Earnings Call: Q1 2019

Apr 17, 2019

Ladies and gentlemen, welcome to the Bilhoru Korchnes Interim Report January to March 2019. Today, I am pleased to present Petra Einarson, President and CEO and Christina Schaumann, Acting CFO. For the first part of the call, all participants will be in listen only mode and afterwards, there will be a question and answer session. Speakers, please begin your meeting. Thank you. Good morning, and welcome, everyone, to today's webcast of our quarter 1 report. I would like to start by sharing some key highlights of the report and then to invite Kristina to give a more granular update of the financials. And after Cristina's update, we will open up for Q and A. These are the main highlights of the quarter. I am very pleased with the continued strong demand, resulting in 10% sales growth and the solid margin of 16%, not far from our long term targets of 2017. However, we still experienced headwind regarding raw material costs and above the level of last quarter. And I'm happy and proud to inform that our strategic investment, KN7, in Gruyveon, is progressing according to plan. And we have now entered into the start up phase. And we will have stock on wire any day now. And I definitely believe that it will be in April. The Bergvikoyst transaction is expected to be closed in May, and the process to find a suitable investor continues as planned. We have now sent out the information memorandums to several interested parties, and the interest is very high. We are on a journey with good momentum in the Q1 towards unlocking the biliary kosne as potential. And if you look at the 3 focus areas that we have on unlocking the potential, the first and foremost attention for us has been to secure a successful ramp up of our strategic investment, KN7, in Gjoern and to secure long term competitive wood sourcing. 2nd, we need to continuously, day by day, improve safety and production stability. And 3rd, it's last but not least, growth is our focus, and we need to accelerate regarding innovation and solutions. If you look at KM7 in Gruyvan, it's a huge project, still far from being finalized. It's SEK 7,600,000,000. And but right now, we have green lights on safety, green light on at cost and green lights on time, time, thanks to a tremendous teamwork within the company. The start up phase is now initiated, and we will have stock on wire in April. We plan to produce commercial liner already in May, June and to have certified material produced in October. The coating machine will start up in August, and the first material will for our customers, as I said, will be sent to customers in October. Our guidance of SEK 500,000,000 impact on EBITDA related to mix is still valid and the SEK 250,000,000 regarding increased schedule depreciations is also still valid. Looking at the sourcing of wood. This accounts for roughly 30% of our total spend. And Bergvikost is still in our focus from 2 different perspective. First of all, we focus to finalize the deal with the letter of intent signed by Vikost in May or early June. And we believe that as was conveyed during the Capital Markets Day last year, we still believe that it creates more value for Biller Kosnas to invest forward in our Packaging Solution business than to own forest land. And we are now in the process of inviting robust investors for long term collaboration and have sent out information memorandums. The interest is very high, and I look forward to deepen the discussion with several parties. And now some words about safety and production stability. A safe company is a well run company. And if you look at the safety performance of biliarykosnaz, last year, we had we reached 7.2 lost time injuries per 1,000,000 working hour. And this is very far from 0 harm. And unfortunately, if you look at the 4th quarter, we have moved in the wrong direction and are now on 8.7 frequency rate. During the Q4, we have now launched the Bilhut Kosna as a safety program, where we focus on structure, engagement and predictability. And with our focus to have safety as our first priority. And we are committed to achieve our targets of less than 1.5 loss time injury frequency rate by 2023. We believe that all accidents can be prevented, and we will never walk by to raising the voice to avoid an accident within the company. But we have a far it's a long way. This will be a long journey, and it's very much correlated to mindset. Another area where we have total commitment is production stability. And here, we continuously need to improve our production stability, and we have seen no major disturbances so far during 2019. The first quarter had a soft start with a maintenance related challenge in Jadla, but we also had a very strong finish off of the quarter with a month in line and above our targets. The production targets have been triangulated based on external benchmark, internal benchmark and the nature of the loss to evaluate our performance by each segment and by each machine. We have set availability targets for the next coming 2 years to improve by 4%. This is equivalent to SEK 400,000,000 in EBIT improvement or roughly 1% unit in EBIT margin each year. This program is now in execution phase to deliver on the committed targets with our key competence network set up to facilitate the cross mail learning and the Bexus practice sharing. The loss the key loss initiatives are monthly tracked, and we also track corrective actions when needed to get back on track. So we are fully committed to deliver on these promises, and we definitely plan to increase OE by at least 4% units by the end of 2020. And if you look at the full year production of 2019, we expect to reach 2,900,000 tons. So now we have talked about what to secure and what to continuously improve. So let's talk about accelerated growth. Innovation is at the heart of what we do. The end results are new packaging solutions that create value for our customers and at the same time support a profitable and sustainable growth for BirgitKosnas. When it comes to measure our performance to launch new packaging material, our long term target is a new product ratio of at least 15%. A few years ago, we surpassed that level. But during the last 2 years, the level has decreased to 6%, 7%. This is primarily the effect of where we are in the investment cycle. But already this year, we expect to come up on the targeted level of at least 15% again. We have been one step closer to a fully bio based paper bottle during this quarter. Bille Rekorsnes and Alpa join forces to fulfill the shared vision of developing a fully bio based paper bottle with biodegradable barriers. So this is something that is really exciting that we look forward to see the paper bottle out on the market soon. And finally, before I hand over to you, Cristina, the outlook. And if you look at the next quarter, we expect the good demand of our products to continue. We also experienced an increased price pressure on some parts of our product portfolio. But for the major part portfolio, we need to focus on safeguarding the current price levels and also the fact that we have newly negotiated price levels for the major part of our liquid packaging board. And finally, the cost of fiber, expect to flatten out on a high level for the next for the quarter to come. So with that as an introduction, Kristina, I hand over to you. Thank you, Kristina. And I will now go through the results, first from the group level, and then I will give you some highlights on the different divisions. As you have already seen, we have started the year with a very strong net sales growth of 10% year on year, and this is a strong growth that we have seen across all the divisions. The increase is mainly driven by the fact that we have higher sales prices year on year, but we also have seen a positive currency effect. Of the growth, approximately twothree relates to organic growth in sales and 1 third to currency. At the same time, our sales volumes for the group have been more or less unchanged compared to the Q1 in 2018. We have also continued to see high raw materials costs in our production. The largest effect we have on the fiber, and it has continued to increase somewhat in the Q1. And now the prices have increased with more than 20% compared to the Q1 in 2018. We expect that this price increase will start to flatten out, but the level will still remain high. Phosphochemicals has also remained at a high level, But here, we have seen that the increase has already flattened out. In addition, we have also, during the quarter, seen a negative impact from higher energy prices year on year. So looking at our EBITDA. Compared to last year, we have a small decrease, and we ended the quarter with an EBITDA of EUR 1,035,000,000. Dollars So the main explanation is that although we have managed to increase our sales prices, we have not fully been able to compensate for the higher raw materials costs that we now see a full effect of in this quarter. I will now guide you through the effects on the different divisions, and I will start with division Board. For board, we have seen a net sales increase with 12% in the Q1, whereof the major part of this has been organic, approximately 9%, and the remainder part is based on currency. The organic increase is a result of higher sales prices compared to last year but also that we have had higher sales volumes in division board. The increase in sales volumes relates to a transfer of production capacity from division paper. And here, we have then increased the production of fluting and liner for board during the Q1. The EBITDA decreased with 8% compared to the same period last year, and we ended the quarter with a margin of 19 But also, have we had costs in Gevle in relation to that we have replaced part of a digester in 1 of the pulp lines and used dissolved pulp in the production, and this has also affected the cost. Our return on capital employed for division ended at 9%, and this is the same level as we have seen at the group level. And as you know, the long term target is 13%, to be above that. The lower return is, of course, related to our large CapEx program and where the investment in our KM7, the carton board machine, is allocated to board. We expect to start depreciation of this machine as of May. Let's see what happened here. Is it okay? Okay. Sorry about that. And then I'll just continue. So what I said last thing I said was that we expect to start depreciation of the of KM7 as of May. And Pietro already mentioned that the we also expect to have the same level of $250,000,000 depreciation for this year. The outlook for board is that we see that the market is expected to remain good. And the only segment where we have seen some weaknesses is the uncoated liner segment. Now Division Paper. And here, we have yet seen another strong very strong quarter for paper, and the net sales increased with 10% year on year. The main explanations is that we have been able to increase prices and keep this high price level throughout our segments. We have also seen positive currency effects, and we have also seen an improved product mix, and this is due to the start of Paper Machine 10 in Scharblacker, where we're producing MG paper. The EBITDA increased with 9% year on year, and we have a margin that remains on a high level of 20%. The return of capital employed in paper is high at 20%. The outlook for this division is that we expect the markets to remain stable, but we have started to see some price pressure, but our main goal is not to safeguard continue to safeguard the current price levels. Finally, the Vision Solutions. Here, we have a good growth also of 10% during the quarter, and we had net sales of CHF 206,000,000. This is mainly related to new sales within our Managed Packaging segment, but we have also here seen positive currency effects. The EBITDA was positive at SEK 13,000,000 compared to a negative number in the first quarter in 2018, and we ended the quarter with a margin of 6%. Since this division is solutions oriented and therefore asset light, here we focus to follow-up on margins rather than return targets. The outlook for solutions is that we expect the growth to continue in a strong way during the remainder of the year. So now some words about the balance sheet. We have had net debt ended at SEK 9,800,000,000 in the end of the first quarter compared to SEK 6 1,000,000,000 a year ago, and this is clearly a result of our large CapEx programs that are now coming to an end. In the first quarter, we had strategic investments of around SEK 700,000,000 and the major part another close to SEK 8,000,000 SEK 900,000,000 is expected in the Q2. If we exclude any effects from Bergvik in the first instance here, and when I talk about it, we expect net debt to peak in the end of Q2, and this is due to the remainder part of our CapEx for our strategic investments, but also that we have the dividend payout in the that we booked in the second quarter. But and if we include the closing of Barivik during the second quarter, we expect, as we have already mentioned, a cash out effect of around SEK 5,400,000,000, then our debt position will increase even more. But as we have communicated, the sale of Bayovik is progressing well, and we expect to sell a majority of this during the Q3. And even if we had Bergvik on our balance sheet, we still have headroom for our debt covenants. We have debt covenants based on net debt to equity and interest coverage. And we will start to see a decrease of our debt position in the latter part of this year, and it's we expect it to be in line in late 2020. That is in line with our net debt to EBITDA target. So then I'll hand over to Peter for some final concluding remarks. If you summarize the long term financial targets, we reached the net sales growth of 10% and EBITDA margin on 16%. Return on capital employed, 9%, which is below the long term target. And also net debt to EBITDA is now on 2.9% level. The dividend policy to be 59% to be decided at the Annual Meeting And to summarize the quarter, it's definitely so that we what we see during this quarter is that the strong demand for our products continues, which is really good. And we see also a strong sales performance in all divisions. I believe the 16% margin to be solid, considering the high fiber costs that we have had also in the Q1. The ramp up of KN7 has started and proceeds according to plan. And the process of finding a suitable investor for Peridikast is ongoing. We definitely have a very good momentum in the company right now. And I would like to say that we have a quite optimistic view on our future. The strategy process is taking form now in the new organization with divisions in place and the management team in the division in place. And we plan to tell you more about our 5 year plan when we meet later this year in at the Capital Markets Day. But now I would like to open up for some Q and A. Thank you. And the first question is from Linus Larsson from SEB. Thank you. My questions. I'd like to start just for clarification sake, just a follow-up on your Grievan KM7 start up. You're guiding for SEK 200,000,000 EBITDA impact in the second quarter. Should I understand that as the sequential impact is also SEK 200,000,000 I. E, on that basis, there were no such costs, no such impact in the Q1? That's my first question, please. Yes, that's correct. And then thank you very much. And then going into the 3rd quarter, is it then DKK 50,000,000 less of an impact? Is that the way we should understand your guidance comments? Yes. We foresee SEK 200,000,000 roughly for the second quarter and then for the remaining SEK 300,000,000 to be split evenly the next quarters. Excellent. Many thanks for clarifying that. And also, I mean, this the way I understand it, this is guidance for the project in its totality. Does the guidance also cover some group wide improvements like, for instance, the moving of volumes from, say, the closed machines at Grovan to other mills in your system? Or does that is that outside of this particular guidance? No, that is included in the guidance of 500 euros. Okay. Thank you very much. And then could you quantify that? How important is that? How much volume do you expect to move from Gjoven, for instance, to other mills in your system? I think, Lewis, what we have said so far is that PM5 is now closed, and that has been already moved. That was MG paper and is now produced in Kvaer Blakka. PM1 and PM2 is expected to be closed down in May. And the last machine, I think it's PM4. We have not taken a decision when to move those quantity that capacity yet, but we expect it to move those qualities going forward. So we have to come back to that. Okay. But do you expect to retain the vast majority of the business that is now on the machines subject to closure at Gluvande? PM1 and PM2 is now producing liner and pure board. So yes, some of those volumes will be moved to KM7 as we ramp it up. Okay. I see. Okay, okay, okay. Good. And then thank you very much for that clarification. And then may I also ask on the Bayvik, you hope to close a divestment or part divestment in the Q3, if I heard you right just now. Is your intention to release capital on a net basis in connection with these transactions? I think that is too early to speculate as we are right now in the absolute beginning of the negotiations. Understood. And maybe in connection to that, how important do you view a buyback option as part of this potential deal? I think that is also something that will be part of the negotiations. But I think it's important to have some kind of mechanism to secure that the Lil Relkorsnas has sort of a stake in this long term. But if it is a buyback option or not, it's part of the negotiations. Okay, understood. Thank you very much. Thank you, Lunez. Next question is from Justin Jordan from Sandd. Please go ahead. Your line is now open. Thank you and good morning everyone. I just wanted to clarify something that's in the statement on division paper. You talk about transfer of production capacity to division board and clearly lower volumes year over year in division paper in Q1. So is this something that we should think of as a longer term structural change within the divisions? So it clearly will have impact in Q2 to Q4 respectively for 2019? Or is this a 1 quarter thing? My first question. This is a 1 quarter thing, and that machine has not been closed down. And that's the machine where we moved the production to PM10 for paper, for empty paper. And then it was used for production of liner meanwhile up until the end of March this year. But now it's closed. So there's no effect from that going forward. And just in terms of thinking on a group line basis, again, your volumes were down 0.7% in Q1 year over year. For calendar 2019 overall with the benefit of KM7, should we be thinking in terms of overall group volumes being up year over year? Or how should we think about that overall? Yes. You should think that it should go up. And we are aiming for 2,900,000 tons. And if you divide it, you have the increased productivity targets that we have of roughly 30,000 60,000 tons. And then we also have contributions from KM7. And also thinking about the volumes that we lost last year due to the wood shortage, also if you add that back, then we are aiming for 2,900,000 roughly. Okay. Thanks for clarifying. And just again staying in division paper, you talked about pricing pressure going forward. Can you just give us some idea of the particular product areas that you're expecting that or seeing that already as it were? Well, we haven't really seen a price decrease so far. So we are able to safeguard our price levels. But then there are indications in certain segments that it could come, but we still are working towards keeping the price levels up. So we're not overly concerned, but we need, of course, to keep an eye on it. Sure. And I think also if you look at the sales performance in the quarter with a 10% sales increase where roundabout twothree were related to price, I think that, that is also a message. Yes. But I'm just trying to clarify, sorry, the certain segments that you're cautioning on, can you elaborate as to what they are, please? It's mainly within the in the well material containerboard. So it's uncoated liner where we are most worried. But we still just want to send a signal that the market is good, but not as good as it was last year. And we see some pressure out on the market, but we have so far been able to safeguard our price levels and feel confident about that. Yes, yes. Sure. Okay. And then just thank you for giving the EBITDA bridge, but can you just help us understand just on the 10% revenue growth at a group level year over year in Q1 over Q1 2018? I appreciate you've got a negative 70 basis points from volume. You've got I'm trying to work it out here, about a 6% or so group FX tailwind. Is that sorry, pricing impact? And then sort of something like a 4%, 5% FX tailwind year over year, is that correct? So I'm trying to work out the 10%, can you bridge that for us between volume, price and FX, please? The answer to your question is that we see 10% increase in net sales and approximately onethree of those is currency driven. Yes, and twothree are prices. And the rest is price increases. The volumes are more or less unchanged year over year as you said. Yes, that sounds like. That makes sense. Next question is from Oskar Lindstrom from Deutsche Bank. Please go ahead. Your line is open. Yes. Hi. Thanks for taking my question. Three questions. First on the operational side, in the Board division, you had quite good increases in average sales price, sort of sales divided by volume sold during the quarter. Does this reflect higher liquid packaging board prices? Or is there also some sort of a liner? No, it's both. No, it's both what? It's both liner, but it's also reflecting the liquid packaging board increased pricing. But there is also some increase in liner prices sequentially. Is that how we should understand it and year on year in there? Year on year. If you compare Q1 over Q1, yes, it's an increase in line, yes. But also sequentially? Not in this quarter, no. No. So did your average sales price for liner stay the same quarter on quarter? Q1 over Q4, yes? Yes, more or less. All right. So the entire sequential price increase is due to liquid packaging board. Also to folding boxboard? Limited effects on folding boxboard. I would say it's liquid packaging board mainly. All right. Very good. And my second question is on the Bayouik Erste sale. Now you had a question on that already. But I'm just wondering, I mean, given your, at least at the moment, sort of slightly stretched balance sheet, is that in any way sort of impacting and how important the conditions that you attach to the sale are and to how much of Bayouvik Ast you're looking to sell? No, not at all, I would say. No, I don't think that, that influences this very much or not at all. We also have negotiated loan, especially for Bergvik. So we can't keep the Bergvik cost in our balance sheet for this year or for another year as well. So we are not at all forced to finalize this negotiation, and we will not do it unless we find a good deal. And we can also keep it, and we have headroom to keep it, but we see that, that is not the wisest thing to do since we want to develop Illud Korsnas to develop forward into our Packaging Solutions business. So it's not at all guided in a way to from a balance sheet perspective. All right. Thanks. And then my final third and final question is on the PM7 startup. You mentioned that you're aiming to sell certified material in October, if I remember correctly. Does that mean you will be selling sort of certified liquid packaging board already in October? I thought that was a process to get that very much longer. No. In October, we will start up the coater in August, and then we will provide our customers with material to be certified in October. Okay. And how long do you expect that process to take if it goes according to your plans? If you look at KM7, the to have the machine fully ramped up will take up until 2023. So the certification part of that will sort of continuously move towards the full ramp up of the machine. All right. So I mean, does it take a year or 2 years to have materials certified? I don't want to speculate in that. But I think it's the message that we want to send is that we start up the certification period already in October. Next question is from Robin Santavirta from Carnegie. Please go ahead. Your line is open. Hello. Thank you for taking my questions. Now looking at volumes, actually your volumes have now declined for 6 consecutive quarters. What are the key reasons for declining volumes? As I understand, the market demand has actually been very good during this time. You say production has been running quite smoothly during this time. So what are the key reasons for the volume declines over the past 6 quarters? If we start with the major effect last year, it was very much related to the wood shortage that we had that was, to the large extent, weather related. And if you move into this year, it has been affected by the maintenance prolonged maintenance that we had of the digester in Javal. I think those 2 are the 2 major reasons. But still, Robin, I'd say that the volumes the net sales volumes sorry, the sales volumes are more or less in line with last year Q1. So we are up in this quarter, right? I guess the sales volumes are down by 1% year on year, the delivery volume. Okay. Yes. So it's a small change, yes. But more or less in line. Yes. Sure, sure. Smaller now, smaller now. Yes, sure. All right. So mainly weather related problems last year, but you're not sort of deliberately running machines slower compared to the time where you had a lot of production issues back in 2016, 2017. We don't do it deliberately. And we do believe that or we know during the exercise that we have done in production excellence that we have a great opportunity to increase availability. And we now monitor that journey every month. So I think that we have a quite rock solid plan to increase volumes and to release potential for the company during the next coming quarters. Okay. Good, good. Thanks. Then related to this OEE program, this production excellence program, I guess it has been now up and running for 6, 7 months since the Capital Markets Day in September. Are you promised an update on that at that time? And we have been talking about that. But can you provide some more material sort of information about where we are standing, any sort of kind of numeric data you can provide of I think I would like I would be happy to do that the coming quarters. But in this quarter, we have we're happy to see that the production excellence that the performance database that we have is working. And we also see some really good performance from the mills that are mostly advanced in this program, like for instance, Karlsborg. And here, we have also had a new permit that also enables the Carlsborg to increase and to release the potential that they have in production production excellence program that was not they were not able to do before. So I think we see a lot of signs that things are moving in the right direction. But our plan is update more in detail the coming quarters what so that you can see for yourself the journey, how close to 2% this year and 4% in total for 2 years that we are. All right. Good. That will be very useful. Then in terms of the start up volumes of KM7, I assume that is mostly this uncoated liner. Now aren't you a bit concerned now if that market looks a bit softer, put it that way, at the moment, I know you're bringing more volumes. Have you agreed on a home for those volumes? Is it on spot market or is it with current customers? What kind of pricing have you agreed on? Can you a little bit comment on that? Because I believe that the ramp up, I'm not that concerned about the technical part, I'm more concerned about the commercial part of the ramp up. I'm not really concerned about that. I think we have good contracts in place. And from a KM7 perspective Okay Okay. So you have is it are you planning to sell those volumes on spot markets or in Europe or overseas or with current customers? Or how does that work? I think it differs. But mainly, we already have contracts in place and will not utilize spot. All right. All right. Thanks. And then just on the I guess you guide for positive EBITDA in 2021. When should we expect for KLM 7 or for all the sort of closing down the current production machines and then ramping up KM7? When should we expect on that? 2021. 2021. We have said that we will have a positive effect in on EBITDA in 2021. I think we stick to that right now. All right. All right. And then finally, just a technical thing for Kristina or Christophe, maybe on CapEx this year, is SEK2.8 billion a good figure? Yes, SEK2.9 billion actually. SEK2.9 billion is good, yes. SEK2.9 billion. All right. Thank you very much. Thank you. Thank you. Thank you. Next question is from Christian Kopfer from Nordea. Please go ahead. Your line is open. Yeah. Thanks, operator. Just one brief follow-up for me on the price pressure that you see in Q2. You say that you expect the majority of the portfolio to be more stable. Can you just be a little bit more clear on this? So on the majority, is that to be interpreted as 70% to 80% of the portfolio? Or Or But if you take the different segments in order, you can say that the area where we are mostly concerned is for the well products or the containerboard, where we see where we do we will see price pressure now on the coated part of the containerboard. And then if you look at kraft paper and also Sac, brown and white, we see a softening of the demand, but we don't see any real tough price pressure on the niches where we are in. I think it's a different thing if we look at the full market. And then also if you look at the carton board, the carton board market as such is huge. I think it's like 15,000,000 tons or something, but we operate on some 100,000 tons. So but we operate on some 100,000 tons. So we are not really that price sensitive on a sort of such a small slice of the market. And then we have the liquid packaging board, where we have quite recently renegotiated like SEK 6,000,000,000 of the SEK 7,000,000,000 in liquid packaging board for new contracts that has duration for more than 1 year. So if you add that together, I would say that the price pressure is not the most evident for the whole portfolio. But of course, we feel it in some parts of the portfolio, and that is what we are guiding for. Okay. Thanks, Peter. And just to follow-up on that. The price pressure that you do see on some parts of the portfolio, Can you just say something about the magnitude? Is it low single digits or? It's no double digit price pressure. I think it's single digit. All right. Okay. Thank you very much. Thank you. Next question is from Kevin Hellegel from Goldman Sachs. Please go ahead. Your line is open. Yes. Just one quick follow-up. So your production guidance for TAKET of around $2,900,000 this year, that implies pretty strong second half or should we already expect that production pickup from the second quarter? Can you just elaborate a little bit on that? Is it mainly PM7 driven? Or is it all divisions, all machines sort of producing better in the second half? It's all machines and all divisions. I think this is we have some potential to unlock in the company and to increase the availability in all machines is a huge potential for BILr Korsnas. And that is what we aim to do. So it's definitely all machines. It's called Borukar, Blaka, Pietasare, Gruvon. It's all over that we can lift the availability in all machines. And that is what we have spent time to make sure that we are definitely have that is proven in numbers. And we have also set up an execution plan that we follow now weekly actually, but we have a performance we've used with the management team every month to look at each task, each loss each loss and each machine and each mill. Okay, perfect. Thank you very much. Thank you. Next question is from Marco Yarvin from Handelsbanken. Please go ahead. Your line is open. Yes. Good morning. Just had a few more clarifications on the Game 7 project, if I may. Did I understand correctly that the €500,000,000 that you're guiding for this year, €200,000,000 of that will be lost production and euros 300,000,000 is sort of start up costs? No. No. I think you should think of it like $500,000,000 and the major part of that approx slightly above $400,000,000 is mix and volume effects from closing down and opening up the new machine. And on top of that, we will have around 50 to 75 that we expect to be babysitting costs, meaning extra consultants, extra personnel, etcetera, related to the early start up. Okay. Very good. And then following on that, did I understand now correctly that you've discontinued all paper production at Gruvon now? No. So what we have done is that the PM5 smaller machine is now closed, and that capacity has moved to Graublacher. It was an MG machine. The PM1 and the PM2 is now producing liner and pure board, and most of that capacity will enter into the new machine when it's open. So that is the situation right now. We will close PM1 and PM2 during May. So again, have you sort of stopped producing packaging paper at Gruvon? Or are you still producing packaging paper? That's my question. In PM4, we are still producing products that is related to paper business. Okay. Okay. And that will end, I guess, next year. Is that correct? Decision is not taken yet. So it's too early to But it will end in a year. Okay. But we haven't decided exactly the date, but it will end. We will not produce packaging paper in Gjoern. Okay. Very good. And could you just clarify what your capacity now is for packaging paper after you've closed PM5 and closed those 2 other machines? How much capacity do you have for that business? I don't have those figures with me. We will have to come back to that. But the major changes that we have closed down paper capacity in PM2 and now producing liner and bore there, and we have closed down PM5, which is, of course, an impact on paper. No, sorry, that is moved to Karel Blakka, which means no impact on paper. And if there's any other changes, I need to double check that and get back to you. But in general, you can produce at the levels that you produced in Q1 in packaging paper and even more, I guess, if efficiencies improve and so forth? Yes. Okay. Very good. Very good. So just a clarification on PM4. That is part of that production will be moved to Joachimstad. That is TFA paper. And there's also Fiberform paper that will be moved to Carlsberg. But it's too early to say exactly when we will do those changes. But it's in the pipe. And as I said, Petain said, probably within a year. Okay. Very good. Then just a detail, I guess, we've talked about your increase in liquid packaging board for this year. Now that Q1 is behind us, could you sort of comment on what the magnitude of that increase in the end was? No, we cannot do that on a numbers perspective. But if we can reinforce negotiations and also that it's a long term contract and that it's also involved a partnership when it comes to innovation and actions in working closely between the companies that we have negotiated with. Okay. Then finally, just you said that you have plenty of headroom within your loan agreements and so forth. Could you just clarify what your primary covenants are? Our primary covenants is net debt to equity, and it's set to be above no, to be below 1.25. And then we have an interest coverage covenant as well, but that I mean, it's like to be above 3, but it's way above that. But even the net debt equity covenant, we have plenty of headroom. Okay. So no EBITDA type of covenant? No EBITDA covenants, no. Okay. Very good. Thank you very much. Thank you. Thank you. Next question is from Martin Malibu from H. C. Please go ahead. Your line is open. Good morning. If we sum up the big changes quarter over quarter into Q2, starting with depreciation, how much will you then be depreciated in Q2 compared to Q1? Yes. We're starting depreciation in beginning of May, and we expect it in the for Q2 to be around SEK 60,000,000, a little more, around SEK 60,000,000. And then for the remainder of the year, it's about SEK 30,000,000 per month going forward. Okay. And then we have maintenance of SEK 300,000,000 and rent cost of SEK 200,000,000. Euros Is there a price impact from these comments we've been hearing now in Q2 already? Or is that more second half? Sorry, the last part, if there is an effect from Is there a price effect already from these comments about the price pressure already in Q2? Or is it more second half? Maybe on uncontent line, if we should point at anything. Okay. So then we're left with, say, EBIT of close to 0 if we sum up everything, starting with the $650,000,000 we had in Q1 ish. That's the sum from these numbers. Yes. Okay, good. Thank you. And there are currently no further questions registered. So I'll hand the call back to the speakers. Go ahead. Okay. So thank you all for listening in. Petra, would you like to say anything, final words before we? Yes. I think that if you look at the quarter, I'm very happy with the demand actually, and that it's such a strong momentum both in the market but also within the company. I think that we have we did a lot of things to reorganize and to put the house in order last year. And I feel very confident now with the new organization in place. Everyone is hungry, and we can work with real stuff now to improve the result. And we see a lot of improvements that we can do. So I feel very, very confident about this year, and I feel confident about the KM7. Fantastic. Thank you all for listening in. Bye bye. Thanks. This now concludes your conference call. Thank you all for your participation. You may now disconnect your