Earnings Call: Q2 2018

Jul 18, 2018

Morning, everybody, and welcome to our Second Quarter and Present Analyst Conference. My name is Christoph Gansblad, and I'm Head of Investor Relations. With me today, I have Peter Enarson, our CEO and Susanna Thandler, our CFO. We will use approx 30 minutes presenting our results and then open up for a Q and A session. I think we are ready to start. The floor is yours, Pieter. Thank you, Christophe. And let's start with the key highlights of the Q2. And to start with the positive note of the quarter, We had a strong demand in during the quarter. I think that goes for all business areas. And we had a very favorable mix and as well as the sales price development during the quarter, especially, I would say, within Packaging Paper and within Corrugated Solutions. We have had stable production, and we actually had a production record all time high levels in 4 of our eight mills. So we had a production record in Gjavle, in Frivi, in Karlsborg and in Rokkammer. And if you look at production disturbances, we have had very few, if any, production disturbances during this quarter if you disregard the long planned maintenance stock that we had in Gluvion and in Karelakka. And looking at that, we had some startup issues in the planned maintenance stuff that we had in Gruyvern and Karblaka, as I said. And the main reason for that was the preparation that we did for launching the next project in Gruyvan. KN7 will, as you know, start up and go live in March next year, and that is still the case. And this is the last time, chance, we have to prepare for that start up. So there were things that we needed to do from a proactive point of view during this planned maintenance stop that we had. And that ended up in some delays in the start up, some 6 days all in all delay. We have also suffered from increased wood costs during this quarter. And that is something that if you look at it from an overall perspective, We have a competitive situation when it comes to wood and wood sourcing and considering the fact that Wiederse Koschnes is the largest consumer of pulpwood in Sweden, this is something that is a great concern for us, and it's something that we are looking into very carefully. And on top of that, as you already know, also we have had some hit from wood shortage as we also did during the Q1. And the hit that we had from the wood shortage situation was not as severe as in the Q1, but we have had some negative impact of earnings also in the second quarter. Looking at other things that has been happening during the Q2, we have a strong progress when it comes to ongoing changes. We launched a new organization during the Q2 where we will look at the organization from to make it more agile and customer focused, we will divide the organization in 3 divisions. And one of the 3 divisions will be solution focused. So I'm very happy also to see that during the second quarter, we have had a positive development and performance from the solution initiative that we have called Managed Packaging. Other changes that we have also launched is that we have put in place a program office in Gruyvyan to really have a strong focus on risk analysis when it comes to the KM7 and the next project in Gjoern. And I'm very satisfied with what has happened during these 3 months in the second quarter, where we have actually come to a situation where we have daily performance and weekly pulse meetings, looking at all the risks, considering Kilometers 7 when it comes to the machine, when it comes to the mill, when it comes to the product certification and when it comes to the business ramp up. And thirdly, I'm also happy with the development during the quarter when it comes to operational excellence. We launched the operational excellence program in the mid June. And I look forward to the impact that we will see from that performance from the operational excellence performance program during the next coming months. We have also put a provision of the SEK 450,000,000 during the second quarter, which will hit the EBIT result for the quarter, 2nd quarter. And of the EUR 450,000,000, EUR 200,000,000 will impact the cash flow. You can divide this provision in 2 parts. 1 is strengthening the workplace environment, and it's also a result of the thorough scrutinizing of the development in operational excellence where we have gone through all losses and looked at each improvement in all mills during that program that we launched. And during that process, we have also discovered some parts that needs to be approved of to really take as we speak when it comes to workplace environment. And on top of that, looking at diluted cost as from a more one company perspective, there are also some parts that we need to adjust in the balance sheet when it comes to unified accounting principles. And last but not least, the strategic investments that we have are progressing according to plan. We have the next project, Kilometers 7, that we are looking at. No changes compared to plan. We will launch the KN7 in March next year. And looking at PM10 in Hjalpaka, that project is also up and running, and we will have the inauguration in September 5. So with that said, I think that there are a lot of things that are developing in the right direction during this quarter, which I am very satisfied with. But there are also been parts that has impacted the earnings heavily during this quarter. Looking a little bit at each business area. We have Packaging Paper, which has increased sales 7% compared to last year. And I think that they have done a very good job in taking advantage of the strong market situation that we have. And but they have not seen the effect on the EBIT due to mainly that they have been impacted by the maintenance shutdown and wood shortage that has hit especially Guevaraen and Gravelaka. But I think that compared to last year, we see a strong performance within packaging papers when it comes to market demand. And I think that they are taking a really good step forward. And I think this also still have more potential when it comes to selected price increases. Looking at Consumer Board. Also here, we have continued strong demand and the net sales that increases by 2%. We have high availability in production. As I mentioned, we had production records in Friv and in Jable during this quarter. But we also had increased raw material costs that hit Consumer Board during this quarter, and we have had no opportunity to increase prices when it comes to Consumer Board. And the market is expected to remain stable. When it comes to corrugated solutions, we have increased sales by 11% compared to last year. And also here, we see a very strong performance when it comes to the market and the sales and mix improvements that we have made. We also have a very strong sales when it comes to the solution part of the corrugated solution that we call managed packaging. And when it comes to the results, corrugated solution has been negatively impacted by the maintenance stop in Gluveon and Karelakka, mainly Gluveon in that case. And we also see a positive contribution now from the solution part to the managed packaging where we have seen black numbers for the last 3 months, which I'm very happy to see. The market is expected also here to remain stable, and Managed Packaging is expected to continue with strong growth. When it's talking about the investments, as I said, the investments are progressing according to plan. Gruyvyan KM7 is keeping the time frame, and we are targeting the start up of March next year. Cadillac PN10 is successfully started in during the Q2. And as we speak, we are trimming up the machine with really looking at the most difficult qualities in producing the paper. But so far, everything looks good and especially the quality of the paper is fantastic. We have an inauguration in September 5, but we also have open for everyone to that are interesting to look at the new machine are welcome to visit Karelaka PM10 on September 8. Operational excellence is something that we have put a lot of effort into both during the 1st 6 months of this year, but also last year. And we have really put a lot of attention to the pre study. And we have now launched in the end of June a big operational excellence program that will cover all parts of Bilud Kosnes, where the stable foundation in the program is health and safety. And then we have environmental performance as the second, product quality and production stability. And we will also put in a lot of effort to make sure that digitally enabled program that this is a digitally enabled program. And that means that digitalization will be a very strong part of the improvement. And what we have done is that we have spent a lot of time at each mill, and we have made through we have made a loss analysis in detail, both especially when it comes to availability and OEE in production. And we have a pretty good picture now of what we will do and how much it will influence the Liljil Kocsner's result. And this is something that we will come back to and tell you more about during the Capital Markets Day, September 17. And as I said, the wood sourcing, the part of the dynamics when it comes to wood sourcing is changing in I think also as a consequence of the strong market that we are in. And considering the fact that dilute Korskness is such a strong such a big pulp paper producer, it is something that, of course, is on top of our agenda. And here we are looking through all parts of our sourcing strategy and strengthening that. We are looking into domestic purchases when it comes to Bergvikurst. Also, if we can work in a more close way with private forest owners and also some parts that we are looking into new sourcing And also if we can import more than we do today from other areas than Sweden. And then we are also looking into the logistics systems if we can make cost per tonne sort of in a lower way. And that all of these 3 is something that is part of the strengthening of the wood strategy. And we are also launching a new organization. And this is something that we have already communicated, and we are now in the final phase of recruiting division managers. We will have 3 divisions. 1 division is division paper, which is very similar to the business area packaging paper that we have today. But in this context, it will include all the costs. So the division head of paper will be profit and loss responsible. So within division paper, we include Karlsborg, Kjerblakka, DSM and Jakobstad. And if you look at division board, we will merge together consumer board and corrugated solution. And the mills that will be included in division board is Gavle, Frivi, Grovan and Rokkamal. And this also makes a lot of sense considering the fact that corrugated solution products and consumer board products, to a large extent, can be produced on the same machines. So it will be I think it's a good idea to have both businesses during one division head. And then last but not least, division solutions, which will enable us to really look into the packaging solution parts. And considering the vision that we have in Billeerkosnes to challenge conventional solutions for a sustainable future, I think this is an area for us to grow and something that needs separate attention. So we are in the final recruitment stage of launching the new organization. And the new organization will go live on October 1. If you look at the financial targets during the Q2, we had 5% growth in the Q2, which I think is a good performance of the company and especially from packaging paper and corrugated solutions. EBITDA ended up at 11% adjusted and return on capital employed at 12% for the quarter. And net debt, EBITDA is still below 2.5% on 2.15 And here we have also a little bit more sort of going into the details. And I think I would like to invite Yousafan to help me sort of scrutinize the numbers in this report. Thank you. Okay. Starting off with net sales. We have increased our net sales with 5%, as Petro just said. So growth rate, 5% positive. Currency has helped us with EUR 155,000,000 in this regards. And what is driving the growth is the increased sales prices that we see from packaging paper and corrugated solutions. Packaging Paper has increased their prices with about 13% and corrugated around 10%. If you compare it to the previous quarter, both business areas, it's around 3% growth in sales prices. When it comes to consumer board, we have not seen any increased prices. We can adjust our prices when it comes to cartonboard. There, we don't have the long term projects with our customers. So there, we do see an opportunity moving forward to also increase some of our prices. When it comes to sales volumes, we have been negatively affected by the wood shortage. The wood shortage, overall, our volumes have gone down over 6 months period compared to 6 months last year. We have lost 80,000 tons in volume sales volume. About 50% of that is related to the wood shortage. And the wood shortage has primarily impacted packaging, paper and corrugated solutions. We have also lost additional volumes in our planned and prolonged maintenance stops that Petros talked about in Gerbla, Kannjibe. Those are also impacting packaging paper and corrugated solutions primarily. So this shows clearly that we also in this these numbers have a negative mix as the record producing mills are primarily within Consumer Board. Raw material cost, we see increased raw material cost, primarily also as we have talked about to a large extent. Wood cost continue to increase. The on the right side here on the chart, you see our wood cost index. That is a 12 month rolling index that shows the wood cost. And over average, we can clearly see the trend now that it's moving in the wrong direction for us. Overall, over this 1st 6 months, our wood cost has increased with about 15% compared to the average wood cost per cubic meter in 2017. When it comes to chemicals, we see an increase, and that has impacted us with some SEK 80,000,000. And even if we still feel the pressure that chemicals overall is pressuring upwards, the price is there, We can also note that the caustic soda, which is a significant amount of our chemical cost, about 25%, has flattened out on current level. To dig into the EBITDA and the development there compared to the Q2 last year, Our sales prices has increased with about EUR 380,000,000 and Packaging Paper has increased their pricing with 13% corrugated solutions from 10% quarter on year on year. Quarter over quarter, we see an increase of about 3% within both business areas. Currency has helped us EUR 155,000,000 and EUR 180,000,000 of those is you can see in the business area P and Ls. The hedging impact compared to last year has been negative, almost SEK 90,000,000. And then you have a positive revaluation of our receivables, offsetting that with about EUR 60,000,000. And you should remember also that in this currency amount, we do not include or we don't have the numbers for or the currency effect on our purchasing. The next item is wood shortage. And to clarify again, we clearly separate the cost or the impact from wood shortage and the demand driven cost increases on the fiber side. Wood shortage is related to the weather, primarily in the last part of last year, beginning of this year. We said that we were going to have an impact of DKK50 1,000,000 to DKK75 1,000,000 in the second quarter. The impact actually became DKK100 1,000,000, which was more than we anticipated, and that is due primarily to lot more logistics costs when it comes to getting the wood to the right side and rerouting the wood to the wood yards. Our maintenance shutdown had an effect of BRL 401,000,000 in the quarter. And we're planned in both Jarblaka and in Gruyvern. We had guided for or we had estimated EUR 335,000,000. So we actually overrun those with about EUR 66,000,000 And SEK 30,000,000 of that is taken by packaging paper and SEK 35,000,000 is corrugated solutions. And then we come to the demand driven cost increase for fiber. It's about EUR 300,000,000 in the quarter. 50 percent of that or EUR 150,000,000 of that is pulp that we buy to our nonintegrated mills. And Beetham and Jakobstad are struggling in this environment with the increase with the really high or the record high pulp prices actually. The rest, EUR 150,000,000 is demand driven wood cost. So that is actually what the wood cost does. We should add here, when we talk about the pulp and the pulp exposure that we have previously said that this year, we think we will be able to have a net exposure to the pulp market of $150,000,000 that we will sell EUR 150,000,000 more EUR 150,000 tons more of pulp than we buy. This year, due to the wood shortage, we will not be able to do that. So we think the net exposure on the pulp market for 2018 will be 100,000 tons. Chemicals, euros 86,000,000 negative impact. EUR 15,000,000 of those is currency related. And as I said before, caustic soda is a large part of that, which has flattened out now. As Petra mentioned, we have also made a large provision in the quarter, EUR 450,000,000 related to EUR EUR 160,000,000 of that is related to improving our work environment or the environmental issues we have on our in our MIMs primarily. Euros 170,000,000 is related to unifying accounting principles that we have previously decided to take over time and that we're now taking 1 shot instead. And the remaining part primarily relates to finished goods and accounts receivables and the IT systems that we have put on our balance sheet that we want to write off. So SEK 200,000,000 of the SEK 400,000,000 we expect to be cash flow or affecting our cash flow. The rest is not. We also have a part here on the chart that you see that says other. It's EUR 90,000,000. That consists primarily of logistic costs. We have had also in the outbound area severe increases in our costs due to our delays in the start up and also our wood shortages to get it out to our customers have also caused a lot of rerouting and a lot of fees, extra fees and re planning that is primarily driving the other column here. So that brings us now to the clean to the EBIT of NOK 203,000,000. And if we exclude the provision, it's BRL 655,000,000 for the quarter. So moving on to our net debt. We have increased our net debt to EUR 8,200,000,000 and of course, that's driven by our strategic investment projects in Gvardaca and Gruber. When we adjust our net debt to EBITDA, we come to a level of 2.15% compared to our target of 2.5%. So if we adjust for the provision that is not cash flow impacting, we come to a 2.15% level. Always when we talk about net debt, we get the question about Bergvik, how that will impact us. And the news on Bergvik is that there is no news. We still expect the deal to be finalized by the end of this year. So the outlook that we will provide is that the demand and order situation continues to be strong. We expect it to continue to be strong. We have normal seasonal variations for all business areas. We also see possibilities to increase our prices in selected segments. We also see that the demand on wood continues to be really high, which impacts the cost development also in the future here. And the last item on this list is just a reminder that we continue to have one off impact from our investment projects for the full year for training and education of our extra personnel, in Gruvan, EUR 75,000,000. And also we have a decreased increased depreciation. We speed up the depreciation on the machines that we are closing down. That impacts EUR 60,000,000 for the year. So EUR 75,000,000 and EUR 60,000,000 is just a reminder. So to summarize the quarter, we continue to see a strong demand in all business areas, strong growth. We saw really positive development on the pricing side from to our customers from packaging paper and corrugated solutions. We had 6 mills that were producing really well and 4 of them actually made production records in the quarter. We had big negative effects from start up issues related to our planned maintenance stop and to the wood shortage. Good news is that our strategic investment programs are progressing according to plan, And we also see strong progress in the change activities internally in the company that we are taking to mitigate the cost development and also to become more agile and improve overall our performance. And this is also a reminder. On September 17, we have our capital markets in Stockholm and on 18, a shorter one in London. And now we will open up for questions. The first question comes from Linus Larsson from SEB. Please go ahead. Yes. Thank you very much, and good morning to everyone. Maybe if we can start on the wood supply and wood costs topic. It's a very challenging situation, obviously, right now. And I guess the ongoing forest fires don't really help the situation. Could you maybe talk a bit about your Q3 expectations? So the impact in the second quarter in terms of supply constraints was SEK 100,000,000. So how much of an impact do you expect from supply constraints in the Q3? And then secondly, on top of this, what kind of impact do you expect for potential price increases, which, like you said, Sasan, which are demand driven? Those two items, if you could maybe help us bridge Q3 versus Q2, please? First of all, the What was the question? The wood shortage and the expectations of cost for that for Q3, right now, we have wood in our wood yards. So right now, we have a situation that is, you can say, under control. However, we all hear about the fires and the dry season that we are in with the high risks of the fires. So we have we are the harvesting is working on a reduced pace, you can say, and they're harvesting at night in the areas where they can harvest. We should remember also that this time of the year in July is typically a low period when it comes to harvesting. But there is a significant risk, of course, that we will see impacts also into the Q3. But right now, we really don't know, and we don't have a good estimate to give for that. So it's really depending on if there will come water. 2nd question regarding the price increases or cost increases for wood. And as you know, we typically don't want to guide on that as we are in constant negotiations with our suppliers. And what we can say is that we expect it to continue to go up, maybe not in the same pace as we have seen before, but that as far as we're willing to stretch it. Okay. That's helpful. And maybe in connection to that, you said there are no news on Bergvik. But on a more, I don't know, general note maybe, I mean, what's going on now in the wood market? And considering what you said about Bieder Korsnes being the biggest pulpwood consumer in Sweden, Are those factors impacting your decision whether to own Bergvik long term or not? I would say that, that is not something that has changed during this quarter. And I think that the prerequisites that we have moving into Bergvik and the letter of intent that we have published is still unchanged. And we are now in the final stages of negotiations. And as Sam said earlier, we estimate this to be finalized by the end of the year. And when you say because I'm thinking maybe there is a second step to this. You will buy back the forest land, yes. But what I'm kind of alluding to is that there might be a second phase where you sell or parts sell these assets maybe back to back. Would such a potential follow on transaction also be concluded or announced if that was to happen before the end of the year? I think that is still too early to reveal. And I think that is still ongoing discussions within the Board of Billehard Khorsnaz. So we have a lot yet decided. And the first step is, as we said in the letter of intent, to finalize the purchase of Dalvikurst. Okay. That's helpful. And maybe one final question regarding the DKK 450,000,000 provision that you announced on the 10th July. And you then said that this was part of the group wide program for improved production efficiency. And as far as I can tell, the initiatives that you have announced so far aren't really affecting productivity so much. And my question is, should we expect more provisions of this kind to really address productivity going forward? I think the provision from a safety point of view or from an increased productivity and efficiency point of view is something that we have really scrutinized carefully looking into the pre study of the operation excellence program that we launched in June. And it is a result of the fact that we have parts of our organization where we need to improve our safety perspective, but it's also due to the fact that we need to improve productivity and efficiency because the buildings that we need to dismantle and remove has, to a large extent, tubes and infrastructure depending on these buildings. So I think it's also to a major extent to reduce the risk of production disturbances that we need to do this in a thorough, careful, production disturbance when this happens without us taking sort of carefully notice of it. So that, I think, it is the main reason of why we took the provision. We cannot wait for this building to fall apart and then have production disturbances threatening the infrastructures in the mills. So it is a safety precaution, but that is to the larger extent production efficiency measure, avoiding production disturbances. Thank you. The next question comes from Kevin Hellegard from Goldman Sachs. Please go ahead. The floor is open. Thank you. Maybe my first question relates to the Consumer Board divisions where the margin squeeze was quite significant. What is the path for margin recovery? Either further pressure coming in 3Q or have we seen the full impact of cost now? And when do you expect price recovery to really start impacting the division? Yes. I think looking at from a consumer board perspective, it's as Sam said, with the price negotiations that will come during next year. We are in a very stable price situation with the Consumer Board. But that doesn't mean that we cannot improve the results because also here, we have a big potential in operational excellence looking at improving availability, increasing the OEE in production, but also reducing cost quality. So I believe that operational excellence and also so consumer board also has it in their own hands to improve the results. So you think margins can improve before next year? Or but can margins recover to the sort of mid-twenty or mid-twenty or mid-twenty levels without price increases? Or will we have to wait till next year to see that level again? I don't want to guide specifically on which quarter. But I can I expect consumer board to increase availability in production and improve to reduce costs and to have a stronger availability in yes, internally? Okay. And also on the wood availability or shortage, you said that you don't have a good estimate for 3Q yet. Does that mean like is base case that we remain at this €100,000,000 level? Or is base or you just don't have any idea whether it's down, up or flat? Because previously, you said the situation was expected to improve into 3Q. Is there no longer any improvement expected in 3Q versus 2Q? And maybe if I start and you continue, then this is also. I think that it's the original cause of the wood shortage was the mild weather in the Baltic area. And that happened in by like half a year ago. And then we had the extra effects of the wood shortage affecting us the whole industry that also affected Belarus as a consequence. But the root cause of everything was originally the mild weather in the Baltic Sea and I think and in the Baltic areas. And that affected below the Kosmos by SEK 119,000,000 in the first quarter, and the wood shortage was SEK 100,000,000 during the Q2. We have not seen disturbances to a large extent caused by the hot weather condition that we have now in Sweden in during the Q2. And I think as Sasan said earlier, this is not yet something that we can calculate on how that will hit because that is totally dependent on the number of weeks that we will have now without rain. So I think it's from us right now, the wood shortage is very much tied to the root cause of mild weather. No, I agree. I don't have anything to add to that. Yes. But so is the situation going like from 1Q going into 2Q, you had a small improvement or guided for an improvement in terms of how much this shortage impact would have. From now versus where we were going into 2Q, is it a similar situation? Or I get it, you don't know how long the dry season will last. But just looking at it now, is it a similar situation as going into 2Q? Or is it better or worse? Looking at what we know now, we have good inventories, and we have a low season. And we don't have problems that is tracked back to the Baltic minor weather. So The EUR 100,000,000 headwind you had this quarter should could be 0 if you get rain and there's no impact from the dry season, but it could also be higher if the dry season continues for longer. Okay. That's correct. Okay. And lastly, do you have any guidance for full year CapEx? Can you just remind us? There's no changes there. Okay. No changes. Thank you. Thank you. Thank you. The next question comes from Robin Santavirta from Carnegie. Please go ahead. Yes. Thank you. So my question related to the delivery volumes. I think you're down in Q2 44,000 tons year on year. And is it so did I understand correctly that half of that 44,000 tons is due to the wood shortage you suffered during Q2? But why is the deliveries down otherwise? I understand that you have a prolonged shot in Gruver. And is that because of that? Or I'm a bit surprised that the volumes, the underlying volumes are also declining quite significantly in this strong market. Yes. That's because of the prolonged maintenance and that we didn't get the machines up in time. Okay. So all of that is entirely because of the prolonged maintenance? Yes. Well, it's due to the planned maintenance in Gravelaka and the planned and prolonged maintenance in Gudrun. And they both had problems with their start ups and the start ups were severely delayed in both places. So during this quarter, we did not have any production disturbances more than very, very small, if any. And they were totally offset by the production records that we have in Iavli, Surajev, in Karlsborg and Rokkamal. Okay. I understand. I understand. Do you have some kind of guidance for the full year volumes as it stands today for the group? I think you used to say flat when at the end of last year for this year, but what is do you have a guidance for Yes. What we said was that the guidance for the full year was that the total volumes were going to be flat. But with the food shortage now, it's going to be really not possible to reach that. Okay. Related to the pricing, now you're again up Q on Q in not in the Consumer Board, but in the other sort of subsegments and segments. What do you look, you said, sort of opportunities to improve prices? What are you seeing in the market at the moment for Q3? We see a very strong demand from an overall perspective, and we still see opportunities to increase prices and mix effects positively in selected parts of the businesses in all three business areas, I would say, but mainly within Packaging, Paper and Corrugated Solutions. Okay. Good. Thanks. And then related to wood raw material costs, I think you said that they're up 15% year on year in H1. They were less up in Q1. Can you split that to sort of year over year Q1 and Q2? I don't have it in my head. We'll get back to you on that. We're talking probably 20% or something like that year on year in Q2 and then closer to 10% year on year in Q1. Let's get back to you on that. Yes. Okay. Okay. But what you're saying is that the year on year sort of increase in prices will most probably accelerate in Q3 beyond the lines of the pricing of wood? No, not accelerate. But we see a fixed fee of that price Yes. For the first half compared to first half last year, we saw 15% increase. No, for the that's not how we say it. The 15% increase in cost for the 1st 6 months is compared to the full year average cost in 2017. Right, right. And you saw some underlying inflation in 2017 as well. So it doesn't necessarily mean that the year on year figure is higher in Q3. Is that correct? Well, we don't see it going up as quickly in Q3 as we have seen before. Okay. Okay. And then finally related to this project related one offs, is it so that they are booked as nonrecurring items, the €75,000,000 for training and the €60,000,000 for accelerated depreciation. Are those booked every quarter as non recurring items? Yes. Well, the education or the training, you can see it is booked as an they are both well, they are booked as items affecting comparability. That's the correct term these days. Exactly. The depreciation though is under the you see that under depreciation line. So it's only the training that impacts EBITDA. Yes. But it is included. And you can you have a specification of all our items affecting comparability on Page 21 or 22 in the report, I think. Okay. Good. That's all for me. Thank you. Thank you very much. The next question comes from Oscar Lindstrom from Danske Bank. Please go ahead. Yes. Hello. This is Oscar Lindstrom from Danske Bank. Four questions from my side. First one is, you've mentioned that you have good or that you have wood in your wood yards. Would you say or characterize the sort of inventory levels of wood that you have currently as normal? I would say so, yes. All right. So I mean they're not sort of dangerously low or anything like that. It's a that maybe that they are on the low side. That maybe that they are on the low side. So we are not sort of totally satisfied. But it is more we are closing into a normal situation that we have compared to other sort of summer seasons. All right. If I may follow-up on that. Just and the supply of wood from the Baltic States, is that sort of has your mix changed compared currently versus where it was over the winter season? Are you buying less from the Baltics or more from the Baltics or as a result of all this turbulence? That has not changed substantially. But I think we have more we have looked into other sourcing opportunities. So we have we also source from other areas, but that is still something that we'll we look into and to launch. But I think we have made precautionary actions so that we are prepared if this happens again in the Baltic countries, I would say. But we have not made any dramatic change in that resource from other areas. So it's still a singular sort of sourcing mix that we have. And if I understand correctly, that slide which you showed in the presentation today, are you reviewing your sourcing sort of strategy? And could we therefore expect changes in how and where you source wood in the future? We are reviewing the sourcing strategies. And this is something that we will come back to at the Capital Markets Day in September 17. But I think with the dynamics changing as much as they are when it comes to sourcing of wood? I think we all need to look into that question. But we are not about to launch any dramatic change. But we will let you in on our way of thinking at the Capital Markets Day. All right. Thank you. My second question pertains to the operational excellence program, which you've mentioned a couple of times today and talking about increased efficiency, and I understand at least partly the provision was related to this program. Are you able to give us any quantitative goals or parameters to that program? Yes, I am, but not today. This is something that we also will provide during the Capital Markets Day. But we still need time to work through thoroughly all the mills. We have done one part now when it comes to the pre study. And I think we have a pretty good picture of the potential and how much it would increase our future earnings if we release and unlock that potential. But the next step now is to really make sure that we have a local ownership at the mills and that we make a continuous improvement every month, every quarter. And that is something that we will be transparent with. But we are not yet on that note where we can disclose per each mill what they have committed to. But that will come soon. But in terms of sort of the overall potential of the operational excellence program, would you say that it's significant? Or Yes. I would say that it is significant. And we should expect this in terms of primarily increased volumes? Or Yes. Increased volumes mainly look targeting OEE, but also looking into mix. Okay. Should we expect further sort of provisions or costs relating to this operational excellence program, the way you see it now anyway? I think that the not we have looked through it, and we have really scrutinized where we are visiting all the mills and looking into this. And what we believe that we can take upfront, we have communicated in the provision. And I can't what I see right now, it's not part of the operational excellence program to come with yet another provision. I think we have a pretty clear picture of what needs to be done. It's more hard work that we'll take on now. Good. My third question is just the Gruvon Mill. After this 6 day extra or delay in the start up, is it running well now? Or Well, looking at Gluveon and the preparation that we have been doing, I think this is the last chance that we have to make sure that we have everything in order in Gruvian. And considering, as you know, one of the of the prerequisites in the next investment is the fact that Gruyvyan has several machines from 1930 and also an infrastructure from 1930. So one part of the next program is to really make sure that we are set to go with the KN7. And that also includes what we call the brownfield part of next Ingleven. So I think that, that is something that we put a lot of attention to, but I think it was also the root cause of making sure that we took proactive measures in the in dusting and evaporation plant to make sure that we have a stable energy balance launching KN7. So that is I think that is it took longer than we thought. And Gluvarn needs to be in good shape now also to take care of the launch of KM7. Okay. But that it took longer than you had planned, that does not I mean, it's now running well. And the fact that it took longer than you planned is not an indication of that we'll have problems next year. That's what I'm trying to get at now. No. Exactly. Yes. Okay. Great. Yes, great. And then just my final question is, I mean, the way I see it, much of the weaker earnings performance is related to the inability of the Consumer Board division to compensate for higher raw material costs. And I know that you're, I think, renegotiate a couple of the major contracts that you have with this division next year or you'll have new pricing in place next year. I mean, are there any clauses that will be triggered in the meantime during H2 given the raw material cost inflation that we've seen? That was my I really hesitate to really reveal that kind of information because we are in pricing negotiations as we speak now when it comes to Consumer Board. So that is too sensitive to have as a discussion after the Q2 in this room. Yes. And maybe it's you can answer the second question here as well. I mean, is there any way for you to change your product mix? Or will the product mix change during the second half of the year to and is there any other way to compensate for the higher raw material costs in this division? I think that to a large extent, because short term, Consumer Board has it in their own hands to increase OEE, to have a higher availability when it comes to production and also to decrease cost of product quality. And we also, from an overall perspective, have an opportunity to steer the mix. And I think that is something that is very much in focus when it comes to packaging paper, where they are doing a great job with mix and also within corrugated solutions. And comparing consumer board and corrugated solutions, we also, to some extent, have they are competing of the same capacity. So here we also have an opportunity to look at favorable mix for the company. All right. Well, thank you. Those were my questions. Thank you. Thank you very much. The next question comes from Linus Larsson from SEB. Please go ahead. Nynas, we cannot hear you. Hi. I'll try again. Thank you very much for taking a follow-up question. It's relating to the Gruvon project. The start up is approaching with the planned start up in March. It will have an impact on your earnings in 2019. I wonder if I mean, how much more are you going to guide the market around what point in time should we expect that? At what point in time should we expect that? Yes. And what we have said, and we repeat it now, that we will reveal more details around the ramp up and ramp downs that will happen when we go live with KN7 on our CMD in on September 17. So we will provide more details on that then. Okay. And you have guided on a volume figure for the project. Is that still relevant? We will come back with that information on CMD. So you're not reiterating that tonnage figure that you have communicated before? We are reviewing all of the numbers that we had previously in our calculations, of course. And we are so we will come back with all the information on CND. And one of the reasons, CN, is that we are not answering that question is that we have, as you know, put in place the program office in Gjoern. And that was put in place in at the end of March. So we are right now in a risk analysis gathering phase. And we divided the project in 4 different parts: machine ready, mill ready, product ready and business ready. So we really would like to have an opportunity to thoroughly go through all the risks and to make sure that we are not only talking about the machine part. We have to be able to look at the successful start up business mix and that sort of so that is why we have made the review of the whole investment and the whole project. So that is we need more time so that we can come back to you with the numbers in at CMB. Excellent. Thanks. Thank you very much. Thank you. Thank you. The next question comes from Harik Paitinen from Norde. Please go ahead. The floor is yours. Yes. Hi, good morning. Two quick questions. You mentioned the managed packaging making black numbers for 3 months in a row. Can you just put that in the historical perspective or on a year on year perspective? And how is this sort of a new situation? The second question is about kind of a follow-up on the in which grades you might be able to raise pricing and there's been kind of reports on at least attempts to raise white top liner prices in the corrugated side. So what's your view on that? So those two questions, please. First, I would like to say that I'm very happy with the development when it comes to managed packaging. And I think it is during the right timing now to put the solutions as a separate division within BILU GOSNAZ. And but I think looking at the exact numbers and the details of Managed Packaging Packaging previous years, I have to lean on you, I think, Sasan. Well, as we have communicated before, they have not contributed positively. They have been a burden. The burden has not been very significant, however. For the first half last year, there they were a burden of minus EUR 15,000,000 and now they are positive slightly positive around the 10 ish. So we're not talking big numbers. But nevertheless, very important that they had turned the corner because it was completely according to the plan that they were going to be negative for the first half and then turn a corner in the third in the second quarter. And they did that a little bit earlier than planned. So that is a very good job that they have done. And I think all the great opportunities always sort of start as a small burden. And I think that they will be a substantial part of the Buildroot Costners going forward. Correct. But you also had another question. The sec it was exactly in which segment that we have targeted the price increases, if I don't remember exactly. Exactly, exactly right. And I'm just sort of given the recent news about some competitors apparently trying to sort of move or get the white top liner bought pricing up. So that was kind of a specific question on that. Grade. I think it's tricky for us to answer that in a more sort of specific way. But it is we have selective segments within Packaging Paper and within Corrugated Solutions where we have good opportunities for both price increases but also mix opportunities. But it's I would like to avoid moving into each and every cobalt segment and comment about that. Fair enough. Understand. Thank you very much. Thank you. Thank you. The next question comes from Mark Inmaevi from ABT. The floor is your Yes, good morning. Could you give some more information on the, say, geographical mix of your wood purchases? You buy 10,000,000 cubic meters. How much is coming from Sweden, Norway, Baltics, etcetera? Can you take that one? Sure. 10% we buy from Breivik School 20% we buy from the Baltics and the rest we buy from Sweden. That has been the historic split. And has that changed lately? Well, not significantly. We are importing a lot more. We are importing eucalyptus. We continue to do that, but not to that it throws completely changes the mix. But we are looking at possibly changing the mix moving forward. But so far, it hasn't changed that much. In which direction? Are there any regions which are cheaper, so to say? That I think that is too early to comment, yes. Okay. And did you say Norway, how much that was? Well, it's not big enough to get on the map. Okay. Good. Thank you. But it is a small amount. Thank you very much. We have no more questions in today's conference call. I now hand over to the speakers of the call. Thank you. Thank you. Do you have any questions? No. There are no further questions in the conference call. Yes. So I would like to summarize the quarter that I think it's from my expectation when looking at the company moving forward, I think that I'm quite satisfied with the changes that we are putting in place. And I think the result and the outcome of the Q2 was in large what we expected from the Q2. So we are moving ahead now with high expectations both from ourselves and also from our shareholders and analysts. So and that I think that's a good thing. And I think that we can definitely deliver on higher expectations. So thank you for listening. Thank you.