Good day, and thank you for standing by. Welcome to the Sappi Q4 2025 results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Binnie, CEO. Please go ahead.
Good day. Thank you, everybody, for joining. As always, I'll go through the investor presentation, calling out page numbers as I move through. I'm just starting briefly on page two, just drawing your attention to the forward-looking statements disclosure. Turning to page three, which is summarizing the year as a whole, the financial year 2025. It's fair to say it was a challenging year marked by ongoing global economic weakness. We did see difficult market conditions across all our segments, actually, and obviously partially driven by the weak economic conditions, but also the global trade tensions. As a result of all of that, we saw downward pressure on selling prices. From a materiality perspective, particularly on dissolving pulp, they dropped quite sharply during the year. On the paper side, added to that, we have seen excess supply globally in our key market segments.
Despite all those challenges, we did have some operational highlights. We saw our DWP and packaging volumes growing year-on-year. In the graphic paper space, we were able to gain market share. I'm thrilled to say that we've obviously completed the Somerset PM2 conversion and expansion. That's an important step in our strategy, and the machine is performing well. In Europe, we continued to make further rationalization to take costs out of the business and to improve capacity utilization. On slide four is a summary of the quarter itself. Relative to the prior quarter, Q3 of this financial year, numbers are up a little bit. However, the market conditions remained challenging. We did see sales volumes pick up for pulp and packaging. We also benefited, obviously, because there were no maintenance shuts. Regionally, Europe continues to be in a challenging place.
The economic situation there is still difficult for us. Across many of the paper grades, we see excess capacity. North America is obviously beginning the ramp-up of the Somerset II conversion. We saw improvements in volumes and modest improvement in profitability. Obviously, you are not at optimized levels, but we start to see that improvement come through. South Africa, I think South Africa had a pretty good quarter, actually. Obviously, lower dissolving pulp prices are the big story there. On the packaging side, a reasonable quarter, albeit that on the packaging side, even selling prices there globally have an impact on the South African business. Slide five has the bridge from last year to the current year. The big story is obviously the lower selling prices and its impact on our business. It is across all the segments, and that kind of dwarfs all the other.
Variables when you look year-on-year. To give us 111. On slide six, we did see. Relative to the prior quarter, we did see variable costs coming down. In each of the regions. Pulp at relatively low levels. Obviously, that benefits the paper business, but obviously indirectly has a negative impact on DWP prices. Energy prices coming down a little bit as well, but really across the board. Then turning to slide seven, which is the evolution of our net debt and our leverage over the last few years. Obviously, we saw the peak through the COVID period. We saw it coming down substantially. We made a decision to invest at Somerset, obviously. In the current year, we have the higher CapEx, which is now behind us. We also were negatively impacted.
By the exchange rates, the fact that a significant proportion of our debt is denominated in euros. When you convert that to dollars, you get the negative impact. Having said that, now the investments are now behind us, and we would expect our debt to start coming down. You saw it coming down a little bit in this quarter, and we would expect that to continue over the next quarters ahead and into the next few years. The debt maturity profile is reflected on page eight. Maybe just a couple of callouts. Firstly, on the short-term debt, which is 2026. You can see we have got a chunk of short-term debt in the box there, the EUR 224 million. We did put out an announcement on this. We are in the process of terminating out some of that debt and making good progress.
We'll give an update as soon as that's complete. Perhaps the other major refinancing that we've got coming up over the next few years is the 2028 bonds, the Euro bonds. It's about EUR 400 million. We obviously monitor the markets, and we'll pick the right time to refinance that as we move into the new year. On cash flow and CapEx, obviously a tough year and lower profitability, which has meant that we utilized cash during the year. You add in the CapEx as well, so EUR 360 million that we utilized during the year. CapEx going forward, 2026, we're estimating at EUR 290 million. In 2027, we're committed to keeping that below EUR 300 million. We haven't finalized the number yet, but it will be below EUR 300 million. Taking that.
Forward into page 10, as you all know, we give a recent update on some of the work we were doing on the balance sheet on the funding side. Obviously, with the lower profitability, our leverage ratio increased. Because of that, we proactively renegotiated our covenant levels through next year, great support from the banks, unanimous support. We have negotiated enough headroom to manage through this peak time. We are terming out the short-term debt, as I said. Overall, with that debt reduction focus, back to basics, focusing on productivity, cost containment. At the same time, we have obviously stopped the dividend. We have some initiatives to reduce costs, particularly in the European business. I have got a slide on that just now. The Thrive strategy is reflected on page 11. Obviously.
Our focus in the short to medium term is back to basics, but we must never lose sight of our strategic focus. Obviously, operational excellence is key to back to basics, maximizing productivity and efficiency and reducing costs. We continue to focus on enhancing trust across all our stakeholders. In terms of growing our business, we're not going to be taking on any projects or any material projects in the next couple of years. Our focus is on ramping up the projects that we've done, and primarily, obviously, that's the Somerset PM2. Ultimately, we're laser-focused on getting the debt below EUR 1 billion. We know it's going to take a couple of years, but with all the actions that we're taking, we're confident that we'll get there in the medium term. Obviously, with a strong focus on our maturity profile, which I talked about already.
Slide 12, I'm not going to repeat because a lot of this is similar to the prior slide, just to say that we are in this consolidation phase, focused on costs, focused on efficiency, maximized production. We've got a EUR 60 million target to take out costs in Europe, and much of that's already been made public. It's not just Europe. We are focusing on the other regions and at the corporate level. On top of all that, working capital optimization. It's only once we complete all that that we would consider dividend payments and any growth opportunities. The slide there just talks about our capital allocation priorities, and I've touched on this. I'm not going to repeat everything here, but obviously strongly focused on reducing debt, ramping up on PM2, ensuring we get a return on capital employed above our costs, above 2% o f our WACC.
2% above WACC, and then making sure that we optimize our product portfolio and matching graphic paper capacity to market demand. Slide 14 is a specific slide on Europe, which we thought would be useful. It just breaks down the EUR 60 million saving that we've got. You can see it's across the mills and at the corporate level or the central regional level. We're closing two machines at Alfeld, one at Kirkhniemi. At Ehingen, we are reducing the shift details. At Gratkorn, which is our number one mill in Europe, looking at a number of initiatives to optimize production and profitability. Turning to the segments, and again, I'm not going to go into detail, but just to summarize, and I'm on slide 16. The underlying demand for DWP remains good. We are fully sold out.
We continue to have our customers pushing for volume. The challenge is obviously that global prices have come off. That is linked to various macroeconomic conditions. I also think that the lower paper pulp prices have not helped as well, with carouselling and substitution there. Overall, volumes are good. Also, on the production side, things are going better as well. Packaging, a really tough year. Sorry, slide 17. Packaging, a tough year across all the regions, actually. Europe, a modest recovery. As I said earlier, the European economy continues to be challenging, and there is overcapacity in all the key product categories. North America, we have begun that ramp-up. The machine is performing well. We are adding volumes, and we are confident that we will continue to do that in the quarters ahead. South Africa had a very good citrus market season, which is our primary product.
That's our primary market for our South African containerboard business. Good season. The only challenge, the one challenge we have is that global containerboard prices are weak, and that does have an impact on domestic selling prices. On graphics, we continue to be proactive in terms of managing our capacity. In North America, the domestic market's tightened. Obviously, we took out PM2 out of graphics, so that supported the market balance. I think it's helped ensure that we have stable selling prices and good margins. Europe, the challenge in Europe is the excess supply. That obviously impacted on selling prices in that region, which had a negative impact on profitability. Slide 19, just a very brief summary of the regions. All in all, you can see selling prices across the board down. Some of it we did get.
Cost savings in Europe to offset some of that. However, not enough. In North America, costs up, obviously, because we had the initial ramp-up at Somerset, and that obviously impacts on efficiencies and usage and the likes. In South Africa, we did have some of the raw material costs up year-on-year, some of the chemical costs and wood costs there. Slide 20 has some of our key awards and highlights. I'm not going to go through all of them. We're particularly proud of our rankings in the Forbes Best Employer and Top Companies for Women. We were 144 in the world for Top Companies for Women, the second in South Africa. Really very proud of that. Even Best Employers as well, globally, to come in at 289. When you look at the companies on that list, we're very proud of that.
Other than that, we continue to focus on our science-based targets and our wood certification, which gives us a strategic advantage. You can see the links to our reports there as well. Turning to the output, I do not intend going through every bullet. I am on slide 22. I think it is fair to say that the market conditions continue to be challenging. We do believe that as we progressively move through 2026, things will get better. DWP has stabilized. You saw a little bit of an increase in that quarter, and we continue to think that that will be the case as we move through 2026. We will obviously have the benefit of the ramp-up in PM2 as we progress quarter on quarter. On the graphic side, it is about proactively managing that capacity. The cost side.
Some of the raw material costs are relatively low, and we'll look for opportunities there. We do have a maintenance shut, scheduled maintenance shut at Somerset. That's an 18-day shut, which will have an impact of about EUR 20 million. We obviously took that into account in our guidance. You've heard me say it many times: back to basics, focus on what we can control, focus on efficiency, focus on cost, debt reduction. Very disciplined capital allocation. Taking all that into account, and the shut, obviously, we estimate that the Adjusted EBITDA for the first quarter of 2026 will be below that of the quarter we've just reported on. Operator, I've gone through the presentation. I'm now going to put it back to you for questions.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by as we compile a Q&A roster. Our first question comes from the line of Brian Morgan of RMB Morgan Stanley. Please go ahead. Your line is open.
Thanks very much, Steve. Steve, if I can ask two questions. First question is on Europe. Pretty torrid quarter, September quarter, like we saw with the rest of the paper packaging names, but none of them were EBITDA negative. Just a question on that is, in terms of those machines that you closed during the quarter, were there sort of non-normal effects coming through EBITDA which we can reverse out in coming quarters?
Brian, I think specifically, the two machines that we took out were negative. Negative EBITDA. Obviously, by taking those out and optimizing the product mix and the cost base associated with that, we do think we can get improvement there. One of the challenges we face is that at Alfeld specifically, our energy costs have risen substantially since the pre-COVID times. It has meant that those machines that we are closing became uncompetitive. We have moved around our portfolio, and that combined with, obviously, all the other initiatives, we are focused on getting the packaging back to positive EBITDA.
Okay. So without any tailwinds from the market, you'd expect that European business to turn EBITDA positive, even modestly?
Are you talking about, yeah, in the year? Yeah, next year? Yes, definitely. Yeah.
Yes. Okay. 2026. So without any tailwinds, any pricing benefits, or anything like that, you would expect an improvement?
Yes.
Okay. Steve, could you just flesh out PM2 now? I'd be interested to know if you worked out how much of an EBITDA headwind that conversion had for you through the course of FY 2025. Also, if you could just chat to us a little bit about how to think about maybe an EBITDA ramp-up. I know you don't give us numbers, but just help us to think about how that might evolve over the next couple of quarters.
Yeah. Interesting question. Look, I mean, obviously, we had the direct costs of the downtime, and we revealed that in the last two quarters. I'm looking at my colleagues. I think it was EUR 22 million and EUR 21 million. So there was about EUR 40 million specifically. Then you obviously had the indirect impacts of the efficiencies at the mill. Brian, I don't have that as a specific number, but clearly it's north of EUR 10 million. I don't have that as an absolute number, but it had a material impact on the profitability. Now, obviously, on top of that, going forward, you're going to have the additional volumes because we've doubled the capacity of the machine. Now, Q1, we've got the shut, and you've got to take that into account when you're quantifying profitability of the North American business. Progressively beyond that, we're still very confident in the ramp-up.
We've been signing up customers. We've been adding volumes. Yes, obviously, the delay had an impact. Yes, we have that trade-off between price and volume, which we've got to be we've got to delicately manage. You know that, and this is public. SBS prices in the U.S. have come down a lot over the course of the last 18 months. We've got to carefully manage that. We are confident on the ramp-up. We know the machine is performing well. We know that the customers like the quality of the product coming off there. We're still committed. We've said it all along, by the time we get to the end of Q4 of this new financial year, we're confident that the machine can be substantially full.
Okay. Cool. Thanks, Steve.
Thank you. We'll now take our next question. Please stand by. Our next question comes from the line of James Twyman of Prescient. Please go ahead. Your line is open.
Yes. Thank you very much. Thank you for the presentation. Two to start with from me. The first one is the energy credit gain that you always get in Europe in Q1. Could you give us some idea of the scale of that and whether that's included in your guidance? Secondly, the five measures you're doing in Europe, could you give us some idea about broadly when you expect them to give a return and when and what the costs are? Thanks.
Okay. I think on the first one, just to clarify your question. Obviously, energy costs in Europe have been rising, and there has been increased costs. The way that these rebates work is that you incur the higher costs across the year, and then at the end of the year, you get rebates based on your usage. It is an offset of the higher costs that you have during the course of the year. Yes, you're right. Typically, the rebates occur in Q1, but not always. It is difficult to pinpoint exactly when we get them. Typically, they're somewhere between EUR 20 million and EUR 30 million. By the way, it's not unique to Sappi. It's all the industry players in Europe. Typically, they are between EUR 20 million-EUR 30 million. We do not know the exact numbers as we sit here today for what we've done this year.
We have a rough idea, but we don't know the exact. In terms of our guidance, yes, that would be incorporated into our guidance.
Okay. Thank you. You would have included that somewhere in that range of number in your Q1 guidance?
Indeed. I did not say it is an operational. It is an offset of an operational cost. I think is the important point.
Yeah. Thank you.
Your second question?
Yeah. Sorry. Yeah. My second question was just in terms of these five measures, your big measures you're doing in Europe. When should we start expecting that return? When do you expect the costs to, that EUR 40 million of costs to, be incurred? Thanks.
Yeah. Yeah. I'll let Marco go into more detail. Just from my side, obviously, you have to be sensitive about the discussions with Labor and following a process, which we've been going through. Maybe the other point before I hand to Marco, EUR 60 million benefits, EUR 40 million costs. Those are the headline numbers, but obviously, that's phased. Marco, maybe you want to go into more detail.
Yeah. Yeah, James. This is a very much staged approach. We have highlighted the five units basically where most of the work will be done. We finalized the consultation process in Alfeld, Ehingen, and in Kirkniemi in the last couple of weeks, which means that we now can implement the social plans for the FTE reductions there. I would say most of that benefit we will see as of quarter two, fiscal quarter two. The costs, because some of the work, particularly on the central organization, have been done already in September, October. The costs will be kind of divided over the quarters, over quarter one and quarter two. The effects will mainly be as of quarter two next year.
Thank you. If I could sneak another one in. There have been substantial tariffs on importers into the U.S. from Asia and from Europe, which I think is around 15% at least. What has been the impact on domestic prices for paperboard and for coated fine paper? Obviously, the paperboard impact has been offset by other factors, but what have you been able to achieve in terms of price as a result of that?
Are you talking about European prices?
No, U.S. prices in terms of the impact of the increased prices of the importers into the U.S.
Oh. Yeah, that's a tricky question. Because you have your indirect impacts, and it creates opportunities for us. I'm not sure you can say that selling prices have gone up just because of tariffs. Mike, I don't know if you want to elaborate further the impact of tariffs on the European competitors and in North American domestic prices.
I guess my view on that is it hasn't had a direct impact on North American prices. There have been announcements from importers of increases and how much they're realizing. It would only be speculation on my part. That has also allowed some of the markets to improve and orders to move from imported to domestic.
I think that's the important point, James, is that it's not so much for our domestic supply. It's not so much that it's been. Enabling us to increase selling prices. What it is doing is creating opportunities for us to secure more volume.
Okay. Maybe as an example, obviously, you're a big exporter to the U.S. from Europe. What have you found? Have you been able to raise prices, or have you?
Yeah. We're not a big exporter on the plus side. James, we're not a big exporter on boards. I think you were specifically talking boards, or was it graphic paper as well?
Graphics as well, to be honest. Sorry. Yes.
Yeah. Boards, it's not material. Marco, would you want to talk on the graphic side?
Yeah. On the graphic side, James. Of course, we have tried to offset some of the increased cost due to the tariffs and to pass that on to our customer base, which with the domestic competition in the U.S. is not easy. I would say that this has cost us volume, but we've been successful to around 50% of our incurred costs due to the tariffs. It's not so much the pricing that we could get up. It's more the volumes that we started to lose because of this attempt that we did to pass on the tariffs.
Okay. Appreciate that. Thank you.
Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Sean Ungerer of Chronux Research. Please go ahead. Your line is open.
Good afternoon, Steve. How's it going? Just first question around the European cost savings. Just to be clear, as we've been sitting on the call so far, the sort of run rate, sort of see these cost savings come through, is I think it really filters through into the second half of the year. Is that the correct way to interpret that?
No. I think you'll start to see it in Q2. If I was to, Marco touched on it, but there'll be a little bit, there'll be some in Q2, more in Q3, Q4, and the final little chunk will be in Q1 of 2027. Because a lot of these things that we, these initiatives are happening now as we speak, right? You still have some of the costs in this quarter, but for the next four quarters beyond that, the savings will progressively get larger.
Okay. Got it. Thanks, Steve. Just on the net debt target of below EUR 1 billion, what is the sort of definition of medium term? Because if you look at the slide of the presentation, I think it sort of flags resuming dividends and growth and considering share buybacks from 2028 when the target is reached. Am I interpreting that correctly, or how should we think about that?
Yeah. Look, it's hard to be definitive because clearly it's going to be dependent on market conditions. We've obviously got a strong commitment to reducing CapEx over the next three years. I think that. I do think market conditions are going to improve and profitability will pick up. Everybody can do their math. It's all going to depend on the level of profitability. If we can get back to normalized levels, we'll get there quickly. I think it's going to be gradual. I mean, clearly, 2026 market conditions are still relatively challenging. I do think we will get the ramp-up of Somerset. We will have better DP prices. Our CapEx is going to be EUR 290 million. I think there will be some strong cash generation this year. When you get to 2027 and 2028, I think there'll be further cash generation.
Listen, if it takes longer, obviously, we'll stay committed. We are laser-focused on getting this debt level down. However long it takes. What's our best estimate? Three or four years.
Okay. Perfect. Thanks, Steve. Just to follow on another question around packaging and specialties pricing in North America. If we sort of exclude the ramp-up of PM2, what has the core sort of board business pricing mix done year-on-year at least? I mean, sort of listening to a couple of other competitors in the U.S., it seems like pricing was down about at least 3-4% year-on-year.
Yeah. That's right. Obviously, it depends on the mix and the different grades and all that kind of stuff. If you look, on average in some of the key product categories, you're talking EUR 100, EUR 150 type decrease. Mike, I don't know if there's anything you want to add.
No, Steve. That's accurate.
Yeah.
Okay. Got it. That's great. Steve, I appreciate the—yeah. Sorry. Go ahead.
Mike, anything you want more?
No. No. No. We got it.
Okay. Great. Steve, I appreciate the guidance on the planned maintenance in Q1. There is obviously a nice schedule for maintenance for the full year, about quarter. Just trying to compare like for like compared to 2025. If we sort of strip out the once-off cost of ramp-up, I mean, what is your best estimate? Is planned maintenance going to be sort of roughly flat year-on-year or lower, or how f lat year. You've obviously got a number for Q1.
If you, yeah. Look, if you back out the whole Somerset thing, I mean, last year you had, in the U.S., you had Cloquet, and this year you've got Somerset. In South Africa, you've got Ngodwana, which you did have last year. Oh, there it is. Yeah. Yeah. It's on page 28. Yeah. Page 28. So you've got different quarters, but you've got Ngodwana in both years. Perhaps a little bit higher would be, I am looking at Graeme here. Cycle's a little bit higher because we've got that little bit of a longer shot to fix the one piece of equipment that we need to spend time on. But it's not that material. Graeme?
No. I think more broadly, we're doing a full mill set in that one just to do a full clean of systems that do not regularly get cleaned. It is slightly longer, but not less material.
Yeah. I think the conclusion out of all that, Sean, is that broadly, I mean, obviously, Somerset, taking out Somerset project last year. Broadly, it is about the same as last year. Maybe, yeah.
Okay. So quarter like EUR 70 million odd.
Yeah.
Okay. Cool. Steve, just going to North America in terms of quota free sheets, I mean, there's a couple of competitors after price increases for Q4. I'm assuming that will sort of benefit your business as well. Is there any sort of update there or traction or no traction?
I'll let Mike go into more detail. Obviously, taking out the machine has brought the domestic market back into balance. It does create opportunities on Somerset PM1. I think we talked about that in our results announcement. If there are opportunities to add value and make some graphics on PM1, we'll take advantage of that. Mike, specifically to recent pricing moves and that.
I guess the way I'd phrase that, Steve, is the market is still overcapacity with the current quota free sheet assets in North America. On the website, not as much traction as on the sheet side. The sheets are dominated by imports, which have had the tariff impact. I'd kind of frame it up in that way. We are carouseling some graphic grades to PM1 as we're ramping up the volumes at the Somerset mill.
Yeah. Overall, the certain grades we would have been able to get it, but others more challenging. Having said that, it's obviously a much tighter market condition than Europe.
Thanks. Steve, just last one from myself. I mean, what do you think is going to be the biggest catalyst in the short term to sort of see a rise in DP prices?
The biggest risk?
Catalyst.
Oh, catalyst. Look. I do, and again, I'll let Mohammed expand further. I think that it's clear that there's still a high correlation between paper pulp prices and DP prices. Obviously, paper pulp prices have gone up a little bit in recent months. I know there's another price increase out there. I think that will help. Obviously, secondly, as the kind of macroeconomic situation improves and the consumer environment gets better and the trade tensions that have been out there, as they get resolved, I think all of that will help as well. We think it's going to get progressively better. Mohammed, I don't know if there's anything you want to add there.
Yeah. Steve, the only other thing I would just add is that the fiber prices also have a big impact on the DP price. Visco-stable fiber prices have stayed and operated in a fairly narrow band for a long time. The operating rates have moved higher. The inventory levels have moved lower. At some point, that's got to start showing up in the fiber prices moving up. As soon as that happens, that could be a very important trigger to lift the DP price.
Excellent. Thanks for the time.
Thanks, Sean.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Please stand by while we take the next question. Our next question comes from the line of Lars Kjellberg from Stifel. Please go ahead. Your line is open.
Thank you for taking my question. I just want to come back to Somerset a bit. Steve, you talk about your great confidence in ramping up this machine over the next 12-15 months or so. At the same time, most would say it's about 500,000 tons of excess supply in the U.S. market, and volumes are flat to down a couple of %. How will this be done? What is behind that confidence? What are you prying away to ramp your machine?
Yeah. Look, I think it's a progressive process. We've been in discussions with customers for the last couple of years. We know that we've got the best machines in the industry in the U.S. We know that we are targeting the independent converters. It's going to be a progressive process. Interestingly, and I'll let Mike expand further here, we've seen some reasonably good growth numbers in the last couple of months in terms of volumes coming out of the SBS markets. It's a combination of, in terms of the longer-term discussions that we've had, our ability to service those independents, and building on the relationships that we have. Clearly, and I said that in an earlier comment, there's going to be a price-volume trade-off. We've got to carefully manage that and optimize profitability as we go through that process.
Mike, do you want to talk further there?
I think if you just think about the market and the scale of the two assets that we now have as independent suppliers, it is absolutely the best, largest-scale machines in the SBS market. We have new equipment, highly technical. We have a product match with our PM1 that was extremely well accepted in the field. We are obviously a domestic supply. We have seen opportunities as a result of some desire to switch to domestic from imports. As the independent suppliers are looking to grow their business, they are clearly looking to grow with companies that are convicted around this business, which is clearly Sappi with the investments that we have made, and not just the mill, but with our sales force and our technology group with R&D. We have had many visits to customers, and I think it is a relationship piece that we are going to continue to build.
We feel as though things are progressing well. Is it a seller's market? It is clearly not. We are making great progress. The products off the machine and the asset is running very, very well.
Thank you, Mike. One other point, Mike, is that remember we have PM1 at Somerset. With margins healthy on the graphic side, we can leverage off that flexibility on PM1 as well on top of all the good stuff that's happening on PM2.
Yeah. Could you remind us also the yield benefits you would have relative to standard U.S. SBS sheet and how you would compare with import FBB?
Probably that we have about a 5% yield advantage from SBS, which is a little bit less than FBB. But we also have a couple of fighter grades that we've developed that are similar to FBB.
Got you. Final question for me is, again, we're talking coming back to Europe, right, where there's, as you pointed out, significant excess supply. It feels as if some volumes are turning back that used to be exported from Europe. Are you seeing any incremental pressure from repatriation of overseas tons into the European market that makes that particular market, when it comes to quota paper, more challenging than it already is?
Look, that's one of the dynamics, isn't it, Lars? Yes. Yes. That's part of it. It is already there. And it's a continuing pressure point. Obviously. You have the indirect impact on tariffs, right, from the U.S., right? Other players can't get into the U.S. Where do they look to sell their product in Europe? It just compounds the challenges of Europe and adds to that excess capacity. That is why it is very important that we have proactive matching of our capacity to our demand and taking costs out of the business. It just compounds the challenges we face.
Got you. That's all from me. Thank you.
Thank you. There are no further questions. I will now hand back to Steve Binnie. Please continue.
No. Thank you. I just want to take the opportunity of thanking everybody for joining us today and look forward to discussing our results at the end of Q1. Thank you very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.