Earnings Call: Q4 2018

Jan 29, 2019

Report Earnings Call. My name is Christoph Kaspelar, and I'm Head of Communication. With me in the room, I have our CEO, Peter Henner Schon and our acting CFO, Christian Scharmann, who is also a Board member since 2014. As usual, we will use approx 20, 25 minutes to go through our presentation and then open up for questions. Petra, please. Thank you, Christophe. And good morning, everyone, and welcome to our webcast to talk about the results in the Q4. I would like to start with the key highlights and then to invite you, Christina, to give an update on the financials. And after that, we will open up for Q and A. So the main key highlights of this quarter are these. And I'm pleased to inform about the solid performance that we have had in growth, plus 5%. And but this 4th quarter was somewhat lower due to year end seasonality. Production levels continued to develop in line with our expectations with very few production disturbances. And we have continued to experience headwind regarding raw material costs at a magnitude of 25% increase year on year. And I'm also very pleased to inform that we have renewed our long term contracts within liquid packaging board. Importantly, our strategic investment, KN7, in Gruyvern, is progressing according to plan towards a start up in March, April 2019 this year. And Bergvik Ost is also well on the way, and we expect the transaction to be closed late April or maybe early May. And the process to find a suitable investor continues as planned. The proposed dividend from the board is SEK 4.30 per share and to be paid out at 2 occasions during the year as an improved cash management. So let's start by looking at the strong very strong performance of packaging paper. Sales increased by 5% with some seasonality variation towards the end of the quarter. And EBITDA increased by 2% to SEK 411 1,000,000 or 18 percent of sales. We expect the market to remain good, and I'm happy to say that we have reached a record high result for the year. And let's turn to consumer board, where we are also experiencing continuing strong demand with sales up 4% but with limited effects on price increases. EBITDA is down by 20% compared to last year, mainly due to increased raw material costs and unchanged prices. We reached SEK 290,000,000 or 14% of sales. We expect the market to remain good, and we have renewed our long term agreements with our largest customers, which will have a positive effect on margins. The new contracts are, of course, of utmost importance for our long term goal to take profitability back to historical levels of liquid packaging board. And last but not least, the performance of the corrugated solutions, where sales has increased by 15% and the solutions part within corrugated solutions that we call managed packaging has increased by 14% during the quarter. EBITDA reached to SEK 178,000,000 or 24%, and this is an increase by 31% compared to last year. And also here, we expect the market to remain good. So continue with the strategy. And as we said at our recent Capital Markets update, we need to unlock the potential of our business because we do see that we have large opportunities ahead when for from a billet Kosnier's perspective. My first and foremost attention has been on securing a successful ramp up of our investment, KM7, in Gruen. And also, the cost of wood is key to us. So that is also the first priority to secure that we have a cost competitive wood sourcing strategy, short and long term. 2nd, we need to continuously improve safety and production stability. And third, growth is in focus, and we have to accelerate regarding innovation and solutions. But 1st and foremost, secure the ramp up of KN7. And here, I feel confident that we are on schedule towards the start up of March, April. All risks in the project are monitored on a weekly basis, where we have pulse meetings looking at risks based on safety first, on time and at cost. The civil construction has now been finalized, and the assembly work of the machine will be finalized during February. The machine will run with water during March, and we expect stock on wire in April. We also expect EBITDA to be positive 20 21. And this whole process is very exciting for all of us. And we are really proud to be part of ramping up the world's most advanced board machine. Another important area is to safeguard the sourcing of wood. The sourcing of wood accounts for 30% of our total spend. And as you all know, we have experienced the wood shortage during 2018, mainly weather related, impacting the result of the full year of SEK 250,000,000 or taking out roughly 1% unit of EBIT. This has not affected at all during the Q4, but it's we had some big it influenced the full year quite a lot. But we do see that the competitive situation continues, and we estimate for this year that the cost of wood will flatten out, but still on a high level. We now focus on finalizing the deal of with the letter of intent parties on by August latest May. And as we conveyed at the Capital Markets Day, we still believe it creates more value for biliarykosnas to invest forward in our packaging business than to own forest land. So we are now in the process of inviting robust investors for long term collaboration, and we plan to send out an information memorandum late February. And now some words about and production stability. I truly believe that a safe company is a well run company. Wilur Korsnev had 7.7 lost time injuries per 1,000,000 working hours 2017, which is far from 0 harm, and the correlation to production instability is quite obvious. Our priority is safety first, and we are committed to achieve our target of less than 1.5 lost time injuries per 1,000,000 working hours. We now have a track record of moving in the right direction. For the lost time injuries during 2018, we have developed from 7.7 to 7.2 regarding the lost time injuries. And regarding all injuries, we have an even more distinct positive development during the year. But this is not good enough. And here, I would say that we need to have almost what you can call a paradigm shift when it comes to safety for the company. So this is of it's very important for us to continue this work. Another area where we also have total commitment is production stability. We continuously need to improve our production stability and have seen less disturbances during 2018 compared to previous years. It remains our key focus, and we are not satisfied with the pace of improvement that we have seen during 2018. Targets have been triangulated to evaluate our performance by each segment and also by each machine. And we are setting availability targets for the next coming 2 years to improve 2% per year. That is equivalent of SEK 200,000,000 in EBIT improvement or roughly 1% unit in EBIT margin per year. This program is in place, and I have full confidence in our ability to deliver. And as I said, we have experienced fewer disturbances during 2018 compared to previous years. So now I have talked about what to secure and what to continuously improve. So let's move over to what we need to accelerate. Innovation is, of course, at heart of what we do. The end result are new packaging solutions that create value for our customers and at the same time support the profitable and sustainable growth of Bvlgari Kosnes. When it comes to measure our performance to launch new packaging material or solutions, our long term target is 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 somewhere around 6% to 7 percent. And this is primarily an effect of where we are in our investment cycle. Already this year, we expect the new product ratio to come back up on targeted level. And so hopefully, we will reach closer to 15% already this year, next year. It will not take up until 2023 to reach the goal. And one thing that I'm also very happy with is that we have my management team in place now. We launched a new decentralized profit and loss based organization October 1, And now I have all managers in the team appointed, and we actually had our first kickoff management team meeting a couple of weeks ago. So now it's we are all set for execution, I would say. The long term financial targets, as you know from the Capital Markets Day, we are committing committed to meet our long term targets, and those were unchanged when we presented them at the Capital Markets Day in September. This quarter, we are well above when it comes to net sales growth of 6% compared to the targets of 3% to 4%, but not fully in line when it comes to EBITDA, return on capital employed and net debt to EBITDA. The dividend proposal of SEK 4.30 per share is in line with our long term target. So that was the key highlights of the quarter. And now I would like to hand over to you, Christina, to continue with the financial presentation. Thank you, Peter. We finished 2018 with just another quarter of top line solid growth. And as you have seen, our net sales increased with 5% in Q4 2018 compared to the same quarter last year. And this increase is mainly explained by the increased sales prices within packaging paper as well as within corrugated solutions. We have also seen a positive effect from currency in the Q4. On the negative side, we saw lower sales volumes, and that's an effect of inventory buildup, both within consumer board and packaging paper. The increase in inventory in board was mainly or is mainly an effect of building inventory ahead of planned maintenance stops, And that's mainly related to Ghevele, which we this year will take place order in Q2 compared to Q3 in 2018. For paper, the increase in inventory is mainly due to seasonal effects around year end that we normally see. This year, however, we saw a somewhat larger effect and lower orders from the customers that optimize their working capital over year end due to the high price levels? Regarding the results, the EBITDA decreased in Q4 with 14% compared to the same period in 2017. And as Pietro has already gone through, the main reason for this decrease is the continued headwind that we are seeing from the higher raw materials cost. It's the higher cost within the fiber but also other raw materials and then in particular chemicals that have remained at the high level. So although we've had price increases within paper and solutions as well as positive currency effect, we have not been able to fully compensate for these higher costs. For 2018, the costs for pulpwood have increased by 25% and the cost for caustic soda, which is one of the main chemicals that we are using, has increased by 20%. Moving ahead and looking into 2019, we are expecting this cost level to remain at a high level, but that this increase will flatten out. Our next generation program is now close to completion with the expected start of our carton board machine in March, April this year. And with this, we are now coming to an end of a very intense investment period. As a result of the investment activity, our net debt is now at SEK 9,300,000,000 and this implies a net debt to adjusted EBITDA of SEK 2.7 to compare with our target to be below 2.5x. We expect our net debt to peak in Q2 2019, excluding any effects of the Bergvik transaction. As Pieter mentioned, the work to find suitable investors for Bergvikost is progressing according to plan. And looking ahead, we have a clear focus to deleverage the company. And we expect to be on target again, that is a net debt to EBITDA below 2.5x at the end of 2020. So I hand over to Petra for the outlook. Thank you, Christina. And looking at the outlook of 2019, we see limited possibilities to further increase the sales prices and focus on safeguarding the price level achieved during 2018. And also, as I have already informed, we have renewed our contracts with the largest customers in liquid packaging board, which will also affect 2019 when it comes to pricing. We have also a wood cost increase that we expect to flatten out, but still on a high level. So the summary is that the production levels are in line with our expectations, It's which is good, but we are not satisfied with the pace of the improvements. We have the continued headwind from higher raw material costs. And as Kristina pointed out, it's both wood and chemicals. The renewed long term contracts with liquid packaging poured, where we foresee positive effects on margins KM7 progressing according to plan, and we still expect the start up and plan for the start up in March, April. Bergvik's process of finding a suitable investor continues as planned. And we also take off in 2019 with our new organization, and we plan to publish the pro form a numbers on March 11. So that was the summary of the Q4. So now I would like to hand over to you, Christophe, or maybe I can open up for the Q and A myself. I think we do it like that. Yes. So please, if you have any comments or questions. Thank you. Our first question comes from the line of Justin Jordan from Exane. Please go ahead. Your line is now open. Thank you and good morning everyone. I just wanted to get a little bit more color, if I could please on in the Consumer Board division, you talked about renewing long term contracts within liquid packaging board and talked about clearly a positive impact on margins. Can you give us some idea of how quickly we should see this positive impact? Is that in Q1 'nineteen? And secondly, clearly, any more color on the degree of, say, margin benefit that might bring? And secondly, just a slightly technical You clearly have stopped up at the end of 2018 for clearly a Groupon startup in April, May sorry, in April, apologies. Should we see the stock levels unwind as we go through 2019? Because your 2018 production was 2,785,000,000 stocks by 144 tonnes. Should we see that unwind in 2019? Or is that a new elevated working capital sales level? And thirdly, just on CapEx. Your CapEx for 2018 came in at €5,135,000,000 and your guidance was €5,300,000,000 So does that mean that 2019 CapEx will be higher than your existing €2,750,000,000 guidance? So maybe we have to ask you to repeat the questions as we go along, Justin. The first question was regarding the renewed contracts of the liquid packaging board and whether when we will see the impact. And the contract is renewed and is valid from January 1. Fantastic. Okay. And can you give us some idea of the potential benefit to margins from that increase or new contract? We don't reveal the details of the contracts that we have with our customers. But if you look at it from a broad sense and look at the Consumer Board margin, where we are on a quite low level as we speak. Our ambition is to gradually take the margins back where they have been on a historical level. And talking on an EBIT level, Consumer Board has been somewhere around above 10% EBIT margin, and that what I estimate for the as a long term target. But then you need to consider, of course, that we have an extremely high cost of raw material with wood and on top of that, chemicals. So but with the new contracts in place, I think that we have the ability to have a decent margin in Consumer Board. Board. Sure. Okay. I appreciate Q2 almost will get sort of slightly confused by the KM7 start, but should we see some margin benefit in Q1 'nineteen regarding stock levels. And I appreciate this is slightly confused by KM7, but your as I said, your production I assume that part of the question is that we have had some buildup of inventory levels in at the year end. And that I can explain. It's mainly from a broad perspective that you can explain it as a seasonality effect to some extent, considering the fact that we have increased prices quite a lot. And I think we always see this pattern at year end that our customers try to avoid building up stock at year end. But the main part or the main explanation for this is that we very late in December decided to replanned the maintenance stop in during 2019. So we have we will stop earlier than planned in Gavle, and then we will push the maintenance stop in Gruyvion later this year. And in order to make some extra security, we decided to build up stock to prepare for those maintenance ops during the year, especially taking down Jable earlier than planned. So that is the main reason of the inventory increase. Okay. Because I'm just curious, in your corrugated solutions business, you talked about general market conditions for Gatine was slowed down somewhat in the latter part of 2018. So did that impact year end stock levels for that division? I couldn't really hear the Sorry. In Corrugated Solutions, you talked about your statement says general markets for containerboard slowed down somewhat in the latter part of 2018. Can you just give us some more detail as to what that means? Is that presumably lower volume demand from customers? And should we assume that had a contribution to the It's an effect of the start up and the ramp up of KN7 that we are building inventories for. Okay. Okay. And then sorry, my third question was just on CapEx. Clearly, you beat guidance as it were in terms of your CapEx for 2018 was $5,135,000,000 lower than your $5,300,000,000 guidance from September. Is that a timing impact? Or should we think that 2019 CapEx will be slightly higher than your September guidance of $2,750,000,000 It's a timing question. Yes. We as you say, there is a small deviation between the CapEx guidance and the actual reported CapEx, and that will be moved to 2019. So approximately $150,000,000 will be we will increase the CapEx for next year with $150,000,000 dollars meaning around $2,900,000,000 including base CapEx. Thank you. Our next question comes from the line of Linus Larsson from SEB. Go ahead. Your line is now open. Thank you, and good morning to everyone. First question on the Grovan start up. If you could please say what, if any, impact it may have on the first quarter results, please? Good morning, Linus. I think that we are fully concentrating on planning the start up. And I would not like to give any guidance when it comes to the result impact on the first or the second quarter. Okay. But in general, you can say that the $500,000,000 mix volume effect that we have talked about earlier is that effect will come when we open up the machine March, April and going forward. Yes. Yes. And okay, that's helpful. And you say March, April, but might there be an impact in March already from that from a portion of the SEK 500,000,000? Or should we understand it as from April? I think you should understand it as from April. Excellent. Thank you. And do you have a date already for when you will close the old machines? No, we don't have a date. We are operating on a monthly level now. It's March, April. And as long as we can, we continue to produce on the paper machines. And when we are ready to shift the pulp supply, we will do that. And that will happen somewhere around March, April. But just given what you said previously, do I understand it correctly that the closing of the old machines will happen in April rather than March? Yes. I think we need to do that at the same time. When we cut the supply of the pulp to the old machines, then we will start to feed KN7. Right. Thanks for that clarification. And also on the Q1, when it comes to the wood costs, do you expect to have sequentially lower wood costs Q1 versus Q4? No. I would say that this is we don't know more than you do, but we think it's we see and plan for a flattening out level in Q1 of the levels that we have in the Q4. Okay. So for modeling purposes, unchanged costs Q1 and Q4? Yes. Excellent. Great. And then finally, you gave some updates on the Bergvik East changes. And as I understood, the dates you were referring to were like referring to Phase 1, the buyback of the forest land, when do you expect to close a new ownership agreement that we may call a Phase 2? We you are correct with your assumption that when I talk about April or early May, then I talk about the transaction of us investing in Berbigost. And then, of course, the process of finding an investor that can work together with us to that process, we don't have a clear set date for that. And I think the most important is to find the partner that we can work together with to secure a competitive wood cost, and that will be the prerequisite if we go ahead with the next step. And I think that we'd rather take some time to find the right partner than to feel that we are pushed to close that of financial reasons or other reasons. We need to make sure that this is a good step for the company. But just to give something, I definitely expect everything to be finalized during the year. Great. Thank you very much. Thank you. Thank you, Leonhard. Thank you. Our next question comes from the line of Martin Marlbe from ABG. Please go ahead. Your line is now open. Yes, good morning. A bit more color on that liquid faction board contract. You said EBIT margins would move back up to above 10%. So I guess you've come down from 15% if you go a couple of years back. Is there more price increases coming later or new contracts to be renegotiated from here? No. I just wanted to since we don't reveal details from the contract with the customers, I thought just to give sort of a picture of where we are heading and our long term target is that we see the ability to take consumer board or especially liquid packaging board back to the levels where they need to be in order to be the core of Birkorsnas. And with this new contract, I think that, that is possible. But I can't say today the exact percent unit, but we have the new contracts in place valid as from January 1. And I feel confident with the price levels. I feel also very confident with the long term contracts that we have negotiated with or which will have a positive effect on the margin. But maybe even more so, I'm also very pleased with the partnership that we have with the liquid packaging board customers focusing on innovation. And also in this period of ramping up the KM7 machine, which is very much focused on liquid packaging board, it's good to have this contract in place partnering up also with KN7. Okay. And have you now renegotiated everything? Or is there still, say, onethree left? No, we have not renegotiated everything. We are we have roughly the magnitude of the contracts that we have negotiated is somewhere around EUR 6,000,000,000 of turnover of the total liquid packaging board customers. Yes. Great. And then one follow-up on the ramp up costs, this $500,000,000 of EBITDA and additional, I guess, $300,000,000 $400,000,000 on depreciations when it starts, which is a very big number. Is that in any way included in your maintenance numbers set for Q2? Or is that on top of that one? I think the cost of $500,000,000 that we have guided. And then it's $250,000,000 in depreciation, if I'm not Approximately. Approximately. And it's not included in the maintenance guidance of next year. No, Martin, it's a mixed volume effect that we see from closing down 3 old machines and opening up the new machine. Yes. So Q2 is a big minus, if that is so the $500,000,000 is that then $500,000,000 divided by 4, say, for Q4 or It's negative. Or is it The negative effects will come at the same time as we open up the machine. Yes. We will run the old machines until we open up the new. So yes, it's a 3 quarter effect. Excellent. Thank you. Thank you. Thank you, Martin. Thank you. Our next question comes from the line of Gustav Schwareen from Pareto Securities. Two questions from my side. First of all, just a follow-up question on you building inventories in Q4. You said part of that was related to the maintenance being moved to Q2 for Javal. If I look at the delivery volumes in Q4, the volume drop seems to be the largest in Packaging Paper. And I mean, correct me if I'm wrong, but I recall that you produced very little of that in Jable. I mean, is that the case? And how should we think about deliveries in Q1? I mean, are you going to continue building inventory? Or should we see sort of more normalized volumes? Yes. As I mentioned, looking at the maintenance, the buildup to maintenance, that's there, we do not see any large further increase. Regarding the other part, as you correctly said, a large part is related to the Paper and Packaging business area. And as I mentioned, it's this year, we saw a somewhat higher buildup there due to the fact that our customers were actually basically closing down their converters earlier than they normally do for Christmas and to optimize their own working capital. And this, we believe, is very much due to the fact that we have very high price levels within the packaging paper at this point in time. And we do not foresee that this will continue into Q1. Okay. Very clear. Then lastly, how much of the KM7 CapEx has been taken now at the end of Q4? Well, we have next year, we expect to have a full CapEx or a total CapEx of SEK 2.9 1,000,000,000 and SEK 1,300,000,000 out of those are base CapEx. Yes, correct. Okay, perfect. Thank you. Thank you. Thank you. Our next question comes from the line of Kevin Hellegard from Goldman Sachs. Please go ahead. Your line is now open. Good morning. So I have two questions. The first question is related to your kraft paper prices prices and sort of demand. You're saying demand is remaining good. Can you just remind us, do you have a portion of annual contracts that are now resetting at higher levels? Or would you have No. When it comes to kraft, we don't have long term contracts that are about to be renegotiated. Okay. So we would have already seen the price increases in your numbers? Yes. Yes. Then on your working capital, like throughout this LPM7 build, your account payables have gone up quite significantly. When do you expect that to reverse? And what sort of normalized level do you expect going forward? Yes. As you have seen the past year or so, we have had a decrease down to at least last quarter, it was close to 9%, 8.8% working capital in percentage of sales. And going forward, we believe, as you know, the CapEx remaining, we said it's around SEK1.6 billion for the K-seven. And when that's out when that's paid and out, so that will be in the Q2 and moving forward, we believe we're going to come back to the levels we had before this investment project, and that is in the region of 10%, 11%. Okay. Thank you. Thank you. Our next question comes from the line of Christian Kopfer from Nordea. Ed, your line is now open. Yes. Thanks, operator. Just one quick follow-up for me. We saw SAXPY phases coming up further in Q4. Did you see the full effect on this already for packaging papers in Q4? I'm sorry, Christian, I didn't fully understand the question. The SAC paper? Sorry, Peter. Yes. We saw that the Sac kraft paper came up in Q4. Did you see did you feel the full effect of these price increases already in the Q4? Or would you see some quarter over quarter effects also in Q1? I would say that we that you could anticipate that we have seen the prices in the 4th quarter, but there might be some small spillover to quarter 1. Okay. And then also on the deliveries of unbleached kraftliner that you're supposed to produce at least initially from KLM7. Have you secured the customer contracts already for this or? Yes. To the largest extent, we have done that. And that is also why it is of utmost importance. It's so critical that we ramp up this machine in time. Right. But Because we have back to back contracts. Right. But does that also mean that you sell some volumes on the spot market or? That, I think, remains to be seen. I think we have the targets set on ramping up as fast as we can. But of course, the most important is to do this in a steady state and to make sure that we have a good quality. So that I would like to say that it remains to be seen. Right. And finally for me I'm sorry, Christian. No, no, no. Go ahead, Petter. No. It's a quite short time of the ramp up where we plan to produce and sell the brown kraftliner. Right. And then finally, on corrugated, what kind of market movements are you seeing there on the price levels? Are you seeing pretty much stable prices on white top and so on? Because we have seen prices coming down a bit on the spot markets and but you see more flat prices? Yes. We see that the price levels that we have right now is it would be very difficult to continue to increase prices. So the main focus that we have now is to defend the price levels that we have. But it is so that we have seen a softer extent, parts of the paper. Thank you. Our next question comes from the line of Robin Santorvista from Carnegie. Please go ahead. Your line is now open. Thank you. A lot of questions already been answered, but I have a question on Bariwik. You said the transaction, the first part of it will be probably closed now in March, April and now you're looking at a suitable investor. And what kind of structure are April, May. I think it's April, May. April, May. Sure, sure, yes. I was just wondering what kind of structure are you aiming at? Do you plan to sell all of your holding or just part of it and remain as a minority shareholder sort of the new vehicle. And as I understand, the cash out now in the first part of the transaction will be a bit more than SEK 5,000,000,000. What kind of sort of prices are you looking? I mean, the market prices may be a bit higher, but is the target to sort of maximize the value of the forest or to maximize the flexibility of wood procurement? I think that is too early to go into in such detail. And what we are planning to do now is to send out an information memorandum during February, where we will outline the criteria what is important to us when we are looking for an investor or a partner in this. So I don't think that, that is something that I would like to go into in detail as we speak. But this is something that we will be able to talk more about presenting the quarter one closing. All right. And do I understand correctly from previous communication that you have agreed with banks, I guess, your sort of balance sheet will become a bit stretched now after the first part of this transaction. Is there some time line when you need to close sort of the sale of the forest assets? Or how is that agreement sort of set up? What are the covenants you have with the banks? Okay. We have, as you said, as you mentioned, we have secured financing. And I would say we have plenty of time. So this is secured in the long term. So it's more than a year, 2 years. And there aren't any additional covenants to this financing compared to the covenants we have in our other financings. So overall, our financing is long term secured. All right. Thank you very much. Thank you. Thank you. Thank you. Our next question comes from the line of Oskar Lindstrom from Danske Bank. Please go ahead. Your line is now open. Hi. I have just two questions and they've partly been covered. So please excuse me. But the first one is coming back to this issue of the renewed liquid packaging board contracts. Now you said that it's going to have a positive impact on your operating margins. Does that in fact mean that you have achieved price increases? Or are there other ways that you could have achieved a positive impact on margins? Excellent question. Well, Oscar, I would say that I don't want to go into the details, but I could reveal that we have increased price, yes. All right. And following up on that, I mean, you mentioned now today that you want to and expect to come back to a 10% EBIT margin for the Consumer Board division. Is that something that's going to be achieved with these new contracts? Or how close to 10% is that going to get you, do you expect? Given that you've got sort of stable Since I don't want to discuss the price increase numbers, and it's also several contracts with different setups in the liquid packaging board negotiations. But when I talk about the margin of 10% or above 10%, then it's partly the negotiation, but it's also the fact that we have the price increases as such, but it's also that we have a long term agreement with one of the most important customers for Biederikosnes. And it's also important for us to work in a partnership environment, very much also focusing on innovation and in the situation where we are now the next coming years of ramping up the KN7. But it's also impacting by the execution of our own doing to increase the stability in production, increasing the OEE or the availability. But with the negotiation, as we have closed now, with that in place, I see it as a possible realistic long term target to be back above 10% EBIT margin on the Consumer Board. All right, good. My second question is around the KM7 start up and the $500,000,000 start up impact. Now I think in an earlier answer to an earlier question, you said that is going to impact Q2, Q3 and Q4. That's how we should understand it. Now what is going to be the sort of is it going to be an even number for those quarters? Or how is that $500,000,000 going to be divided between those three quarters? I think that's the question for you, Kristofer. I think it's too early to say. But as you know, Oscar, this is a mixed volume effect that we see on the results. So it depends on how successful and stable the ramp up is and so forth. It's also included in those $500,000,000 babysitting costs of $50,000,000 to $75,000,000 So no, it's too early to say how we split them between the quarters. But they should be sort of front end loaded or heavy? Yes, I know what you mean. No, I think it's too early to say something in detail about that. Let's come back to that in Q1. Yes. What about the mix between different business areas? The impact? Yes, of the 500,000,000? Only in the Board Division. In the Board Division. And is any of this 5 of these 5 sorry? I think I need to correct myself there. It's also an impact in paper, of course, sorry. But the exact how we split it between the 2, I cannot answer that right now. I don't have the answer. Okay. And is any of that $500,000,000 what's going to be is any of it going to be reported as a non recurring item? And how is the split going to be there? You think or I think it's also too early to say. We haven't discussed exactly, but I'm hoping to be very clear about how these how we disclose this. But we need to discuss exactly, but part of it will be one off, I guess. All right. Good. Yes, those were my two questions. Thank you for answering them. Thank you. Thank you, Oskar. Thank you. Our next question comes from the line of Marco Jarvinen from Handelsbanken. Please go ahead. Your line is now open. Yes. Good morning. I had a few more questions. If we look at back at 2018, could you sort of did you have any impact from the KM7 project in 2018? And what was that in the end? If we have any impact from KM7, you mean from the FPA? Earnings impacts, any earnings impact. Should I answer that? Yes. We had a guidance for full year of SEK 210,000,000. That was SEK 75,000,000, the prolonged maintenance stop we had in Groove related to the new machine. A second part is the education and extra personnel. We have to educate and back do backfill on staff in Groove, which was guided to around 75. And on top of that, we also have the accelerated depreciation for the 3 old machines that we're closing down when we open up. And you met that guidance or Yes. The prolonged maintenance of was it came in a little bit higher. But on the other hand, the education and personnel came in a little bit lower. And on the depreciation side, yes, spot on. Okay. Good. And the impact of Scharbach PM10 in 2018, what was that in the end? Well, we on resource level, I'm not sure, but we said to that we will produce around 40,000 tons from that machine. And I haven't updated myself exactly what it was what's in the books right now, but somewhere between 30000, 40000 tonne has been produced in that machine. Okay. Okay. And just on Game 7, I guess Kruger now has a capacity of 710,000 tonnes. Can you just remind me what that will be when the whole process of closing the machines and ramping up the machine? What will the capacity be there? We're closing down 4 machines and opening up one new machine. So when we are fully ramped up in Gjovern, we will have a large fluting machine of approximately 300,000 tonnes and the new KM7 machine, which is a 550,000,000 machine. So 850? In that area, yes. Okay. And then on the price increases in liquid packaging board, are you sort of comfortable that this sort of 10% long term margin level will be sufficient for you to reach the €1,000,000,000 earnings improvement you're guiding for KM7? Sorry, can you repeat? I think I understand the question. I think it's once again, we don't want to go into exact details of the contract, but I think we also have an opportunity in the KN7 to also produce liner and as well as cartonboard top stock. So it's liquid packaging board is not the only product that we produce in Kilometers 7. But I feel very confident with the contracts that we have negotiated and the discussions that we have had that we have a joint interest together with our key customers to ramp up KN7 in a good and productive way. So I think that the negotiations has also put the foundation in place to do so. Okay, very good. Thank you very much. Thank you. Thank you. Our next question comes from the line of Hugo Hinton from Jefferies. Please go ahead. Your line is now open. Good morning. My first question is regarding the wood shortages. Is this an issue specifically localized to Sweden? Or have you seen any spillover in neighboring countries? The wood shortage early 2018 was 1st of all, it was in the Baltics, mainly affecting Q1. And in Q2, we had effects from a lot of snow in the Swedish woods. And in Q2, we also said saw effects from the extremely dry weather. So but yes, to your question, it's mainly Sweden, but also an effect in Q1 from the Baltics. So for your mills outside of Sweden and the raw material cost is relatively unaffected? I think the mills outside of Sweden, then we are talking about BSM in UK and the TSASARI in Finland. And in Finland, we have a contract with UPM that we guided for during the Q3 that we have a quite expensive contract in place since we have a fixed rebate. So we are have quite expensive pulp pricing on the rebate level where we are right now. And we guided for roughly SEK 90,000,000, I remember, as it was for the Q4 and this continues of course and it's very much connected to the pulp prices. So basically, what we're saying here is that the Swedish mills are fully integrated. We buy pulpwood for those. And in Finland and U. K, we buy pulp. Okay, great. Thanks very much. And for my second question, you spoke a bit about this already, but regarding the specialty craft, fat craft, could you give a bit more color on the current supply and demand situation you're seeing and pricing outlook into 2019? Specialty kraft? Well, for what's the question about kraft paper? SAC kraft. SAC kraft. Okay. So what we have seen is that the prices on well, the our SAC prices quite extensively throughout 2018. And what we're seeing right now is a clear focus on safeguarding those prices. So you see it as quite achievable to retain those levels throughout 2019? That is too early to say, but we're doing everything we can to keep the labels or stabilizing the prices at these levels. Okay. Thank you very much. Thank you. Thank you. There are no further question at this time. Please go ahead, speakers. Thank you, operator, and thank you all for calling in. Thank you. Thank you very much.