Earnings Call: Q3 2017

Oct 17, 2017

Ladies and gentlemen, welcome to the presentation of Billet Korchner's Quarter 3 Result 2017. My name is Pal Lindberg. I'm the President and CEO up until year's end. And we also have Sasan Lythander, our CFO and also we have a reinforcement from the Board, Lennart Holm, he is the Chairman. Welcome, Lennart. And as mentioned, this is I'm leaving the company, as you all know, at year's end and this is going to be my last presentation from Bilo Korsnas and it's I feel a little sad to be honest, but I think we've done a tremendous journey. So actually I'm quite happy with the development of the company. This picture as you can see, it's actually if you haven't been to downtown Grooms lately, this is now the new skyline of Grooms. This picture was taken a few days ago where the erection of course for the building of Kilometers 7 is happening and it's very exciting project no doubt. And also coming up now at the end of November is the 5 year anniversary of BILOUKORSNESS. And I think as I mentioned, I think we've had a tremendous journey. We've had a growth of 3% on average over the 5 years and we have a target of growing 3% to 4%. So we have fulfilled that target. We have stable underlying earnings. As you can see by the bottom graph, of course, the earnings in terms of EBITDA tend to vary with quarter depending on when we have our maintenance stops. But nevertheless, we have an upward trend over the last 5 years and of course that's a good development and we're certainly working hard to continue this development. And if you have sharp eyes and a ruler, I guess, you can also see that at the end of this curve right there is actually the best EBITDA result ever for the company. We beat quarter 1 of 2015 with 1,000,000 euros. But it's still the best result so far. But one should keep in mind that in this quarter and quarter 3 this year, we had maintenance stops and the cost was €215,000,000 and we also had a fire in Carlsberg. So we're actually SEK251,000,000 better than quarter 1 of 2015. So things are improving. We have delivered an average total shareholder return of 23% over the last 5 years. And of course, this company is the function of M and A, a merger with Kosnes and Bilalud and also the acquisition of UPM Packaging in Finland. So I think we have a proven track record of positive and accretive M and A. Finally, also of course, we are recognized as a leader in sustainability. We received in the quarter 3 a recognition from Dow Jones where we are considered to be 1 of the top 10% to be in the top 10 percentile of the best sustainability companies in the world and the best in our industry. So I think we have a good track record. But of course everything is not sunshine. We've had our fair share of issues when it comes to production and as you all know. Even if we've had a development of roughly 3% growth in production over the last 5 years, we still have our issues. And this year, we had the beginning of the year, we had quality issues. We also had Rokkammer in quarter 1. The cost for that was SEK80 1,000,000. In quarter 2, we had a breakdown of a digester in Gruvon, the cost was SEK25 1,000,000. Dollars And in quarter 3, we had a fire in Carlsberg, cost of $35,000,000 And of course, all of these are very difficult to predict, but nevertheless there's plenty of things to do when it comes to achieving stability and availability in production. And of course, one question could be, are we worse than the others than our peers? I don't think there's any reason to believe that. I think we're actually pretty much on par with others when it comes to availability. But our structure is such that it's very visible. When we have an issue in a mill, you can immediately see that. We have 5 integrated mills and every time we have an issue or a breakdown, it's immediately visible in production as well as in our result. And I think one should be aware of that when you look at our company. And we're also trying to be as transparent as possible when it comes to things happening and incidents happening in production. But of course, we need to do something about this. And we're basically working on 3 fronts. And the first one is on this slide is occupational health and safety. We haven't been the best in industry when it comes to health and safety over the last few years, but this year we've made significant progress. We have introduced a program called TSF, in Swedish. And I think it's created really good results. So we're actually on track to improve significantly when it comes to metrics, when it comes to health and safety, which is very good news. And of course, this is also baseline when it comes to availability as well as quality. Production stability is something of course that made some question marks around that and we have now decided to hire specialists to put them on corporate level, roughly 10 people. And the purpose of that is to work with the mills to install a systematic work around availability and maintenance and also to create a very systematic approach towards our investment programs. And I think that's going to give us good results for the foreseeable future. And what we've done over the last few years is that we have installed higher nominal capacity and but we have not improved availability. So the purpose of this is to increase availability of the installed capacity. So the intention now is not to continue to make investments for new capacity, but to increase the availability. Of course, thirdly, we are working with quality. And the incident that we had end of last year beginning of this year is something that we do not intend to repeat. And we have customers that put very high demands on us and increased demands on us when it comes to quality and we recognize that. So we are working very systematically in implementing quality approaches and production to make sure that the incidents like the ones we had beginning of the year will not happen again. So we take this very seriously and we work very systematically to make sure it doesn't happen again. Now to the real purpose of this presentation is quarter 3. We had net sales of $5,500,000,000 and a growth of 3% again, which is again in line with our targets. We had an EBITDA of $1,501,000,000 again best so far with a margin of 19%. So I think I'm quite happy with the result actually. Obviously, it could have been better if we didn't have the fire, but we did have the fire. And by the way, the fire was started and an evaporation of the oxygen preparation plant for the bleaching plant in Cosmo. And it was basically I would say a mistake from one of our suppliers. And fortunately we cannot force our supplier to pay for the damage. But nevertheless, I think there's no reason to believe that this was happening again. But it did create significant damage on various cables, electric cables to other parts of the mill. So that's the reason why the consequence was quite severe for the mill. But we were up and running again after 8, 9 days and Carlsberg is now back on track and producing fully. So in terms of key highlights, we do have very solid demand and it's solid throughout. And it's been solid for the last couple of quarters actually. When we came into 2017, we did not expect demand to be at this the level it has been, especially when it comes to packaging papers and containerboard. We did expect the consumerboard to be stable and it is, but the development in the other business area is actually surprisingly strong and it continues to be strong. And of course, I already mentioned the €35,000,000 in cost burdened. I also mentioned the new organization for availability and quality. And as you can see, we have stable earnings in all business areas, 19% EBITDA margin in Patching Paper, 23% in Consumer Board and 27% in Corrugated Solutions. And I think certainly that's both stable as well as very good. And it seems like this the development when it comes to demand will continue. Of course, we do have our seasonality. So end of year typically has somewhat of a slowdown around Christmas and New Year's and certainly probably will happen this year again. But it seems like the market is very strong and we expect that to continue into 2018 as well. So financially, sales is up 3% as mentioned. It's actually down from quarter 2 slightly, but we are constrained in terms of capacity. We have had maintenance stops. So that's the reason why quarter 3 is actually somewhat slower in terms of sales in quarter 2 and quarter 1. The demand is there and production is our bottleneck. EBITDA is up 1% as already mentioned and again it's slightly this quarter is slightly better than quarter 3 of last year. But looking at the underlying result, it's actually significantly better than the previously best results. So this really makes me happy. I think this is also where we should be when it comes to earnings. Cash flow is negative and the reason is that we're investing of course. The investment in the quarter was 1,300,000,000 dollars Average investment typically is about $325,000,000 so of course significantly higher. Average cash flow, operating cash flow is €350,000,000 of course now negative €200,000,000 and obviously the explanation is that we're making investments. But we also have a positive development on working capital, so that also helps cash flow. And in terms of return on capital employed, no drama at all. And so it's around 13% and this is our target. So we are fulfilling that target as well. And when it comes to leverage, we are slightly up when it comes to net debt to EBITDA now at 1.41. And of course, the reason is our investments, but certainly large headroom towards our target to stay below 2.5. So I think the company is doing well, Stable results, best EBITDA result so far and financially also in good shape. Business areas, packaging paper, very briefly, we are targeting or working according to a strategy called selective growth. And the consequence of that is that we are making the investments in Graublakka to target more value adding segments. But also over time, we will reduce capacity in Gruver as a consequence of the investment for the board machine. And the intention is to increase basically the profitability within packaging paper when sharpening the focus on more profitable segments. And we have very good position, number 1 or number 2 globally when it comes to kraft and sack papers. Net sales, it is more or less unchanged versus quarter 3 of last year and EBITDA slightly down. This the big impact there is actually Carlsberg with 35,000,000 euros So it's fairly straightforward to explain the reason behind that. We have also slight volume decline actually with minus 1%. And that really explains the deviation from the last quarter. But we're still at 19%. I think that's relatively good for packaging paper. It does vary over time obviously and you should know also that this is the more volatile of our business areas. Not that this is now volatile at this stage in the cycle, but over time this is more volatile. And I think 19% is where we should be more or less over a cycle. Consumer Board, different strategy. We're targeting volume growth. We expect to grow with 4%, 5%. We didn't grow 4%, 5% this quarter because of capacity restrictions. But of course, we're making the investments to enable ourselves to grow at that pace. And we are number 1 when it comes to ambient liquid packaging board, which is really long shelf life liquid packaging. And that's the area which has more significant and higher growth. We're number 2 globally when it comes to liquid packaging overall. And of course, that's the basis upon we make our investment decisions. Demand wise, it's still looking solid and this is a very predictable market with a few players when it comes to liquid packaging board, certainly more players when it comes to carton board. But we did have the highest sales ever in cartonboard in the combination of billet and kosnes. And this is intentionally because we intend to ramp up volumes as a preparation for the new board machine coming on stream in 2019. Net sales was up 2%, volumes was up 2%. We could have sold more if we had more volumes, but we didn't. EBITDA up 10% basically based on lower variable cost. So I think continued stability when it comes to Consumer Board and 23% margin is also roughly where we tend to be more or less over time. Corrugated solutions, again a slightly different strategy where we focus on value. And as you know, containerboard is an area or business which is the biggest when it comes to paper usage globally. So we are a very small fish in a big pond. Our strategy is very selective when it comes to niches and the intention is to extract maximum value out of these niches. And I think we're doing a very good job. Actually we did have during quarter 3 the highest EBITDA ever both in absolute terms and in margins and $269,000,000 I think is a phenomenal result for corrugated solution especially when we are investing in managed packaging. Managed packaging, I'll come back to that later, but that's now about 15% of turnover for the business area with the growth of 50% so far in quarter 3 or in 2017. But we're not it's not a contributor to EBITDA. On the contrary, it's actually a cost during 2017, but I'll come back to managed packaging a little later. Volumes are up 4% and EBITDA is up 12% versus last year. And also sales is now first time over $1,000,000,000 for a quarter. So corrugated solutions continues to perform really well. Now what's our outlook? Well, as already mentioned, we expect the solid demand to continue into quarter 4 as well as into 2018. We've had some price increases in corrugated solutions for materials as well as for patching paper during quarter 3. We expect to continue price increases in quarter 4 as well as perhaps also into 2018. I'll come back to that. Now we're not talking huge price increases. We're talking low single digits, but nevertheless, we see price increases. Wood costs for quarter 4, we expect to be stable. And we have maintenance stops also coming up in this quarter, roughly the expectation is $120,000,000 And we also have non recurring cost of $30,000,000 for Gruvon in quarter 4. So that's briefly the outlook for the existing quarter. We also made a decision not to have a Capital Markets Day in November. We and the reason was pretty straightforward. I'm leaving the company and it felt kind of odd to be having a Capital Markets Day leaving the company. So we decided to postpone that into 2018 instead to allow for the new CEO to have a Capital Markets Day of his or her zone. So we intend to give you some outlook for 2018 as a consequence. As mentioned already, we expect paper prices to increase, again not huge, but still in local currencies of course. Raw material costs, while we do have increased consumption of wood in Sweden, So, Draught is building capacity down south in the 2 mills. SEA is investing in Ostrand. We also have investments in Finland and this all contributes to increased consumption and demand on the wood market going forward. We ourselves also expect to increase demand slightly, but still. So this is sort of a heads up that we could see increase of raw material costs in 2018. Pulp pricing is always difficult. I was wrong for 2017. I think many were wrong for 2017 to predict the pulp pricing. It came up instead of down. I think that was sort of the view of most. And one of the reasons, of course, is that the Chinese ban of recycled imports of recycled paper have increased the imports of pulp as a consequence as well as disturbances in some production facilities. But looking into 2018, expectation from us is that the disturbances will disappear as well as new capacity will come on stream. So prediction is pulp prices will come down. Production capacity, we expect to be marginally higher than 2017. And the reason is that we are actually shutting down Grovan slightly a couple of weeks before year's end 2018 and that's the reason why we do not see the normal 3% but slightly slight downturn in capacity. So if you're doing your spreadsheets perhaps this is an indication of where we expect to be in 2018, of course, given that we don't have any major disturbances. Capacity of PM10 in Graublaka is expected to be 40,000 tons, starting up the machine in February of next year. So do not expect a ramp up to 100% capacity directly. No, we expect to have a relatively moderate ramp up curve. Of course, if things fall into place very neatly, we will have a high capacity, but I don't think there's to be on the safe side, I think this is what you should be counting on when it comes to capacity from PM10. We're also going to build stock in Gruvon as a preparation for starting the board machine and also shutting down the pulp mill no, the existing paper mill and starting the new machine, we will have to build stocks of roughly 20,000 tons to be able to fulfill expectations and customer demands. 1 off costs, dollars 150,000,000 this is expected to be this is not one off costs, I can explain that later perhaps in terms of where it ends up in our P and L, but this is one off project costs associated to the given machine in 2018. And the net exposure market pulp will go down to 125,000 tons roughly next year. So those are indications of where we're going to some of the things that will impact our profitability and sales 2018. As for the investments in Gravelaka and Gluvarn, first of all Gravelaka is proceeding according to plan. We did expect to start the machine PM7 which was rebuilt in September and yesterday. It did start yesterday according to plan. And right now it's basically warming up. We're warming up the systems and we expect to have paper on the machine end of this week, which is according to plan. And also starting this is now PM7. PM10, which is the machine that we moved from Tervasari, again, we expect to start up in February of next year. So it's on track. The investment program in is also on track with a slight delay when it comes to the building as you saw that you saw. But we expect the project as such to be time wise on track. So we expect to start that machine end of 2018 as originally planned. And of course you may have questions around CapEx and this is exactly the same forecast and guidance that we have given previously. So we expect our CapEx to be in line with previous guidance with investments of $4,300,000,000 during 2017 and $4,700,000,000 during 2018. And then down again to more normal levels in 2019. So as a guidance for, of course, CapEx. Another consequence of us not having a Capital Markets Day is that we would give you some more flavor into what we're doing when it comes to solutions. We basically have 3 different areas that we define within the realm of solutions. The first one is packaging solutions. And within that, we actually sell ready made packaging. We have 2 initiatives. One is managed packaging which was really the first one of its kind for us. And the other one is SAC sales. And Sac sales is basically the same concept applied in Asia for Sac consuming customers, typically cement plants where we now sell ready made bags and we have a supplier for producing the bags for us. We supply the paper, our suppliers convert, we buy and then resell to cement plants. And the background to that is that we are selling unique concepts, rainproof sacks and other concepts to our customers and we feel we want to do that ourselves rather than have somebody else to be in charge of those sales. And it's going to be interesting to see the development of this. There's huge potential we believe, But right now, it is the volumes are relatively small, so it doesn't have a material impact on sales of packaging paper. But it's still an interesting concept that we are implementing right now. The other area is system solutions, basically where we have a system, a packaging system I. E. Machinery as well as materials. And the first one out I would say is Axcelosap which is a cooperation with Bosch and that's the bag that you see. And it's the first airtight bag and it could be used for a variety of foodstuffs as well as other types of dry materials. And there's huge interest on the market to replace existing solutions not the least plastics. And the machinery of course is produced by Bosch and we produce the material. And Bosch has been over decades a leader in plastic based packaging. And now they have decided to become sustainable and we are the cooperation partner around this system and we expect this to be to continue and when it comes to sales and we're selling the system together with Bosch. The other one is Formidable Solution and it's actually behind that is actually what we call free form packaging. It's a similar setup. We have a cooperation with Curti, which is an Italian producer of liquid packaging systems, supplying to Tetra Pak among others and we supply the material in this case Fiberform And together we now are able to supply the market with very unique shapes when it comes to packaging for again dry foods, but hopefully in the future also liquid foods. And this is we've sold one system so far and we have also a significant interest of further systems out into the market. So again this is immature, but again interesting developments. 3rd area, venturing is where we make investments into small companies with interesting technologies. We have now 5 investments in our portfolio. It's in the area of paper based bottle. I think probably you may have seen this before. It's together we have an investment in the Danish Eco XPAC. The intention is to develop a fiber based bottle that can directly compete with glass, plastics or aluminum for liquids. And the ultimate target is to do that for carbonated drinks. That is technically very challenging. But we are working on intermediate products in the meanwhile. So I hope that we'll be able to relatively soon be able to launch that on the market. And it's going to be and the intention is to be fully sustainable with bio based materials. We also have made an investment in cold chain solutions, which is basically intention is to be able to supply packaging for home to food delivery to home as well as for example medication. And we made an investment in an American company called Vericool and we think there's a huge potential in supplying the market with these types of packages to make sure that the food stuff, groceries as well as medication is kept cool and safe in the transportation chain. We also have a couple of investments in Internet of Packaging where we track and trace solutions as well as serialization technologies in this portfolio. And the intention of course is to aid the development of smarter packaging as well as the e commerce solutions that are now coming into place, briefly around solutions in our portfolio. And the first one out as mentioned was managed packaging. This was actually based on an acquisition we made from the U. S.-based PAXIS Packaging. We did that acquisition back in 2011, yes. And the first thing we did was to reorganize and put things into place and it's now really taken off when it comes to growth. We've had a growth of average almost 30% over the last few years and in 2017, 50%. And this is a growth that's actually very difficult because it's the reason that we exist in managed packaging is that we basically take care of complexity for our customers. We absorb that complexity. Growing with 50% absorbing complexity is complex. So we do not expect to continue to grow with 50%. We expect to continue to grow as 25% and also to establish positive margins. Right now, we are investing or we do have negative margins based on the very significant growth. But again, we'll stabilize growth at the lower level and come into we expect to go into EBIT margins of 5% to 10% over time. But I think this is a good example of what can be achieved thinking out of the box, so to speak, when it comes to packaging solutions. And that's pretty much it. So I'll leave it up to you with questions and answers. Well, you to questions and me to answers, I guess. Thank you very much. It's Linus Larsen with SEB. I wonder if I could ask a few follow-up questions on the Hverblakka project. You say you will produce 40,000 tonnes in 2018. A few questions around that. When I look at your pulp net figure for the group next year 125, so it's slightly higher than what you guided previously. Is there a connection between those 2? That's my first question. And the second question is relating to depreciation. What's the depreciation charge per annum and as of what date? And my third question would be whether you expect Kaerblak PM10 to be EBITDA contributing in 2018? Thank you. The first one the first question is there a relation with the pulp exposure and the capacity of PM10? Yes, it is. So we have now we're now being a little bit more cautious when it comes to the ramp up curve. And this is based on our previous experience when it comes to ramp ups. So we'd rather be safe than sorry in that sense and the consequences that the net pulp exposure is increasing. When it comes to depreciation, Sasan, that's your question. Yes, I can't comment on that exact number for that machine. As well as the EBITDA contribution as well, I think we need to return. I don't have that on top of my head to be honest. As of when will you be starting to charge depreciation? No, the depreciations are ongoing. We've never stopped depreciating the machinery and the machine is moved and it's going to depreciated on the way over. So we have I think we have 4 more years to depreciate the machine that we moved to Terbasale. The other parts of the investment, which was the which is a larger part is the investments in PM7 and that we're starting up right now. So we're starting pick up depreciations on that. Thank you. Olufkirjammerke, ABG Sundal Collier. You've had your share of production problems during a couple of quarters or more than so. And now you say that you will establish company specialists to support and increase focus in our Cross Mills team. Can you please explain that more? New employees, where will they be based? Can you explain how that will fix the situation, so I'd say? Well, I mean, the improvement of availability is really about very systematic job on many fronts in the mill. It is about details in the machine, it's about details in the pulp mills, in the recovery area, etcetera. We have pumps, we have cylinders, all kinds of stuff. And the systematic approach, we need to have a very systematic approach. And this has varied to be honest between the mills, the level of systematic whatever you call the systematic approach. The intention with this the recruiting specialist is 2 fold. 1st of all, to make sure that we do have this systematic approach that we do have a common approach between the mills, both when it comes to working with maintenance as well as solving technical issues with one methodology. And this is also related to quality. I mean we are producing, let's say, for example, we're producing for Tetra Pak in 3 mills. And if we have an issue around quality which we do, we always have issues smaller or bigger. And what you have seen are bigger of course, but everyone has smaller issues and we also have a continuous discussion with our customers. We cannot have one approach in 1 mill, a second approach in another mill and a third in a third mill. So we need to have one common approach. And the intention of the specialists is to work with this systematic approach when it comes to maintenance, when it comes to problem solving and quality and quality communication. But also we intend to look at the investment in our mills slightly differently going forward. We've had a kind of a bottom up process where the mills have basically generated a set of potential investments which they from the mill perspective have perceived to be for the good of the mill. That's all fine, but not necessarily if you aggregate these and filter it upwards, it may not necessarily be exactly what we want to do if we want to stabilize and improve availability. So we're going to implement more of a top down approach when it comes to investments and the intention of this specialist is to create a better overview of what is actually needed to be done in order to improve and secure availability. So that's the explanation. Thank you. But is this group up and running? We have made most of the recruitments, yes. They've done internally, externally, how many people roughly? They are external people. It's going to be 10 people all in all. And the organizationally they will be reporting centrally which is but they will not be placed in Solna. They're going to be in the mills. Thank you. Oscar Lindstrom from Danske Bank. Two questions. First off, maybe just one on wood prices. I mean, you highlighted higher wood costs ahead of 2017. Maybe we didn't see so much during the first half of the year. What was the increase in sort of percentage terms in Q3? And you say then like when you say stable Q4, I presume that's sequentially stable. Yes. We saw, I would say, probably a couple of percent increase of wood cost, not wood price. And the reason is, as I think I explained last time, is that we are increasing since we're increasing the consumption we're also increasing catchment area which means that the logistics costs are increasing and that's the reason behind the cost increase. And when you say potentially higher wood costs in 2018, Is that on top of what we've seen so far in Q3? Yes. And also there, your supply agreement with Bergvik Skog, is that in the process of being renegotiated and when? Well, the supply agreement expires the last of December next year of 2018. And we do have negotiation ongoing with Bergvik for a possible continuation of the supply agreement. Thank you. And then a second area of type of question is more around strategy and more of the big picture here. You've had a couple of different avenues investing in your domestic mills, which is what you've done. I think there's also at least from our side some speculation about expansion outside of your current Nordic region, something which hasn't happened so far. And then the other areas is sort of significant downstream expansion towards the direction of some of these ventures that you pointed out. How do you evaluate these strategic options going forward? I mean, what kind of vision do you and perhaps also the Board have for this strategy? Well, as you say, I mean, you point out several potential directions. And what we've said historically is that, yes, it could be potentially a good idea to move outside of Scandinavia for capacity based on of course the closeness to new customer base existing or new customer base. We've highlighted potentially going into North America. The reason behind that is both market, but also wood basket. So far the pricing of assets is very high. So the multiples people tend to be willing to pay have not been where we want to be. So we haven't really done anything due to that reason. And also there's a lack of potentially interesting assets because we what we said also, we want to stay within packaging paper, consumer board or corrugated solutions and that's it. We don't want to go outside of that and of course that limits the potential scope. So of course, going forward, that remains to be seen. But that's how we've thought about this so far. And when it comes to going downstream with the position that we have is we have a very strong position in liquid packaging, but for us going downstream in liquid packaging is just not possible obviously. So the question is could we go downstream and packaging paper? Well, we're actually looking at it to a small extent still when it comes to SAC Solutions. When it comes to corrugated solutions and managed packaging, this is actually what we do. We go downstream but not investing in physical assets nor in a converting network. We are basically investing in what I just described in managed packaging which is a totally different setup. And that's what we've done so far. And the intention is to extract value and not to make investments competing with our customers. And so competing with customers so far has been an avenue that we haven't pursued in that sense. And that's why we also we are focusing our solutions, managed packaging and SAC solutions in Asia. What we do on a broad scale the same thing in for example Europe, it would be more difficult because here we have a different competition when it comes to our customers basically. So this is but we're still looking at possibilities to do that, but we have to be a little bit more cautious in terms of how we do it. And so that's how we view this going forward. And in terms of but we intend to continue to invest because basically there's as far as I'm concerned, there's for the foreseeable future not that big of a limit in terms of how much you can grow this type of business. But when it comes to evaluating our solutions, basically we are looking at what's the potential value adding in terms of EBITDA in these investments. And of course we just right now have 5 investments. Not all of these are as promising, but some of them are very promising and of course that's where we're going to continue to invest. When the companies need more capital injection, we'll probably go ahead and do that. While the others, we just maintain or perhaps exit after some time. Just one follow-up. Thank you for that answer. I mean following these investments, you will be have no net pulp exposure. So you'll be sort of fully internally supplied with pulp or imbalance. Should that be seen as a sort of a limit to organic growth that going forward, will you be sort of a net buyer of pulp or Well, I think to be honest structurally I think it makes sense to be on in balance. To be slightly long or slightly short on a shorter period could make sense, but I think my view of that would be stay in balance, which means that and also given the fact that we do have we're looking at a capacity expansion in many areas in the Nordic region and there's going to be most likely higher competition for wood. For us to go ahead and expand in a major way our pulp capacity here probably doesn't make sense. So once we've done these investments, my prediction would be that we're probably looking at another type of expansion outside of the core that we have right now. And that's the way we've been thinking all along basically. Thank you very much. Nick Galiov, Kepler Cheuvreux. A couple of questions. Now we've been talking about wood costs and wood pricing. Could you just remind us the size and sort of the importance of the wood cost? Do you have a sensitivity analysis, 1% on the wood cost means exon operating profit or something like that? Yes, we do. We have a sensitivity for fiber, but that also includes bought pulp of 1% change is SEK740,000,000, which is obviously too high for just the wood cost. And then as you already mentioned, all the new projects that will consume pulp And now we've been living, if I remember correctly, for several years with rather stable wood prices. I mean, the last sort of wood price peak, I remember, was it around 6, 2006, 2007 with the Russian export stops. Now how should we think about this new sort of capacity pulp increases? What kind of magnitude should we think about? Is it like the Russian issue back in 2006? Or is it substantially smaller? It's difficult to say. I mean, our objective and our task is to maintain low wood prices and not to argue for the contrary, okay? And this is what we will try to do. If you look at the again, if you look at the fundamentals, there is increasing demand and we did have a spike in 2006 and 2007, yes, the Russian thing. We also did have somewhat of a spike in 2011. That is after that has come down. I don't know what we're talking about going forward. The only thing we see is that yes there is an increase in demand and it could have an impact on pricing. That's all we know. Thank you. And then just two housekeeping questions. The financial costs were clearly lower in Q2 Q3 versus Q2. Was that just lower interest rates? Yes, basically. We have more short very short term commercial papers right now. We are guiding for SEK150 for the year basically, and we keep that guidance also for next year even if we're increasing our loans quite significantly for the future. But we see now that we are rolling out a couple of bonds in March, which will make up for the fact that we don't have much interest at all for next year. So approximately SEK150 also for next year. Okay. Thank you. Follow-up on solutions, please. You have several times in the past talked about the challenges of keeping sparkling liquids within liquid packaging board. Now you said something about that we will have to work with intermediate products for quite some time. Could you explain that? Well, how do I say this without saying too much? Well, I mean, there's the thing is to the 2 components. First of all, it is the structure to which and then the structure has to contain a pressure of 12 bars. Structurally, we have basically a solution, but we also need a barrier. And in order to keep the liquid, the gases inside and how to apply that barrier into a bottle, that's the challenge. So the intermediate product would not to be to apply that into the bottle, but to perhaps insert a barrier or a bag into the bottle, okay? And what's the bottle made of? The bottle is fiber. And the bag would be bioplastics. Okay. Yes. So that's the intention. Now are we ready and done? No, we're not. But this is the intermediate product. Yes. Got you. Thank you. Do we have any questions on Our first question comes from the line of Martin Melby from ABG. Please go ahead, Martin. Your line is open. Yes, good morning. Two questions. First, these price increases that you point towards, can you indicate how much of price increase we have coming in Q4 just based on the price increases you have gotten through already? You had €94,000,000 there in Q3. Well, I would say that certainly we'll keep the existing prices. We'll probably see for this year quarter 4, probably not so much, maybe 1% or so. And the reason is that the biggest opportunity for changing prices is when we come into a new year, a new supply agreement, new price list, etcetera. So most likely not so much more into quarter 4 than what we have achieved in quarter 3. Okay. Then on Gjovern and these new project costs that you give out, what about, say, 20 19? If you lay out the entire schedule until it's up and running and making its own EBIT, is this EUR 150,000,000 going to last a couple of years or is it over next year? Well, the €150,000,000 contains of cost for temporary employees and education that you're not allowed to put us investments. And it's also part of it is also the fact that we need to have a longer stop next year. But when we start up the machine and we will probably have more guidance during next year what the startup curve will be and what it would look like in 2019? Yes. We actually considered to give you some guidance from 2019 now. But at the same time we thought that there's many things going to happen up until now from now and up until 2019. So better to give guidance during 2018 for 2019 rather than do it now. But you've also said that this is fully up and running first in say 2022, 2023. That's why I'm asking is this $150,000,000 also realistic for between 2018 and 2022? It should be. I mean, this is operated training primarily and is also the early shutdown of some machines in Gjovern and that's not going to happen after 2018. So it should be more or less that type of cost should be what we're looking at for that project and that's going to happen in 2018 more or less. When it comes to the ramp up curve, we there are various options on what that would be looking like depending on the product mix in the machine. So and we're not done there. So we have to come back to you, I guess, with that later on. And lastly, on that whole project, how much of the costs are actually activated and how much is expensed like this €150,000,000 I'm thinking this feasibility study, for instance, is that has that been expensed 2 years ago? Or is it included in the CapEx, for instance? It's all included in the CapEx. So basically, what we give you as out the extra numbers that's the part that is outside of the CapEx. Excellent. Thank you. Thank you. Thank you. Our next question comes from the line of Harry Teitonen from Nordea. Please go ahead. Your line is now open. Thank you and good morning. Maybe sort of follow-up Martin's question on the pricing and the timing of the sort of pricing negotiations. I mean, how much of your volumes roughly just ballpark is subject to negotiations at the year end and how much of the volume is sort of fixed on a longer term? And also related to the pricing, well, what's the the situation in the folding boxboard side? Or what's your take? There's been at least one supplier communicated price increase publicly and then there are some other talk that others are also pushing for folding boxboard price increases in Europe. What's your stance on that? Thank you. Yes. Starting with the following boxboard, that's correct. And we are of course, we're trying pretty much to do the same thing, which is of course what we call our term for that is cartonboard within Consumer Board. So we will try to implement price increases as well. Now that the magnitude of what we have seen on the market is not that large. We're talking 3% perhaps, 2% to 3%, but still it's a price increase. When it comes to which areas could be subject to price movements or increases in 2018, Well, it looks like in consumer board or sorry, container board is still looking strong, primarily floating, but also to a certain extent liner. When it comes to packaging paper, basically sack paper as well as MF grades, I would not predict the same for MG because of our new capacity, both new products on PM7 as well as new volumes from PM10. So exactly where that's going to end up price wise, I don't know. So but the other is probably subject to price some price increases. But again, I mean, we're not talking huge increases. So low single digits and that's where we are. Okay. And this is a real quick question on the working capital. You mentioned that you will see some sort of a tonnage increase tying up working capital next year. Would you kind of give an indication of how much or sort of what working capital assumptions you are using? Or would you like us calculate it? No, I mean, we're using we have the target of 10% and we've communicated that before. Right now, we're below the target due to the fact that we're investing so heavy and have very big receive or payables, of course, to those suppliers and that will continue for quite a period of time obviously also for next year. But I guess there would be no reason to think that it's going to change significantly from where we are right now. No. Okay. Excellent. Thank you very much. Yes. Thank you. Thank Our next question comes from the line of Mikael Doepel from Handelsbanken. Please go ahead. Your line is open. Thank you. Just a couple of questions left from my part. First of all, coming back to the Sjablak and PM10 there where you're guiding for 40,000 tons volumes next year. Could you just remind us what kind of utilization rate would that be? Well, I mean, the capacitor of the machine is roughly 100,000 tons. So to make it simple, of course, it's 40% of total capacity. On the other hand, we're starting it up in February, so we had to adjust for that. So maybe it's like 43%, 44% or something like that. But I would guess that you're not EBITDA breakeven at those levels? Probably not. Okay, great. And then just a question on the extra costs that you mentioned relating to Gruvon, both in Q4 this year as well as next year. How will these be divided among the divisions? Or will it only show up in some certain division? Can you repeat the question? The question was on the extra cost that you mentioned for Gruvon in Q4 due to temporary staff and training, then you also have some extra costs in 2018, which you are guiding for €150,000,000 And the question was that how is this, for example, the 150 divided between the divisions? Okay. The €150,000,000 about approximately, let's say half of it is for temporary employees and that will be affecting the other unit. So we report that on other. So that will not be affecting the business areas. The rest will be a longer stop and that will impact the all of the business area in the same way that the normal stops do. And we will add that to that matrix instead of having it as a one off item for the future. Thank you very much. As there are no further questions registered, I will hand back to our speakers. All right. Ladies and gentlemen, thank you very much. Again, this is the last time in this context. So thank you for your patience and maybe we'll see you at another context. Thanks.