contributions, you can see that EBITDA, paper still represents 57%. So it's still a very important business for us. On an operating profit basis, obviously, specialized sales makes, higher margins and that is 62% of the overall contribution. Slide 8 shows the evolution of the net debt.
And again, just this is something that we've talked about in prior quarters, but you saw the peak way back in late fall 'thirteen early 2014. We've seen it come down significantly since then. Q3 is normally a quarter where it's relatively flat. As we look forward to the end of the financial year, you you are gonna see a a a significant reduction, and we should be close to the billion level absolute number by the end of the financial year. Slide 9 has the maturity profile of our debt.
And, firstly, you can see that in 2016, there are no material debt maturities. 2017, we have, a big, Eurobond maturing of $400,000,000. We'll begin the work on that to to to refinance that, next year. And, and, and, and, and, obviously, if debt markets remain where they're at currently, this could represent a significant opportunity to lower our finance costs further. Slide 10 has our CapEx.
We've split it between maintenance and efficiency projects. 2013, as you recall, was high following the dissolving pulp investments. Thereafter, it's come down and and and I've mentioned this before, we we we set ourselves a ceiling of about $300,000,000 roughly about half of that is maintenance CapEx. And and you see that in the 14 number and in the 16, projections. 16, and we may get the question later.
In 2016, I would expect it to be, also within that 300 Then moving to Slide 12 and turning our attention to the divisional overview, firstly on paper, it's fair to say that the strong dollar has had a significant impact on performance and on trade flows it's adversely impacted our US business and we've we've we've had benefits certainly on the selling side in Europe. In addition to that, in the U S, we have seen weak, apparent consumption for coated wood free. On selling prices, because of the the shifts in, currencies, coated wood fee selling prices, have been under pressure, but we have seen, upward movement in Europe. And in addition to that, obviously, we had higher export from Europe. Softwood pulp prices costs for us are relatively stable, but the frustration is the very high and rising hardwood pulp prices, and that's put pressure on our our European business.
Wood prices are still high, and they've yet to normalize that they're coming down a little bit, but they're still relatively high in the U. S. Our strategy here will be to implement, price increases when and where the market allows. Clearly, the US at the moment, it would be very difficult with the underlying demand to do that. But in Europe, we recently announced some price increases, and that market is gaining momentum in a significant proportion of that price increase we think we can get through.
We continue to look at reducing fixed and variable costs, maximizing efficiencies and productivity, and then we would reduce capacity in line with our anticipated demand reductions. On the specialized sales side, Firstly, it's fair to say that over the last year or so, we have seen a deceleration of capacity expansion. And in fact, some capacity has switched back from, dissolving pulp back to paper pulp products. The good news is that underlying demand trends are still moving upwards we've talked about this in the past, and we still believe it will be around about the 5% per annum mark going forward. On the cost side, sorry, on the, on selling prices and costs, commodity grade price prices for dissolving pulp are still relatively low.
We, we fix our prices with our big customers at the moment every 6 months. The quarter that we've just reported on was relatively flat on the previous quarter. However, we are optimistic that we can get higher prices in this second half of the year. The one challenge we have over recent weeks is that we've seen recent oil price declines on the back of the commodity cycle, and that could could put pressure on dissolving pulp, going forward. Input costs have been declining for non U.
S, U. S.-based producers. And clearly, our unwanted and cycle mills do benefit from that, and and we moved down the cost curve. Our strategy is adjacent end uses. Turning to the respective regions.
Firstly, on Europe on slide 14. The top left hand side, we you can see the EBITDA margin trends. Q3, as I said earlier, is a typically lower volume quarter. We will see a bounce in the fourth quarter. The top right has our outlook in terms of demand going forward.
We still believe that the mechanical paper market percent down going forward and coated woodfree between 2% 3%. I think it's fair to summarize Europe. I think it's been a fair quarter demand has been reasonable, and we have got higher price higher prices than we did a year ago. Then on North America, again, a similar format for the slide on on slide 15. Clearly, it's it's been a very difficult quarter for us, mainly impacted by the the currency shifts.
I think we are more positive in terms of our outlook. 4. Our Q4 is is a much stronger quarter for us. And again, you look back in the last couple of years and you'll see it's the biggest quarter for us. We we are seeing the order book improving in this bigger quarter for us and we would expect to see the the margins recover somewhat.
Going forward, we are projecting demand for coated wood tree down about 3%. Then turning to South Africa on slide 16, the EBITDA margin came down in in this quarter, but it's important to point out that the 2 big mills in Gadwana and Saiccor did have shuts you can see that the impact was about $200,000,000. It it's important to emphasize that these are this is a timing difference. The the shuts for these two mills occurred, in a different quarter last year in Q2 last year. So, on a year to date basis, you've got a a a true comparison.
The graph on the top right has, the the evolution of the dissolving pulp prices. And you can see that after being flat for a considerable period of time, from about April onwards, we've seen a significant increase. And as I mentioned earlier, we should start to see the benefit of that in the second half of this calendar announced the intention to sell interest recycle packaging business and the sale of the Cape Kraft Mill. We believe that, we don't have a competitive advantage in the recycled market and we made this the call to exit that market. Slide 17 has the 5 pillars of our strategic focus.
This is consistent with what we've communicated to you in the past. We the next two slides, we have one on each. Firstly, on slide 18, focusing on costs advantages. We will continue to look for opportunities. We recognize that in many of our businesses, grades and we need to be at the bottom end of the cost cut.
Some of the examples of projects that we've undertaken have been the natural gas conversion at Somerset Mill, the investments we've made recently at Gratkorn and similarly the, cutmini power plant conversion which we've been undertaking this year. We do think there's a sizable opportunity for group procurement initiatives in we're putting significant resources behind that to achieve that savings. Then on Slide 19, The next element quarters. We're pragmatic and we're realistic about where the demand is going for graphic paper. And we need to manage our capacity with with those demand expectations.
Some of the projects that we've undertaken has, have been the cessation of coated paper production in South Africa, a more recent example has been or will be the shift of, the Hussm volumes back to the European mills, and and that will enable us to improve profitability there. Then on slide 20, I mentioned earlier that we we we try to keep our within $300,000,000. And with that in mind, we've been able to make some smaller investment and we will continue to look for smaller opportunities. There's been upgrades at, Toguela and Ngodwana And we do think that there are opportunities in our containerboard business, virgin containerboard business in South Africa. We last quarter, we announced the Nano Salas pilot plant in the Netherlands and that project is ongoing.
We will continue to focus, and I'm I'm I'm I've shifted to slide 21. Our immediate priority is strengthen our balance sheet and focus on cash generation. We have sold a number of noncore assets in recent years, and we had further opportunities, this quarter. I've already mentioned the sale of instrat and Capecraft Mills, we anticipate that those deals will be complete early in the new financial year. We continue to work on Trello.
I know it's taken some time, but these deals are complex. And we're still working on that. And and we we still believe that it is an for us. We will look for further opportunities to lower our finance costs. And I think that as you saw from an earlier slide, there's a there's a sizable opportunity coming up with the bonds that are maturing in 2017.
On slide 22, we turn to, the next component of our strategy, and that's to accelerate growth in adjacent businesses from a strong base. As I said, we will continue to focus on strengthening the balance sheet But as we get closer to the debt targets that we've set ourselves, we do believe that that will give us more flexibility. The areas of opportunity we think for us going forward are are going to be in specialty packaging. Also, it's doing well. And as the profitability there is ramping up nicely, We've we were doing a lot of internal work on lignans and sugars.
I think you saw a recent announcement with regard to our joint venture with Borrow card for a further investment in lignans and we'll continue to look for opportunities there. And then longer term, dissolving pulp continues to grow. We think it's a market where we have a competitive advantage and we need to work closely with our customers moving forward. Finally, turning to slide 24, our outlook for the rest of the financial year Firstly, and I've called this out already. Graphic paper markets remain difficult and currency movements are playing a a major impact on on flows in this financial year.
Dissolving pulp prices in China have risen over the past 4 months and the weaker end has helped support the profitability of our South African business. CapEx in this quarter should be about $1,000,000, which will give us 2.45 for the full year. The debt will come down further. I already talked about the fact that it should come down to 1,800,000,000. And as soon as the proceeds from Cape Cross, an extra come in, that's another approximately, $50,000,000.
That will help us bring down debt even further. We will continue to work on the the toilet forestry, which, and this is a number we've given you previously, but that is approximately 1,000,000. Earnings per share for the full year is expected to be substantially better than that of the prior year Obviously, we're benefiting from the the lower finance costs, that that that has pulled through. Important to call out that we have had significant impact all these one off projects both in Q1 of this year and Q3 as we've discussed. So that's that's me going through all the slides, operator.
We can I can put it back to you now for questions?
Right. Thank you, Steve. You. Our first question comes from Robert Smith at the Bank of America Merrill Lynch. Please go ahead, Roger.
You. Good afternoon. Firstly, how much of your dissolving pulp volumes are where you fix them for 6 months and do prices reset every January 1 July 1, or is it on different, time frames?
Yeah. It's it's important to stress that we do have longer term contracts in place, but we, as this market's come under pressure, we've been negotiating short term price concessions. In recent periods, it's been on a 6 month basis. So the price increases that you saw now for q 2 were consistent with q 1. Those are now we're in the process, or we've been in the process of of fixing prices for for this quarter and for the rest of the financial year, So you will see the benefit coming through in our final quarter numbers.
To to your first specific question, that's probably 85% of our volumes.
Okay. So what what you're saying is, you have these contract out there, but, when you say fixing for 6 months, it's actually saying, okay. Outside the contracts, look. Mister customer, I'm gonna fix it for 6 months at this price. It's not that the contracts are written for 6 months.
It's that you're giving concessions.
Yes. That that is correct.
Okay. What is currently pushing up Chinese, dissolving pulp pricing? What's the driver there?
I think there's a number of factors at play, but, most importantly, you have seen a reduction in VSF output which has allowed us, which has pushed up VSF prices. So our customers have been making better margin, and that has allowed us to to pass on some of, some some higher prices onto our customer. As you know, prices came under significant pressure in the back half of last year. You saw you saw cotton prices, polyester prices coming under pressure. Then after Christmas, they started rising cotton.
We we saw, I think it was about a 10% rise in cotton and polyester prices. I do concede to you that in the the last couple of weeks, they've they've they've come under further pressure. So it was a combination of prices for our substitute price, products coming rising. It was also, improved margin for VSF producers. And then the other aspect of play is that a number of the dissolving pulp producers switched back to pay making paper pulp.
So there was less there was less capacity, and we were one of them. As you know, we switched back, some production at cloquet. So so there was less volumes in the marketplace.
Got it. Could you say, the North American coated wood feed, pricing, what did it do sequentially from last quarter to this quarter?
Mark, do you wanna talk about the the the pricing in the US market?
I haven't I don't have a whole industry view on that, but I I would say in our case, it was pretty flat quarter to quarter.
Okay. And, in Europe, you talked about getting price increases in coated paper. Were you referring mainly the coated wood free or in coated mechanical. It sounded like coated wood free is is better as it usually is. So where were you looking to get those up?
Price increases that you that you were announced?
I'll I'll let Berry expand further, but it it is across the board. Barry, do
you wanna take that further? Yes. It's, there has been more recent momentum really over the past couple of weeks also as pulp prices have gone up perhaps against expectations, we are now seeing movement on the coated mechanical front as well. And also the activity level has been brisker than we had expected both on mechanical and on coated woodfree.
Hey. One more. I'll turn it over. What is a Q4, fiscal Q4 working capital inflow, outflow look like? Should it look like last year Q4 or, I mean, it varies.
I'm just trying to get a handle on what that looks like.
We're expecting an inflow short of just short of about $70,000,000 coming through in the last quarter. So Q4
I didn't hear it.
Excuse me?
What was that number you said? I didn't quite catch that.
$70,000,000. 70.
Okay. Perfect. I I will I will hand it over. Thank you. Thank
you. Our next question comes from UBS's Rachael Robinson. Please go ahead.
Hi. Good day, guys. Just, I mean, coming to North America. So maybe just you add some color to exactly what happened there because I think the last call, you're previously indicating that you don't see imports as a threat, and it seems to be a big about there. So I have just some color on that.
Then just on North America, so what do you expect or what can you do to actually be sustainably profitable in that business And are there any plans, for instance, to offset these imports coming into the country? Yes. Look, it's
a combination of factors that are happening. As you pointed out, we we didn't see an increase in imports, on the on the re or the last results call that we had. After that, when we when we started to look at the Q2 numbers, we did see a pickup in imports. But interestingly, a lot of that's actually coming in from Asia. Places like, South Korea and and Japan.
Unless, obviously, Europe, there was some, but but it was mainly from the Asian region. I think a bigger story has been less significant proportion, and that's that that's been done substantially relative to, prior years. Our key our key focus and that leads us into to the next point is the next part of your question is that our key focus now as we we have taken curtailments. It's mainly because we've got less exports, and we are marketplace to to to enable us to fill production at those mills. Mark, do you wanna elaborate a bit further on that?
Sure, Steve. Thanks. Yeah, we mainly moved out of some export markets, as Steve mentioned, and I'm bringing the product back. We have markets that we didn't serve that much in prior quarters and even prior years that are now much more back to the next port. And we also have, product extensions and and we're moving a fair amount our volumes into some specialty grades that we've been developing and, those offer us quite a few opportunities as well.
So we expect to be able to, fill the machines back up and do it with a lot less exports than what we were doing.
So the intention to cut prices to try to recoup some of the market share? And then just maybe an indication what you're, most are currently operating at in North America? What operating rate?
Our operating rate is about the same as the, as the industry is and from what I've seen on industry spec around this last quarter would be around 85%, plus or minus a few percentages. We're we're looking at products, not where we actually have to go in and battle with price, but we've got products that are in demand that we had really constrained of, you know, the availability of those products. And we're talking with customers who have been looking for, and and I'm hoping that we could actually provide some more to them and along with the fact that we are also, moving, as I just said, a fair amount of of volume into specialty packaging and specialty papers out of both cloquet and out of Somerset, which offers us some expansion opportunities into markets that we haven't been in before. Okay.
Thanks.
Thank you. We go now to David Wu at Merrill Lynch for the next question. Please go ahead, David.
Good afternoon guys. So two questions from my side. The first key is just on CapEx. In terms of this proposed 300,000,000 dollars spend in 2016. Could you just give us a split of, towards, which regions this will be allocated?
And then similarly for this year in 2015, what is the split between regions? So that this year and then next year. Then secondly, on pricing, the 10th occurred to the wood free price increases that you're trying to pursue in Europe. We've started to see some traction on reels. What are we seeing on sheets on the ground in terms of increases?
And perhaps you can, put some numbers to this in terms of, the uptick. Thanks very much. Okay. On the CapEx question, it's roughly okay. The the split changes because this year you had the big CapEx projects in Europe.
I don't, David. I I I don't have the exact splits here, but looking at 16, it's roughly it's it's roughly, South Africa is about, fair to 30 to 40% of that number. And then the balance US is about 40,000,000 to 50,000,000 and and Europe's the balance. Yeah? This year, as I said, it was more swayed towards Europe because of the big projects.
And then, sorry, what was your second question again? On the coated wood free increases and, Europe. I mean, what are we seeing on sheets? Because we have seen some evidence that increases organic traction in real Barry, do you want to talk about that split between reels and sheets?
Yes. Certainly, Steve. As far as reels is concerned, The market has been fairly strong, also because Woodfrigated Reels prices have been extremely low. So it's been substituting LWC with the exit of Housum quite a lot of woodfree coated capacity gets out. And that's put some strain on the market.
So woodfree coated reels are going up strongly. Woodfree coated sheets are going up slightly slowly more slowly, they have gone up in August, not very much about 1%. They will go up substantially in September we already see that in the order books. As printers and converters come back from the holidays, the pulp prices start to work through and there is a great determination. I can't tell you exactly what it will be, but it will be quite significant from in September.
That's fine. Thank you very much.
Our next question comes from Brian Morgan at RMB Morgan Stanley. Please go ahead, Brian.
Can you just give us
an idea of the core cost inflation levels in South Africa at the moment?
It's about 5%.
K.
Obviously, within that, you have a number of different dynamics play. You got higher energy prices. You've got labor increases, but overall, it's about 5%.
Okay. Fine. And then, just
to sorry, just to hop
on this a little bit longer, I'm trying to understand the volume picture in North America right now, year to date numbers looks as though sales tons are down 12% on the 9 month and the prior 9 month period. Is that related to to pulling back from export markets?
Predominantly, yes. And and we had to take curtailments as a result of that. The other thing that's in that number would be the lower dissolving pulp because we switched, because we switched some of that production back to making pulp for the paper mill.
Well, the biggest component be the exports export tons?
Yes. That would be.
Okay. In your opinion, what happens next on the supply side in the U. S? You've got 3% declines in demand. Nobody really seems to be moving on the supply side.
What happens next?
Yeah. Mark touched on it earlier. We we are looking for opportunities to switch towards more specialty grades. Look, look, you, what you've got to take into account that this is a seasonally is the lowest quarter. Q4 our biggest quarter.
So you're already seeing higher volume activity that would come through, you know, for this quarter, But, but overall, as we assess the market, our priority, as I said, is to switch that lost volumes from export markets into local opportunities, focus on, opportunities for specialty grades, and and and, and, obviously, maximize, output from the most.
Okay, great. And then the last question is just on the net debt. I think you said 1.8 by year end or around that. What sort of level are you targeting just that from that? And what are you thinking in terms of dividends and growth going forward now?
As I said, we would target 1,800,000,000 by the year end. We will then, we'll have the sale of the 2 mills coming through next year. And then we should generate, operating next year about a 150,000,000. I don't, in in terms dividends, it's not something we're contemplating at this stage. Over time, we've set ourselves a target of getting to two times EBITDA.
So it's not something I don't anticipate dividends in 2016.
Okay. Thank you.
Thanks. The next question comes from RBC Capital Markets. Paul Hoffman. Please go ahead.
Yes, thank you. Just I want to go back to sort of the U. S. Markets I wonder if Mark can give us a little more color on a couple of things. 1, and cloquet, how much dissolving versus wood pulp are you making?
And then 2, just thoughts on the Dakota markets here in the second half of the year, whether demand levels are recovering normally seasonally or are we still seeing that actual weakness?
Go ahead, Mark. Yeah.
On your first question, where about 2 thirds dissolving wood pulp and 1 third craft? And anticipate us the way we'll stay for a while. We can quite easily with our process there, move back and forth, and and it depends on, both our strategy and and what makes the most economic sense at the time. In terms of the second question, in terms of, the markets we are seeing, we're starting to see the the typical seasonal pickup I do believe we will find the markets to be very similar to prior years and going into our Q4 and Q1. Next year, calendar q 4.
But each year, that total demand is down, and and therefore, I do believe we'll see, you know, continuing sliding down between 1 to 3% per annum in total demand. But the right now, our expectation and and so far, our experience is seeing the the start of the seasonal pickup that we now receive during the summer year.
Thanks. And Mark, we saw prices in July here, sliding a little bit here in the U. S. And you're talking prices firming over in Europe. Just can you give me any thoughts on where you see the price trends going?
I think the, the US prices will come under pressure if we see a lot more inputs coming in. But, hopefully, the the European prices, that are starting to move a little bit. We'll continue to move, but the it all it won't come down to overall demand and supply and all of drugs. And, know, hopefully the market stays a little bit better balanced. It'll be going to Q4.
Right now, we're feeling as though our prices will stay relatively stable as we move to Q4.
Okay. Thank you. And then, Steve, just you guys mentioned asset sales. I think you're talking about $60,000,000 for forestry, but then also a couple of mills. Just go through those asset sales that you're talking about right now?
Yes, we've sold, we signed deals to sell 2 small mills in South Africa, Capecraft and Instra. They are, approximately that the sale proceeds of that is in dollar terms is about $50,000,000. The EBITDA that we were getting from those mills was only about $4,000,000. We're in the process of going through competition approval and all that, and, that will likely happen early in the new financial year, that the two mills that we're talking about were focused on recycled paper. Our core strength is in the virgin linerboard and and, fluting in South Africa.
So we these were non strategic for us. The other asset we mentioned was the forestry. We've got some excess softwood plantations in South Africa, and we've been in negotiations with a potential buyer which hopefully we can conclude, in the near future.
Thanks. We now go to James Hutchinson with Barclays Africa. Please go ahead, James.
Hi, good afternoon, gentlemen. Just regarding the $27,000,000 impact of the maintenance shuts during the quarter, I think you'd previously guided that's around $21,000,000. Was the increase in SMB a function of high opportunity costs taking the mills down or was there additional way required when your complications are getting those moved back online?
Yes, that's right. It was the higher opportunity cost. And also there was a bit of currency at play as well, which impacted ironically the opportunity cost, but clearly, the the rent had weakened in that period. So there was some higher costs. And then also the higher opportunity costs coming through.
So it wasn't that the the projects were successful. There was there was no issue there. Okay. Thank you.
Thank you. Our next question comes from Chris Ellis of Babson Capital. Please go ahead, Chris.
Steve, I think you touched about this when you're speaking about Europe. You said you were transferring who's in volumes back. I think that's from Metzaboard. Is that right? So how will that impact the European business in the second half of the year?
My second question is, I know we've spoken quite a bit about the US, but maybe 6 months ago, the guidance for 2015 demand to be flat, and it looks like it's now going to be about minus 3%. What sort of changed within the market from a demand point of view? Would you say there has been
Yep. The answer to your first question about who's in the that's right. It's it is a shift across from Mesa. In terms specifically the second half of the year, Barry, do you want to just talk about a little bit more detail there?
Yes. The, it's starts in this quarter. So the Housum ramp down will start during this quarter and will be complete in the final quarter of the final year. So over the next 6 months, we will see a gradual shift of volume from Housum to our own mills.
In terms of your second question, yes, you're right. 6 months ago, we were saying that the market was going to be relatively flat to to to slightly down. It it we're now projecting 3% down. The market is in a in a softer place. The demand the underlying demand for coated woodfree has softened.
And of at the same time, we've had all these currency impacts, which is, impacted on on exports. So, yes, that the market is softer than we had projected. Mark, I don't know. Is there anything else you wanted to add to that?
No. I would say only that there there continues to be a a shift going on in terms of, some some of the spend for whether it goes into paper or into other forms of media. And and, I think there's a little bit of that continuous cycle of chain going on as well.
Thanks guys. Very helpful.
Thank you. Our final question comes from Richard Thielen at Deutsche Please go ahead.
Good afternoon. Also just following up on the demand side, on page 14 with Esape Europe, you've got some, demand projections, which show coated woodfree and coated mechanical, in fact, the decline increasing in future years, from last year. I'm just wondering, you know, with Europe strengthening in terms of, you know, broad economic metrics, which sort of the basis for the more conservative declines that you've got baked in there? It's the first question.
Yeah. You're right. The the recent trends have been better than this. Look, we really use these forecasts as we we budget forward and we we try to anticipate and plan for our business. So we we do want to be conservative as we as we think about the outlook.
At the moment, things are better, but clearly, some of the the the dynamic, sorry, the dynamics of the US marketplace, you you you know, there's a there is concerned that you could have a delayed impact into Europe. But as things currently stand, things are better than these numbers have indicated.
Okay. That's clear. All right. And then secondly, I think you indicated earlier in the call that as far as potential next financing steps, you'd be looking at the, the $400,000,000 bond due 2017 and maybe early next year as potential refinancing opportunities. Is that fair?
Yes. The 2017 bonds have a cool window of 3 months. They mature in 2017, June. June 2017, we will be looking at opportunities if they arise during the 2016 year.
Understood. During that call window. Okay. Thank you very much.
Well, thank you. Steve, that concludes the questions on today's call. Do you perhaps have any closing remarks?
No, I just want to thank everybody for joining us on the call, and I'll look forward to chatting to you again at the end of the financial year. Thank you.
On behalf of Zappy, that concludes today's call. You for joining us. You may now disconnect your lines.