Earnings Call: Q3 2021

Oct 22, 2021

Ladies and gentlemen, welcome to the Biller of Cozner's Q3 Report for 2021. For the first part of this call, all participants will be in listen only mode and afterwards there will be a question and answer session. I will now hand over to Lena Shattar, Director of Investor Relations. Thank you, and good morning, everyone, and welcome to this webcasted call about Biller Kosnek's Q3 2021 results. It will be presented by our CEO, Christoph Michalski and our CFO, Ibar Ratner. And after that, we will open up for questions. So Christophe, please go ahead. Thank you, Lena. Good morning, everyone. So I'm very glad to present you our report. As you have seen, I think it's a very good report. We had a very good quarter 3. And I think all the indicators pointing in this direction is a mixture of the work we have done to continue our saving program, to work on the stability of our production and by a very strong market environment, which we have. So if you look at our sales growth, it's 17%, 18% FX neutral, very good performance. I want to remind you that quarter 3 last year was a little bit softer than usual. So this growth is helped by that. But nevertheless, it reflects very much the performance of the company, but also It's a very good market environment. Until now, our price increases have more than offset some of the cost inflation in certain aspects of price increases in quarter 3, we got the full quarter impact the price increases of quarter 2, we got the full impact in quarter 3. And also in quarter 3, we had some segments where price increases continues to be implemented. This has all then translated to a very good improved EBITDA margin. And Iva will talk a little bit later on the different components of this growth. And our EBITDA is now at SEK 1,000,000,000 SEK 117,000,000. Most of such EBITDA this quarter could be transferred into operational cash flow, which is a very, very good thing, and with this performance, our net debt to Equity and net debt to ratios have improved significantly. So far to the performance, let me give you a little bit of business status and market outlook. And as you know, we are operating across different product segments And different industry, and across the board, we have seen in quarter 3 a very strong market, be it in food and drinks, Medical, Hygiene, Consumer, Luxury and Industrial. And we also see going forward a relatively good outlook for these segments, I think in Food and Drinks, what we see, it was stable in quarter 3, but at a very high level. And we see that trend to continue in quarter 4 and also probably in going into this first half of next year. When it comes to the other products, they clearly accelerated in quarter 3, and this is probably due to the good economic situation we have, despite still some wobbling question around COVID, the markets continue to have high demand. And as far as we can see, there's very little stock in the market. So our books are quite full in terms of order for this year, but also already continue into next And we expect that situation in most of these markets to continue. I think the logistics have an impact on this. So we have some artificial constraints in the markets that we able to leverage. However, even if you take these special factors away, high energy prices and some shortages in production or logistics, I think even taking those away, you would still have a very, very strong market situation. Then let me go to the highlights. As I mentioned, all segments improved with high demands. I think for liquid packaging board, it continued to be very good. It's not just it did not increase in quarter 3, but it was continues very good already in quarter 2, quarter 3, and we have a very good outlook beyond that as well. Progress in our internal profitability enhancing activities has been made. You realize there's 2 aspects, the stability of our production, and most of our mill had very good performance. We also have continued to produce more and more added value products out of Gruyvern, and that is progressing well. And when it comes to the added value, coated volume increases as well, most of you are still interested in Wes KM7, and we have said that we from now on will not report specifically on it. But I saw some of your comments this morning is absolutely correct. We are producing liquid packaging board on KM7. The machine performance is excellent. And therefore, we continue with a very strong performance. Then you all aware of our saving programs, Melius. And this program has continued well in quarter 3. And I think we are more or less at the end of that program, we expect to achieve our targets by the end of the year, and then we have a little bit more into next year in quarter 1. You're all aware of the difficult situation we had in Ghevele. So I've excluded this a little bit from the stability in Production issue, we actually didn't had a production issue per se. We had extreme rainfalls in the Ghevla region in August, which led to a lake where we take our water to turn into a level of sediment and Color changes that we could not handle with normal water treatment measures. The lake has improved since, but it's still at the worst level than it has ever been since recruitment started. And we are currently back to production, but the situation is still a little bit difficult. We lost 20,000 tons of products, which correspond about €75,000,000 of earnings, of which EUR 50,000,000 have been taken into quarter 3 EUR 25,000,000 are in quarter 4. So it's not 1 quarter effect, but the effect of Ihevla is spreading over these two quarters. I will just on the next slide, you can see a little bit on our cost and efficiency program. I think I made the point already. I think I'm very happy how the team has continuously over the last, I think, 2.5 years worked on this program And actually achieved a very good performance by delivering probably at the end of the year around 650. And then it's a small thing for next year and then the program is done. But as you know, cost savings is something you do every day. So we will continue to look into the areas. We will have other structured measures going forward in 2022 to ensure that we have the highest efficiency and lowest production cost possible in Billehut Korsnes. Raw material in quarter 3. When it comes to fiber, it has been quite stable. We have good availability. Sawmills are also delivering a lot of chips. Initially, I think in quarter 3, we talked a little bit about probably a strengthening or a cost slight cost increases by the end of the year. This is clearly something we do not see. We don't expect any cost increases in the fiber going forward. We have also higher costs for chemicals. And here clearly, like most raw material on the world market, We expect an increase to continue into Q4. And the same is also true for the energy Cost of which you're very, very well aware what is happening in the market. When it comes to pulp costs, I think we have seen a stability at incredibly high level right now in Europe. In China, the pulp market is already softening a little bit, we expect this to happen also in Europe, but at a much slower speed. And as you know, we are quite balanced in pulp. So for us, the effect is relatively little, but it's important for our non integrated mill, In particular, Pietesari and BSM. What we will do in the outlook, we will talk a little bit about the impact on this raw material price, in particular energy and chemicals, to our forecast our outlook for this quarter for the next quarter and also for the beginning of the New Year. Good, Iver. Do you want to move forward a little bit into the details of the financials? So I hand over to Iver Wachner, our CFO. Thank you, Christophe, and good morning, everyone. Let me just say a couple of words about the net sales performance, and you'll see the net sales bridge in front of you. It's been a very strong quarter, as Christophe already alluded to, 17% reported. And when you strip that out from the FX, it's 18% versus year ago, we have a significant positive help from pricing. Roughly 30% of this is coming from the pulp sales, meaning that the remaining pricing impact is coming broad based from pretty much all of the segments, in particular containerboard and 2nd kraft, but also some impact from cartonboard. And as Christophe said, we've had several rounds of pricing announcements during first half and added some new items now in Q3. We also have a very sizable help from volume and mix. As you can see, 10%, so it's the biggest building block. Sales volume is up by 6% and mainly coming from Board, meaning that we have a very good mix help. And that's Extremely encouraging to see because it's very much also what we want to do. Clearly, this is also a tension of what we are doing now with Optimizing our board production and a steady increase of coated materials coming out from KM7. That can just be confirmed that the KM7 ramp up has really gotten into gear and taking a good step towards profitability levels now in Q3. If you move to the next slide and trying to dissect a little bit the EBITDA performance. We had a very strong profitability improvement, as you can see, almost double the earnings versus a year ago. Starting a bit on the left side of that slide, we have a slight negative FX impact of €15,000,000 fully linked to set strengthening versus some of the core currencies of euro and dollar, clearly helped also by our favorable hedging positions for 2021. The yearly incident has already been mentioned. Main driver of that is 20,000 tonne production volume. We will see about 2 third of that or 50,000,000 heard coming in Q3 and the remaining 25 to come in Q4. In Q3, 3, we also had a net short position on pulp, and that means there's a small negative impact of €25,000,000 from the buying and selling. On the other raw materials and logistics, we do see, I mean, high volatility and in general inflation going on. I'll just give you a little bit of coordinates of that bucket of what really sits behind. On fiber, we have actually EUR 60,000,000 HELP versus year ago. Chemicals, we have a Hert of EUR 40,000,000 split between caustic soda and latex. Energy, we have a 6 electricity, we have a 60,000,000 Hertz. And logistics, there's also a 20,000,000 Hertz. So net, you land on 60. Then if you go into pricing, biggest bucket on this chart and clearly very significant building block for the full year. I did mention already that the main part of that is coming from containerboard 2nd kraft and partly also from cartonboard. Good help from volume and mix, as was mentioned. The cost and efficiency program keep delivering and we're adding SEK 70,000,000 this quarter, meaning that a very small negative other and the timing component of the maintenance schedule, it brings our EBITDA to about SEK 1,400,000,000 or 17% of net sales. Good. So we go into a little bit more Specificities around the product areas and starting with product area. Board, I mean, I think the numbers speak for themselves. We had an excellent Q3 and delivered strong performance on pretty much all the KPIs, I mean 20% net sales and 21% stripping out FX. I think that would be performance we will take any day of the year. It is true, as Christophe also said, that there is slightly a base that we need to kind of keep in mind, in particular, due to maintenance shut schedule and in general, the Q3 last it wasn't very strong due to some inventory adjustment. But nevertheless, the top end growth is coming broad based and across all segments with double digit. Again, liquid packaging is up 12% despite the challenges we've had in Nhevele. And I think in particular, you need to keep in mind Q3 last There was some inventory adjustment that impacts that comparison. Carp on board, I mean, I don't know what Say, I've said it already many times that it's outstanding performance, and I think it's getting habit that we report double digit growth, which is very, very good to see since it's one of our main areas that we would like to accelerate the growth, containerboard also very strong, and we see excellent performance both on liner and on the fluting side. In terms of what the profitability drivers to help our increase, I mean, there are several items. Pricing is surely one of the bigger positive mix and volume and also help from our cost and efficiency program. Good. So we move over to product area. Paper and also very happy to see the same kind of trend that we looked at for board and the market situation is completely different now versus what we saw in the end of 2020 and going into 2021. I mean, broad based growth, I mean, double digit across the segments, extremely good to see. And in particular, on the SAC, it's brown SAC, which leading that growth rate. Sales volume is actually down 4%. So it's mainly due to lower pulp sales. We have a little bit better volume development on the SAC and the kraft paper. Profitability, also excellent progress and very much linked to what we said on board, help our pricing mix and benefits from our cost efficiency program. So going over to our cash flow performance, we've had EBITDA as a theme so far in 2021. It has been a very strong cash Flow delivery so far and Q3 is no exception. So I mean operating cash flow is up EUR 400,000,000 versus previous year, clearly linked to a much stronger underlying operating result. I mean, our balance sheet, Christoph also mentioned, it keeps getting stronger and stronger. And quarter on quarter, we can say we put more funds in the bank. Net debt leverage is down now to SEK 1,300,000,000 which is obviously a very good and healthy position to be in. A couple of updates on the CapEx estimates For this year, we can start with that. So SEK 1,600,000, so we lower it slightly from what has been communicated earlier out of this SEK 1,200,000,000 related to base CapEx. And then linking that up to a bit of an update Just on the timing of the 3V recovery boiler investment, SEK 400 SEK 1,000,000 is the estimate we have for this year. Then it looks to be pretty close SEK 1,000,000,000 each then going into 2022, 2023 before the last SEK 200,000,000 should be completed in the beginning of 2024. So with those words, I hand it back to Christoph. Good. And then let's talk a little bit about the outlook. So as I mentioned already before, our view is that the market condition will remain strong, even if some of these specific items, logistics or energy prices are adding to this market. Demand will disappear. We still think the market will be strong. We see no reason why economic development over the next 18 months would slow down. Yes, there are some inflationary pressures on the horizon. But overall, because of the current stock situation in the market and the overall economic development, we think that the demand to our specific products we'll remain strong. 2nd, we have good availability on pulpwood with the strong sawmill market, with strong availability of wood in the areas where we are sourcing, we do not see too much pressure on prices when it comes to pulpwood. We clearly see some long term challenges in the market, be it the policies of the European Union having a long term impact, be it the different competitor moves to increase production in certain areas where we are, But I think for quarter 4 and probably the beginning of next year, we are pretty confident to be able to continue With good prices on wood pulp. Maybe, Eva, you can give a little bit of a review of the other input cost. And in particular, I guess, it's chemical and energy that most people are interested in. Yes. No, thank you, Christoph. I will do that. And I think we all read the same newspapers and see that there's a lot of movement on certain of our input items. And I just wanted to give you a little bit of flavor on the not to speculate at all because I think we can all agree that it's very difficult to even have a good and reliable estimate for next year. But I just want to give you a bit of visibility that if the rates would stay as we have now seen in Q3 2021, and they continue pretty much flat from now on for the whole of 2022, what would some of our exposure be? And I'll just quickly highlight some of our main component and then I'm going to start with electricity. So the short version here is that we consume as a company 3.2 terawatt on an annual basis where we purchase about 2 pretty much flat of that. So we make kind of or we produce ourselves 1.2. The average cost that we would have for 2021, meaning that when we look at our 1st 3 quarters actuals and then assuming that the Q2 continues into Q4, we'll be in the area of €37 per megawatt, okay? But we also know that the volatility has been extremely high. The good news is that we have already hedged a very sizable part of what we expect to buy going into 2022. So 70% of our expected purchase for 2022 is hedged at €31 per megawatt. And I hope you would agree with me that, that's a pretty good position to be in with the current situation we're in. Meaning then if you overlay that with the last 30% on a high spot rate that we see right now, we would land in the area of € 41 per megawatt. And then the math will take you to that roughly, meaning that SEK 80,000,000 is some kind of an estimated negative impact, 2022 versus 2021. Chemicals, that number looks to be in the area of EUR 125,000,000. Due to now we see very high pricing levels, in particular on lafel and caustic soda. And if that continues flat for the next 5 quarters, that will be a pretty sizable hurt, 'twenty two versus 'twenty one. Logistics would be looking there of SEK 75,000,000. In that sense, you can relate that back to some of our new logistic contract that we completed during Q2 this year, so we have a full year impact of that, plus some additional challenges that we've seen during the year with the hiccup of emergency and express shipment, etcetera. On the fiber side, I think as Christophe already mentioned, we don't really see any impact for the time being. So the flat development is what we pretty much would expect in 2022 versus 2021, last point I just want to comment on is the currency. I think you also see that there is quite a bit of volatility on the Swedish kroner versus our core currencies of euro and dollar at the moment, and we've had a good year in the sense we've been helped a lot by hedging positions for 2021, 54% of our net exposure is already hedged for 2022. There is if we see the spot development continue going forward, we obviously would see a net effective rate being strengthened for next year and they hurt and based on what we just see now would be in the area of SEK 200,000,000 year over year. So kind of adding all of that up, you would somehow come between SEK 400,000,000 and SEK 500,000,000. That's certainly not pocket money, and it's a very clear indication also we need to stay very tight and on board with our price management going forward. The good news you can say is that already with the pricing position we have in place and initiated, the carryover position going into 2022 should offset all of what I mentioned now and actually a little bit more. So I hand it back to Christophe with that little debrief. Okay. Thank you, Ivo. And I think on top of the pricing position we are taking forward, clearly, we will continue to work on our cost basis. We will continue to work on particular on our mix because that's a much more sustainable type of growth and therefore, I think we look with relative level of confidence into 2022. So our business priorities remain the same. Clearly, health and safety, we made some progress over this year, maybe not as fast as I would have wished But we will continue to focus on that and make sure that our employees and contractors are leaving our sites in good spirit and good health, stable production. We had a rough year, I think, this year, both in Carlsberg and in Jhevele. Jhevele, You remember the explosion in June and then further the water issues in August, September. So that is clearly a priority to ensure that we are able to build back stocks in our own business, which are currently at relatively low levels and also to provide for the strong market demand. Gruyvern is totally in line with what we expect, even a little bit better. So I think this is now really part of our system, Jhevle, Fulvi, That provides for particular cartonboard and containerboard. Competitive wood supply remains a major focus, and I think we see good progress on that side. And as we said, cost and efficiency programs are to be continued. As you know, we will have a Capital Market Day in November. We have developed or we have rethought a little bit our strategy going forward. So I hope there will be some news for you, and we want to take the opportunity, a, to discuss with you the future and a bit more long term perspective and see opportunities that we see in below it, Koschnes over the next 5 years. And we also would like to take the opportunity to introduce to the management team, to give you a wider perspective of what we do and to people who are working in our business. So to remind you, it's on the 70th November, it's around 13 and please sign up for our Capital Market Day, which I think you will find very enjoyable. Thank you. Having said that, I think we'll now go over to questions. And Jerry, can I ask you to take on The task, please? Thank you. And our first question comes from the line of Cole Hathorn of Jefferies. Please go ahead. Good morning. Thanks very much for taking my question. Just a little bit of color, firstly, on your liquid packaging board Contracts because I know a lot of them are focused on volume kind of 1 to 3 year time line. I just want to get an understanding of how you get kind of cost inflation back on those contracts because they're longer term is the first question. And then on the second question, your outlook on the industrial side is for kind of improvement there and that particularly plays to your Sac and Craft Specialty Craft Paper business. Could you give a little bit more color which end markets you're seeing that positive demand? And then the final point on the cost inflation, Eivol, thank you very much for giving that detail of where the cost inflation will be into next year. Can you give a little bit of color on the mix element of KM7, how that positive mix contributes to that earnings growth for next year? Thank you. Okay. Thank you. Thank you for your question. So you're correct. Liquid Packaging Board tends to be much more long term contracts. And we have some minor price adjustment facilities within some of these contracts. Otherwise, it's really we promise our customers to deliver to a certain price, to a certain volume, and we try to do everything to do that. I think we as with most of these long term contracts, we have what you call that puts them that they don't renew all at the same time. So it's a kind of a dynamic situation. And generally speaking, I think we are all very happy how they work and they do not have a negative effect on our cost position or profitability position as time goes by. When it comes to 2nd kraft, maybe Ivo, do you want to take that one? Yes, I can do that. So I think For the time being, Paul, we pretty much see a very strong demand on pitch map all the applications. So that's everything from automotive to some other heavy industry talking about, well, application going into food and retail industry also when we're talking about foodservice. So it's pretty much green all over. I think the one that has lagged a little bit and really now getting into gear is kind of the foodservice part. And clearly helped by now restriction and bans being lifted in the wake of the COVID vaccination picking up. So I mean, it's Peter Margreen in all fronts. We also see a very positive development, in particular, on the brown sack when we look into our business in Asia, so the cement sack is also extremely strong, pretty much all over. So I think it's good news. The only thing maybe you can add to this because demand is underlying very strong. We would probably be helped a little bit at the moment that there are some supply constraints in the value chain in general. You can relate that to either you can say some maintenance stops schedule that has been complicated for some of the players. You can relate that to energy pricing being unheard of, meaning some mills have actually decided to take Down a little bit capacity. There's also logistical congestion, as you know. So it's certainly, you can say, in that part, little bit helped by a supply side. But in general, what we're picking up is that the demand is strong in all of our user fronts, And there is very little inventory buildup at the moment actually to the contrary. Good. Let me talk about your third question. As I said before, I think we had a long journey on KM7, and we are not anymore in a situation that when we run our business that we take KM7 in the center. You have to understand that Gruvon, Frovi, Jablot, they have overlying Capap capabilities and we start increasingly to use them as a system, and therefore, any particular comment on KM7 is, I think, not really appropriate anymore. The only thing I can say, and I think we said that quarter over quarter now that we are starting to produce top grades on KM7, we are incredibly satisfied with the reliability and the quality that this machine can produce, and we are also very happy that some of our customers have qualified for their needs machine much faster than we initially expected. And therefore, we are now able to really optimize the system between Javal and Frovi and Gruvon, and that's what we are focused on. Thank you very much. Can we have the next question, please? Our next question comes from the line of Robin Santavirta of Carnegie. Please go ahead. Thank you very much for taking my questions. Three questions. First of all, you have spoken about long order books in both of your operating segments. Could you describe roughly what time period you are selling now in the board segment and in the paper segment? And what is the normal length of order book? So we understand sort of what kind of order book length you have. The second question related to pricing. Now clearly increasing prices and higher prices during Q3 implemented, there will be some carryover for sure. But now we're sort of at the end of October going into November. Are you looking to increase prices in any of your segments now, so to us, so November or December and in what segments would we then be looking at? And thirdly, there's obviously very strong markets. And is this sort of more cyclical strength recovery in economy? Is it market share gains or is it sort of plastic substitution type of things? So any comment there, I would appreciate. So let us see. Thanks. Okay. Let me take your first and last and then Iva, maybe you want to talk a bit more about the Yes. So in terms of order book, it's actually very simple. We have I mean, we are fully booked Inboard into quarter 1, and basically this I think is a little bit longer than we would normally think. It's Kind of 2 months where you would think as normal. We are very low on stocks. There's enormous amount of demand. And even if some of the So we haven't seen anything of that. And actually, people are even adding to the order books and are sometimes quite desperate to get hold of product, especially on board and containerboard. On paper, the situation is a little bit different. As you know, there are many different ways of getting these type of papers. Our order books are full for 3 months. It's also something which we don't see too often. I think here 6 weeks is the norm, so very, very strong demand. Look, the last question, that is a subject which clearly we discuss a lot. We know that we are in a cyclicality, which has to do with economic development, which has to do with what our competitors are doing, but the underlying positive trends for our products continues and I think it's even accelerated. So when we talk to brand owners in particular, we see a very, very, very strong demand to move out of plastic. They look at our products as substitution. There are now products in the market like Flow Wrap, which can really replace a normal plastic application with relatively little change to the packaging, machinery and such. So yes, I think the underlying trend is good. And I think therefore the cyclicality that we have seen in the past is probably a little bit softened. On the other hand, even if cyclicality were to come back, we are clearly at a level of low stocks in our own company as well as very, very long order books and a little bit of the softening of the market would actually be positive and would allow us to go into less exceptional demand for products and such. I think today I would argue customers are less satisfied that they were maybe a year ago because we cannot respond to the demands in a time frame which is normal, which as I said before, it's kind of 6 weeks or Say 2 months for board. And it's clearly always very dissatisfying if you have someone waiting for products for 6 months and then you have a little hiccup in your production and then at 6.5 months, and this is not a very good way. So we hope that our production stability in 2022 will improve and on top of that, that the market will normalize a little bit so that we go back to normal customer service levels that we are used to. Iver, do you want to talk a bit about price increases? Yes, I can do that. So Robin, I can try to give you some flavor on what's been planned. I'm keeping pulp outside of this equation, partly because pulp is just literally following, you can say, the peak indices on our side, and it's almost just Straight line from there. But on the material side, we are planning some further price movements in Q4, cartonboard, brownsacking, kraft paper in particular, so we are aiming to add, you can say, another percentage point for pricing in Q4 versus Q3, meaning that in the area of EUR 65,000,000 is the estimate we have now of new pricing coming in Q4 then versus Q3. Good. Thank you. Can we have some more questions, please, Jerry? Thank you very much. Our next question comes from the line of Martin Melby of ABG. Please go ahead. Yes. Good morning. My question was regarding the price increases, which you have just answered. But is that taking out all of the price increases in sackcloth paper and cartonboard that newsletters are talking about and my other question is regarding another twist at KM7, so how much spare capacity do you have compared to what you delivered in this quarter to sell? Okay. Let me take the second one. The first one, I think you need to repeat. I'm not sure if I fully understand your question. So spare capacity, we have 0 spare capacity. So when you have these machines and KM7, to some extent, is still in ramp up, we are basically planning production cycles. They need a little bit more planning and more care than if you have a well run-in machines, we are now basically the machine is qualified for the grades, and it's now over time that you would accelerate the machines and further optimize the grades that you run on that machine compared to any other machine. So I think this quarter, except for the Ihevle incident we have and the maintenance stop we had, we run most of the time at full capacity. And it's now over time only that you can increase the capacity across the network by optimizing and putting the product with the best run ability on the different machines we have. Can you repeat your first question on price increases? I didn't entirely get it. Yes. It was regarding price increases. Now Ivar just gave the number for Q4. But there are, of course, say, lift prices quoted on resay for all of your products. And are you, say, up to speed on the last price increases that have been quoted there? Is that has that come through in your books? Or is it yet to come in, say, Q1? Yes. I think, let's just say that these are the ones we have on the table for now. We tend to monitor the development very closely. I think also we see I think we all need to take that with a very big pinch of salt because some of those are announced price increases and very seldom Actually, that's going through to the full extent and that actually can quite big difference between announced versus what you see impacted. But I hear your point. And clearly, the sentiment is still strong. And it definitely could be that we will add more in Q4 or going into the beginning of 2022, but for the time being, this is what we have on the table. Great. Thank you. Thank you. Next question, please. Our next question comes from the line of Johannes Grunselius of Kepler Cheuvreux. Please go ahead. Yes. Hi, everyone. Johannes here. A few questions from my side. But the first one is actually if you have any if you see any impacts from the spike in recovered paper. I know you're 100% virgin based company, But prices for recovered fiber are extremely elevated. And is this having any kind of impact on your business in terms of dynamic effects, indirect effects, etcetera? That's my first question. Actually here, I think you're well aware that Virgin fiber have different very different performances than recovered fiber. And we have not have any specific Impact from recovered paper prices. I think our customer, generally speaking, buy our products because of their performance and their runnability and their application that they're doing, which are quite far from recycled paper, and therefore, we don't see that. What we see, however, as I said before, we see an incredibly high demand because of the Economic development of the opportunity to change from plastic to paper And basically a strong general market demand. Okay. Understood. I was thinking that perhaps some of the converters Don't get the recovered based material and have to shift into virgin based materials, but okay, you don't see that? No. Okay. No, not in particular. No, no. And my second question is on your wood fiber You mentioned a few times in the presentation and you also mentioned that it's good for you when sawn goods are running at high capacity. Could you perhaps give us Some color on how more favorable this fiber sourcing is for you, the wood chips compared to the traditional wood and if you could perhaps share some numbers or something like that, do you foresee this good availability of wood chips to continue also into next year. That's my question. Okay. Do you want to take Yes. I mean, I can try. I mean, I think you can say, I don't know if I have many coordinates for you, Johannes, but wood chips helps. It's a component that add on the need that we have. I think underlying though, that will never move the needle fully. It's just a supplement. The availability of fiber is very good at the moment in general for many reasons, and that's what we see going into 2022, I think you also probably pick up that some of the sawmill activity is slowing a little bit down from the peak now we had at the beginning of the year in the summer. That means obviously that there will be a little bit less ships available for us. But in general, aggregating all of the sources that we use, we still see a very healthy balance and a good position going into 2022. Okay. That's helpful. And the final question is on you have now finalized ambitious cost cutting in the company and cost cutting programs. But you indicated that something more could be announced. Would that be more of a structural, a bigger program? Or will it be more take down cost, being more focused, being more disciplined? Or will it be a kind of a formal program? That's my final question. Thanks. So my first answer is that we will talk about that during the Capital Market Day. And my second answer is to give you a little bit of a cliffhanger. I think, mergers, basically the program was really about taking out cost. Some of it was unnecessary cost. Some of it was low hanging fruits, which have been created over some time. And I think our next approach is actually to look at structure at real structural cost of how do we run the entirety of Billebrud Koschnes, more from a business model and an operation model perspective. And I stop here, and I'm looking forward to meet you at our Capital Markets Day. Yes. Yes, looking forward for that information. Thanks. Thank you. Thank you. Our next question comes from the line of Cole Hathorn of Jefferies. Please go ahead. Morning. Thanks for taking the follow-up. Just a question on pricing at the moment. I mean, we've seen price indices go up through the whole of 2021 and they continue to move higher for containerboard and SAC prices, but also cost inflation has gone up quite materially. So looking at the nominal price increases, it's probably not the right thing to do. But if I think about your customers, you're wanting your customers to shift from plastic to paper grades. Are you seeing any impact from higher pricing potentially impacting demand from these customers? Or is it Potentially impacting demand from these customers? Or is it just very much a demand pull situation where they're really trying to come to you to replace their plastic solutions. I'm just trying to understand when do you start thinking about moderating your pricing So that you don't destroy some future demand opportunities. Thank you. I think that's a very good question. I think when you look at the market and you compare for similar application plastic against paper, paper is anyway significantly more expensive than plastic. And that is why plastic was basically the material of choice for so many years. What brand owners now seeing is that the market is ready and consumers are ready to pay a premium for products which are not just perceived, but in reality, much more sustainable in terms of packaging solution. And here, it's really the demand from the brand owners who then translate into the Deepgram from converters, etcetera, to change their solution. I think the price increases that we are doing today is there's only as you put it down, there's 2 aspects to that. The first one is actually our cost base is going significantly up and maybe not at the same reason as in the market because of hedging and all these good things that Eva and team has put in place. But nevertheless, we need to protect our cost base as well. And therefore, we need to make sure that we get paid for the products we are selling. Then you have an element of very strong market demand. But as we said before and as Iver said, I think the price increases you see nominally in the market are not that what has actually happened. Reality, we people announced cost increase price increases and then half of that is transferred or a third of that is transferred and that is because you have long term contracts or because there's a customer negotiation or Like you do, you increase the price and then you give a margin discount at the end depending on the volume board, etcetera, etcetera. So I think the real price increase in the market, and you see that in our margin, is covering our cost plus a little bit more and the rest of our profitability increases, better run ability, more cost saving And better operating performance. So I think that's probably the only way how I can describe to answer your question. Thank you very much. Just to remind everyone I think I think that was the last question. So I think we will conclude this call. Thank you all for participating. And once again, welcome to our Capital Markets Day, 17th November. And after that, we will present our year end results, the 28th January. Thank you and goodbye.