Earnings Call: Q3 2019

Oct 30, 2019

Sincerely, welcome to this press conference where we will present SCA's report for the Q3. The report will be presented by CEO and President, Ulf Larsson and CFO, Toby Lawton. And after the presentation, we will invite questions on the report. Well, Ulf, please. So thank you for that, Bjorn. I'm happy to give you some reflections and figures for the Q3 2019. I'm also happy to announce that we have a stable, solid, strong result for the Q3 and still we have rather tough market conditions out there. So we have, if you compare this quarter with last year, same time, sales growth of 5% and that is mainly driven by the ramp up of Ostrand, of course. As I said, we have seen this quarter when we compare that with Q3 2018, weaker market in more or less all areas maybe except from publication papers. EBITDA was down 12% versus 2018. On the negative side, of course, our selling prices on the positive side, volume, but also currency. Pulp volumes during this quarter was slightly higher than Q2. Still, we are limited by the economizer in the Ostrand pulp mill as we have announced earlier, but we have just performed our 7 day planned maintenance stop. So this part is now replaced in Ostrand and we are looking very much forward to November December now to see what we can achieve with the new economizer here. Earlier this quarter, we also announced a new big paper machine in Obbola. And as you might know, the machine that we already have there today is the 3rd biggest in is the biggest in Europe, and this one will be the biggest in the world. And we also think that we will have a game changer when it comes to quality. The new machine will be up and running in the Q1 2023. We have also in conjunction with the valuation of the forest value, we have together with external partners looked into the total return from the forest. And when we have done that, we can state that if we bought 1 hectare of forest land back in 1956 and we have reinvested the cash flow from the operations year by year that would have given a total return from this piece of land of 10% now 2019. And we will come back to the calculation here, but we are not surprised, but it's rather impressing, I would say. And we have also made a study that will indicate the market value of our forest holdings to approximately SEK 63,000,000,000 to SEK 67,000,000,000 and the value that we have today, the book value is SEK 34,000,000,000. So here we have some KPIs for the Q3. And to start with, we have we had a solid EBITDA level of SEK 1,360,000,000, which is 2% better than Q2 2019, but as said, 12% lower than the Q3 2018. But that gave us a solid EBITDA margin of 27% and return on capital employed in the industrial part of SCA of 16%. And we had also really strong cash flow during the Q4. And by that, the leverage came down to 1.4%. And as you can see also on the right hand slide, we are just now comparing with maybe not the all time high, but yes, all time high when it comes to the EBITDA margin and a very solid result back in Q3 2018. If we then turn into each segment, starting with the forest part, we can see also on the graph to the left hand side, down to left hand side, that prices have stabilized on a high level. As mentioned already in Q2, we have seen that import prices now is coming down SEK 150 to SEK 200 per cubic meter. We have also started to reduce prices on new contracts. But as you know, we have a lagging effect here of 3 to 6 months. So we will see the effect out of this in the 1st and second quarter next year. You can also see that the net sales has increased and that is, of course, related to the ramp up of Ostrand. And by that also, sales was up 28%. EBITDA was more or less on the same level. And the reason for that is that the additional volume that we now take in is external wood and the result is driven from the wood that we harvest on our own forest. So that's the explanation here. Otherwise, good availability of wood in all assortments, I would say. And we are also impacted, of course, by the spruce beetle disease that we now have in Central Europe. And the figure that we have just now is that more than 100,000,000 cubic meters are infected in Central Europe and also that we have 5,000,000 cubic meters in the southern part of Sweden. We haven't seen anything in our region and in our forest, but of course, we feel the impact from the wood coming out on the market here. If we then turn over to wood, I would say that we have a rather strong underlying consumption in wood as it is today. But again, this market is now impacted by good availability of sawlogs and that is due to the spruce beetle disease. I think that I did a forecast that prices should go down 5% between Q2 to Q3 and the outcome was more like 6%. And I feel that we will have more or less the same movement in the Q4. So prices will continue down, although the market is rather strong out there, but again, availability of logs is the explanation behind that. Sales was down 10% quarter on quarter and one thing is, of course, lower prices, but the other one is that the consolidation in Wood France that represents minus 6% of the sales for the quarter. If we then turn into pulp, again, as I said, we have been disturbed by the economizer and that one is now replaced after the 7 days planned stop that we've had in the beginning of October. The production anyhow was 2% higher in Q3 in comparison with Q2. We also had a problem now in the start up after this maintenance stop. So a conveyor belt, 1 kilometer long, was destroyed and that added 3.5 day in this stop and that will impact, of course, the Q4. Otherwise, we have lower price this quarter in comparison with Q3 2018. And you know that we had a peak price wise in November 2018 of $12.30 per tonne. Now we are down at $8.25 At the same time, we have seen the Chinese net prices is now up on close to $5.70 and that means that we have the same price level now in China as we have in Europe. We have rather good inventories inventory level on MBSK, 37 days seasonally cleaned. It's more like 34, 35, which is absolutely in the normal span. And we also feel that we have a rather strong consumption. On the other hand, we also see that the inventory level on short fiber pulp is far too high, 60 days, and we haven't had any statistics recently, but we, of course, follow that very, very closely. If we compare quarter on quarter, we have, of course, benefit from increased volumes due to the ramp up of the expanded pulp mill and by that also the sales was up 52% during the Q3 2019. I can also announce now that the planned maintenance stock that we have already announced in Q4 will cost us SEK120 1,000,000 in the 4th quarter. And then we have to add 3.5 days for the breakdown of the conveyor belt. In paper, when we compare quarter on quarter, we've seen lower prices in Q3 'nineteen. On the other hand, just now, we see a good kraftliner order inflow. The inventory level is also very good. Sales quarter on quarter was down 1%. And one thing is, of course, on the negative side, lower kraftliner prices, but we have had a strong production in high prices in publication paper and also strong production in kraftliner during the quarter. Also in this field, we will have planned maintenance stop in Obbola during Q4 and that is estimated to have a negative impact of SEK50 1,000,000 during the 4th quarter, but that is planned and also mentioned before. In Renewable Energy, we have announced 2 new projects that will come up 2022, 83 turbines and additional 1.3 terawatt hours. And by that, we will reach 8 terawatt hour of installed capacity in 2022 and that will give an EBIT contribution of SEK120 1,000,000. And we have also increased the new the long term target to reach 11 terawatt hours installed capacity on the SAE land after 2022. So on, by that, I hand over to you, Toby. Thank you. Thank you, Ulf, and yes, good morning, everybody. I will start with the income statement. And here you can see when it comes to net sales, our net sales grew between Q3 last year and Q3 this year by 5%. As Ulf mentioned, Q3 last year was pretty much the high point in terms of pricing in a lot of our segments. So this growth is both a lower pricing environment but offset more than offset by the growth in the pulp sales through the expansion of Ostrand. So those 2 are the 2 big effects driving sales, but we have an underlying growth driven by the expansion in pulp. EBITDA is then down 12% versus last year, and this is really driven by the pricing environment, as we say, between the peak in Q3 and the current pricing level we have. When you look at EBITDA margin, it's 5 percentage points down from 32.5 percent Q3 last year to 27.4% this year, which I think, given the circumstances, is a pretty resilient EBITDA margin development. The EBIT then is down 6.6 percentage points in margin, slightly bigger drop because we're carrying more depreciation this year due to Ostrand. Then we have some SEK 26,000,000 in financial costs this quarter, SEK 172,000,000 in tax charges, which is pretty much the Swedish tax rate applied to our profit before tax, which all in all gives a net profit for the period of 757,000,000 euros which is an earnings per share of 1.08. If we just talk through a bit by the different segments, starting on the left hand side here in Forest. You can see the top line in forest has been growing steadily for a number of quarters, and this is primarily driven by the increasing volumes used to supply Ostrand in the growth in pulp. Those are primarily sourced externally, so they affect the top line, the net sales, but they do not affect the absolute EBITDA, which then has a knock on impact on margin, of course. But when you look at the absolute level of EBITDA, you can see we're on a higher level versus where we were a year ago. Quarter 2, which is normally which is a seasonal effect. We're a bit down on quarter 2, which is normally which is a seasonal effect. We have a lower level of harvesting in our own forest typically in quarter 3. So that tends to drive the seasonal pattern in the bottom line as well. Then when it comes to the 3 industrial parts, the wood, the top line has come down a bit and is driven by the pricing environment that Ulf mentioned, where the prices have come down since the Q3 last year. And then we have, in terms of bottom line, the margin is also then affected by this price development, and we're down at 12% EBITDA margin, which even so is a pretty I think a pretty resilient EBITDA margin given the pricing trends. Pulp, of course, we have the expansion in Ostrand driving the growth and particularly since last year. But then in the last two quarters, the pricing trend on the other side is reducing net sales, and that's really also what's driving the bottom line. You can see the margin has come down a bit quarter on quarter due to the lower pulp prices that we see today. When it comes to paper, a very stable top line. Underneath that, of course, we have we actually have the kraft liner pricing has come down as well since Q3 last year, but the publication paper has offset that. So we have those 2 going in different directions that result in a basically, it looks almost exactly flat top line, but those trends are going in different directions. And that's really what's if you like, what's driven the trend versus a year ago is the kraftliner pricing is lower now. But that's been offset in recent quarters by a better pricing on publication paper. So a pretty stable bottom line throughout EBITDA margin throughout this year. If I just walk you through the bridge in terms of top line, in terms of net sales, we had, 1st of all, the first bar you can see is the impact on the pricing, the minus 15%. So it is a significant impact from the negative price trend on, yes, particularly pulp, but also kraftliner and wood, all significantly down since Q3 last year, which again was pretty much the high point for Q3, Q4 last year for all those. Publication paper is not as big as those 3 together, of course, but has a small positive variation versus last year. We then have the big impact from the expansion of the pulp mill, which added 20% in terms of top line. We have a 2% impact from the weaker SEK and then a 2% negative impact mainly from well, from this deconsolidation where we deconsolidate the Wood France business this year, which we did not last year. If we walk through the same bridge when it comes to EBITDA, you can see the impact on prices, the same impact we have on the sales, of course, which drops through to EBITDA, and that's the biggest impact. Then this is offset by the higher volumes from pulp, which contribute to significant positive. When it comes to raw material, we do have a higher cost for wood this year versus last year for the wood we source externally, which, of course, is what impacts here. But this is offset by some higher income for some byproducts that we sell. And then on energy, we have basically, the energy prices are not down versus last year, but we have some improved energy costs due to the improved energy balance, particularly in Ostrand, where we're now a net seller of energy. And we also have some impact from wind power as well. Then currency again is positive from the weaker Swedish krona and then a small other effect. So that basically, those effects altogether, our margin versus last year, 32.5%, is now 27.4%, And total EBITDA is impacted by 12% versus last year. If I now walk on to cash flow, you can see basically if we on the right hand side, January to September, we have an operating cash flow so far this year of some SEK2.3 billion. In the quarter, Q3, we had a strong cash flow. We delivered nearly SEK1.1 billion just in Q3, significantly helped by working capital is one factor, the underlying earnings but also the change in working capital, which is with the price environment coming down, that helps in terms of working capital and delivers a strong cash flow. We have strategic capital expenditures pretty low in this quarter, some CHF 63,000,000 We expect that to be larger in the Q4. We will have some impact from both finishing the final payments on Ostrand, but also some down payments from the start up of the Obbola project, which Ulf mentioned, where we will start to see strategic CapEx coming in for Obbola project as well. So that will be higher in Q4. And the impact of this cash flow on net debt, I think we have a good reduction in net debt this quarter. We started the quarter at the end of June with €9,700,000,000 in net debt. We then had the operating cash flow of €1,100,000,000 dollars We've had some strategic CapEx on the other side, but we've also sold the terminal in Rotterdam this quarter, which has resulted in a 660,000,000 impact on net debt, so a significant reduction. Then we've paid some tax. And all in all, that then reduces our net debt from €9,700,000,000 down to €8,200,000,000 So a €1,500,000,000 impact, which then when we look at our ratio, particularly net debt to EBITDA, we were 1.6x at the end of Q2, and now we're 1.4x. So a good debt reduction in the quarter. And you can see that effect of that here on the balance sheet, but here we compare to the end of 2018. And if I just go through line by line quickly, you can see the forest assets. And this is we're still accounting here the same way we have previously with the forest assets. We'll come on to the proposal which Ulf mentioned for going forward. But we have an increase in the forest assets of just over €1,000,000,000 So here, we have the normal revaluation, but we also have some impact from the acquisitions in the Baltics on the forest assets. We have working capital is actually slightly up versus December 31 last year, and you see an impact there working capital on sales in the same way. And other capital employed has increased by around €1,000,000,000 which is partly Ostrand, but is also we have the leasing assets, which we did not have in the same time end of last year, so that has an impact. And overall then, our net debt to EBITDA is 1.4x, net debt around €8,000,000,000 and equity around €40,000,000,000 Okay. Then I will hand back to Ulf. So then we'd like to say a few words about the forest revaluation, and I'll start with this slide. You've seen it before, but value creation financial value creation in the forest can be seen in 3 components. And the first thing is the harvesting, the thing that we do every year to drive cash flow. The other component is the net growth because every year, we harvest less than the growth. And then the increasing standing volume will, of course, be the future cash flow. And the 3rd component is the land value. Step by step, the value of the land is increasing. And then, of course, in addition, we have the positive climate effect due to the net growth in the forest. And you know that it is the growing forest that binds carbon dioxide, but also the possibility that we have to replace fossil based both materials and fuels with renewable materials from the forest. If we quantified this, and this is on national level, Sweden, You can see on the left hand side that we have increased the standing volume in Sweden since 1956, according to official statistics up to 2019 with 55% from 89 cubic meter per hectare up to 139 cubic meter per hectare. At the same time, we have more than doubled the harvesting volume here measured as 2 cubic meter per hectare in year and today more than 4 cubic meter per hectare in year, so 115%. And at the same time, the land value has increased by 2 50% in real terms. And if we then look at this diagram, you can see exactly as I said, if you bought a piece of land back in 1956 and then you used direct cash flow that you get from your harvesting operation and invest that in more land step by step. Now 2019, you can sell the piece of land that you bought and you have had a total return on 10% in these three components. And as I said, at the same time, you've done something good for the climate. And if you look at the green line here, you can see that the net contribution now from our growing forests and also forest is on national level 94,000,000 tonne per year. And at the same time, we of course work to reduce our emissions from the industry. And here, we have calculated the total fossil emissions from Sweden, and that is 2019 expected to be 38,000,000 tonnes. Yes. Thanks, Ofer. And now yes, I would come on to the revaluation in our balance sheet as well. So just here, more of a reminder. We have our 2,600,000 hectares of forest land, which I think you all know, and that means we are, of course, Europe's largest private forest owner. We now have on the map you see on the bottom right the forest holdings that we've acquired in Latvia and Estonia, which are included in our forest holding, of course. And they're included also in the standing volume. You see here, we have an estimated figure for the year end 2019, including our net growth this year in the Baltics volume, which is now 241 1,000,000 cubic meters. There's around of that, around 3,000,000 cubic meters refers to the Baltics. So the Swedish volume is basically 238 percent, and that is 6% of Sweden's land area. This is also a slide we have shown before, but just to remind basically that the if I start on the right hand side here, you can see the book value of our forest land is SEK 136 per cubic meter. Then we've got a few different market level statistics. We have the levels that we buy and sell. And every year, we do buy and sell land to improve our area. And so we and we've purchased it in the last year. This is at 2.86 and sold 2.68. Then we have a market statistic from LRF, which is one of the available statistics, which is based on transactions in Northern Sweden, which is SEK269 per cubic meter. So the market level is pretty stable between the different statistics. You can also there are other statistics available which are also close to this level. So there's a pretty well accepted market level in terms of price per cubic meter, which is pretty much double what we have in our book value. And this is no secret. I think this has been we've talked about this many times as well. And what we have seen this year, particularly, is there's been a few larger transactions, which show that the transaction price on larger transactions is basically in line or even at a premium to the market statistics. We have 3 listed here. You see Beavik, Orest, AMF, Longwind, Holmen and then one in Latvia, the biggest one in Latvia, where Soderber bought the Beevic holding in Latvia. And even though the biggest is obviously the Beevic US transaction, and we believe that one was actually included a number of restrictions, which affected the price versus the market statistics. It was actually a little bit below the market statistic level, but it included restrictions on supply contracts and on buyback rights and not being able to buy or sell land and so on. If it was free from restrictions, we believe it would have been at least at the market statistic level. So we believe this has demonstrated that also large transactions follow the same transaction price as smaller transactions and the market value for smaller transactions is clearly double what we have in our books. And this has led us to the review, which we announced at the end of Q2 and we've been undertaking. And this is the basically, we want to update you on the findings where we are today. And we intend to change our accounting method for accounting our forest land to be based on the level of transactions, market transactions in our area. And there are some 300 transactions in our part of Northern Sweden every year, so we believe it's quite a reliable basis for using determining market price to apply to our forest land as well. And we intend to use those transaction prices and apply them to our forest land. And if we do that and we use, yes, the available market statistics as they are today, we use the available volume estimated as of today, then the impact of that change, you can see here on the right hand side, is basically to change from our book value today is SEK 34,000,000,000 and it would increase to a range between SEK 63 to SEK 67,000,000,000. And we will allocate that then total value between land and biological assets. In the past, we've only valued land at the original acquisition cost, which is pretty much 0 for most of SCA's land because it was acquired a long, long time ago. But we intend to value the land also to fair value and to divide the total market value then between biological assets and land. And we will continue to use a discounted cash flow to value the biological assets in the same way we have done in the past. We intend to change the discount rate used from the WACC we used in the past to being a market return requirement for these types of assets. And then a little bit oversimplified, but the land then is the remaining value once you've taken the total value and taken off the biological assets. The land is also supported. We have other cash flow streams which are not related to the biological assets, which very much support the land value. We have wind power. We have other items which support the value of the land. But the land is then the remaining value. And we expect this to be split roughly 70% to biological assets and 30% to the value of the land. Then it's important to note also that the change in the value of the biological assets is reported through the income statement, while the change in the land value is reported through other comprehensive income. So they get reported in different ways. And then we should be remembered as well, there is a deferred tax item which offsets the revaluation. You always have to account for the deferred tax on the increase. We view that as an accounting effect. If you were hypothetically to sell these assets, you would sell them in a company form and you wouldn't incur that tax. But yes, accounting method is we have to report deferred tax on the revaluation. And then finally, we the review is ongoing. We are finalizing the details of the implementation of this method, which will continue into Q4, but we expect then to conclude this in Q4 and have this value then in our balance sheet at the end of the year. So if we then finally summarize the quarter, we can say that we have delivered a strong result, although we have rather tough market conditions if we compare with the Q3 2018. EBITDA was down 12%, but it was up 2% in comparison with the Q2 this year. When it comes to the ramp up of Ostrand, volumes were higher 2% quarter on quarter, but we have been limited by the economizer, but that one is now replaced and we're looking forward for the production figures in November December. We also during the quarter did announce the new paper machine in Obbola, SEK7.5 billion investment and then you have to keep in mind that we have already financed the SEK8 billion investment in Ostrand through operating cash flow since 2015. The total return from the forest in our region is 10% per year. If we do the calculation from 19.56 up till now. And we are looking into revaluation of the forest asset and the span today is between SEK 63,000,000,000 and SEK 67,000,000,000 to be finalized in Q4. So by that, I think that we open up for questions starting in the audience. Thank you very much. It's Linus Larsen with SEB. I'll start with the forest revaluation. And you're the forest revaluation and you're basically doubling the book value of your forest holdings on your balance sheet. Does it in any way affect the way you operate? Does it in any way, for instance, change your view on indebtedness and or any other aspect of the way you operate? Yes. Maybe I can I'll start. But I think I mean, the short answer is no, this is an accounting exercise that we're we think it's pretty well accepted that the market value is a very different value from the book value, and it's been hard to explain, I think, for us and others why we can't value our asset at what is a pretty well accepted market value. And that's what we intend to change to move towards the market value. It yes, it's not there's no intention to change the financial structure of the company or to change the way we operate. This is primarily an accounting exercise. And then also so you will maintain a DCF model on the part, which is the biological asset value, you will lower the discount rate. Will you also change some other inputs, for instance, what type of inflation will you apply? And basically, my question is, what's the implication on the reported EBIT for 2020, let's say, because I guess the other inputs there will be quite important to understand the ongoing biological revaluation report and EBIT on a quarterly basis. Yes. I think that's a good question. I think the basically, the discount rate is what we expect to be the biggest effect in terms of the DCF. We're still finalizing the details. So but I think the other assumptions we've applied in the past are still pretty much relevant to the current environment using an average of wood prices and an average of harvesting costs and so on. So I think it's really the in terms of biological assets, it's the discount rate that will be the biggest change in the way the valuation is done. And then if we look at the effects ongoing in terms of earnings profile, we have a net growth in our forest every year as well, which supports an increasing valuation. And basically, we see no reason why you would see a particular difference in the future trend versus the past trend. The past has also been subject to changes in pricing and environment, but we've had a pretty reasonable and steady profit contribution year on year, and we see no reason that should change in the future. Of course, it's dependent on what happens in the future, which no one here can really say what that is. But the practice is pretty similar to today in terms of biological assets, and we don't see any big change. And maybe just finally on the forest side. You gave one figure on the renewable energy EBIT contribution as you expected in 2022, I think you said. If you add up all the non wood revenue streams, what does it add up to in, say, annual EBITDA? I mean, I understand wind is probably by far biggest, but you have some other revenue streams as well. What's the EBITDA contribution today or some time outs? Yes. I think another way of looking I think I can give you the feeling you're after. But in another way, the wind power is the biggest other income stream. And we've included already secured wind power income in the cash flow streams allocated to the lands, together with the other 2, our really hunting licenses and gravel income, which we also have from the land. In future, there may be others, but those are the ones we have today. And when you look at the split then in value between land and biological assets, it's driven by the relative cash flow streams from the biological assets and from those other income streams. So together with one additional component, which I'm at risk of getting into details here, but the biological asset is a valuation over one production cycle. So the accounting principle is that it's only the physical trees that are standing there today. After one production cycle, of course, we will plant trees and then harvest them again. And that's many years into the future, so it's heavily discounted. But that also has a value. And that is also allocated to the land, that piece. So those two elements basically contribute to this 30% that I mentioned, which is the land value. But the biggest part is the is this other income streams. Okay. And then maybe thank you for that. And maybe just somewhat related maybe, but somewhat shorter term on the you touched upon it in your presentation, the wood cost or the wood price trends that you're seeing. And in your industrial operations, when do you expect to see easing wood costs? Or to some degree, I think you already are seeing, but in a more meaningful way? I think we as I said, we have a lagging effect of 3 to 6 months. So I think that's valid. We won't see too much in the Q4, but then in the first and second, then that will come through. Hi, everyone. It's Johannes Grunselius here, Kepler Cheuvreux. Just also related to the forestry side, do you have plans for maybe open up the transparency even more in the sort of next year on the forest side? I'm thinking about the non wood profit streams that you might start reporting them? We don't have any intention to report a different another segment. I think we have given information about the income we see from Wind Power. So that we've given information on, but not as a separate segment. We don't there will be some additional disclosure, which comes in from the revaluation of the forest. But the basic answer is that, no, we won't be sort of separating out a different part and reporting a new segment for I mean, major thing is the wind. High teen licenses, that's nothing in the northern part of Sweden more or less. And gravel is minor. So I mean And you mentioned, Ulf, in your presentation the obvious benefit of capturing carbon emissions. I mean, if you think about the future in the next 1, 2, 3 years, do you see any sort of potential to get any financial reward for that? There is a pricing for CO2 like emissions. Do you think you can capture some of that? Personally, I don't think it in the coming 1 to 3 years. But I mean, long term, I think it might be so. But that is nothing that we calculate on, of course. And then during the year, you have also made repurchases of land in the Baltics. What do you think there? Would you continue to buy land in the next few quarters in the Baltics? And if so, how much? Yes. I mean, the long term target we've said is 100,000 hectares in 5 years' time. And I mean, now we've done 30,000. And I mean, we are looking into new opportunities, and we like to buy land, both in the Baltics, but also in Sweden, if possible. Why do you think 100,000 is sort of the land that you want to buy? Is there any reason behind it? And I analyze this also. Not at all really. But I mean we have I think it's good to have a critical mass. If it should be there, I like to see the Baltic as the 6th forest district. And you need some volume from your own land in order to allocate resources for harvesting, silviculture, everything like that. But in addition, we like to buy forest from small private forest owners as we do in the region in northern part of Sweden. And also we like to buy forest from I mean, from bigger place. It could be the state. It could be entrepreneurs and things like that. So I think it's some it's more related to some kind of critical mass. Okay, fair enough. Thank you very much. But long term, we are happy. As I said, I mean, we when we calculate the total return from the forest, we have had 10% per year as an average since 1956. So we think the potential is maybe even bigger in the Baltics. Right. Thank you very much. Kristian Kopfron, Nordea. Just a few follow ups for me. Firstly, if I did the calculation right on pulp for in the 3rd quarters, it looked like cost per tonne came down a bit in Q3 versus Q2. Was that the seasonal lower overhead cost? Or was it a combination of doing the business unit more effective? I think it's probably it's a small change. The wood cost is stable. The volume is slightly better, and the trimming is getting better all the time, so a slight improvement. And you should remember, we also part of this Rotterdam sale, that's the logistics operation is part of each business unit and part of that also held up. So I think it was not underlying, it's a small cost improvement, but not the wood cost is the big one, of course, and that's flat. And we expect that as also to be flat into Q4 before the wood the lower wood pricing that we see now starts to come through to the industries early next year. Understood. How far are you from your if I remember correctly, you expect that cost to come down around SEK 3.50 per cubic meter, right, with the new mill. How far from that are you now? I think we're on track, pretty much in line with the volume development. So I mean, it's really driven by the volume development and the fixed cost coverage. We're not yet there, but we're closing in. And I think once we get there, then we'll have that. So you could say we're probably twothree or 3 quarters of the way there based on the volume development. Okay. That's great. And finally for me, on the you mentioned that you had some income from byproducts in Q3. Was that income or is that income pretty representative for also the coming quarters ahead? Or It is actually a little bit seasonal. We are a big seller of wood pellets in Sweden, and this quarter has been seasonally is a strong quarter, and of course, it's a winter market. So I don't think you'll see that level all year, but I think it's more of a winter market. So Q3, Q4 tend to be stronger seasons for that market. But what's good for us is that we're working in this integrated value chain. So I mean, we benefit both from a higher sawdust price but also from producing pellets, and we used lots of pellets in our own boilers, but also, I mean, sold externally, so to be. Great. Thanks very much. Hi. Thanks. Niko Sachin from Pareto. Just one question from my side. On your geographical pulp sales split now in Q3, if you've done any changes to that versus the last quarter? Yes. No, I think we good question. We mentioned in the last quarter, we had a big increase to Asia. That's pretty stable between Q2 and Q3. So we haven't increased further from where we were in the Q2, but we still have a significant volume placed in Asia. Over time, as we grow our volumes in our core markets, we expect that to come down again, but that will take, yes, a couple of years. But in general, also, you can say that we have a stronger market in Europe nowadays. And you also saw the report from Esity just recently. And I mean, they had a healthy organic growth in tissue, and tissue is the main consumer of MBSK. So we have a slightly stronger market for the moment being. Hello. It's Johannes here again. Could you say perhaps something about the I mean, it was pretty obvious here that you had tougher markets in the Q3. But how should we think about the Q4? If you perhaps can mention what sort of sequential price decline we can have in kraftliner, for instance, that would be helpful. I mean, we don't give forecast, but as I said, in solid wood products, where you don't have any official statistics really, I mean, we lost 5% 5% to 6% price wise from Q2 to Q3. And I think that we will lose another 5% to 6% in the Q4. And again, it's not due to consumption, it's due to variability of logs and it's easy to increase capacity and that is what's happening now just in order to avoid destroying sawlogs in Central Europe. Pulp, again, I think I said that, I mean, we have seen our prices coming down to $8.25 and we see Chinese prices, net China prices was up now to $5.69 or something like that. And that is if you take away the discount more or less on equal level. And when it comes to inventory level, they are on 30 close to 35 days now in long fiber, which is on a healthy level, I would say. Question mark is the inventory level on short fiber where you're up on 60 days. So but we don't know where that will go. Kraftliner, we've had 4 consecutive months now with unchanged prices. And I mean, we see that you have some price pressure now on testliner prices. We don't know really what kind of impact that will have on kraftliner prices. We see that inventories for ourselves is very on a very low level, and we have a stable demand. We will have a planned maintenance stop in the Q4. So that's the situation for us. Now I suppose you will have slightly higher I mean, higher cost quarter over quarter because Q3 is softer on personal cost, right? Yes, that's right. We have you have an effect due to the holiday period, which reduces the fixed costs somewhat in Q3. It's not dramatic, but About €50,000,000 or so or Yes. The majority of that is in the Paper division for us. So if we don't have any further questions from the audience, I think we can open up yeah. The telephone on the line. Please, operator? Thank you. Ladies and gentlemen, we will now begin No further questions. Please continue. Good. Yes. Okay. Yes. We more or less expected everyone to be on Easter leave, but they seem to come here instead for which we are very grateful. Autumn Leap. Autumn Leap. Thank you for the interest you've taken in SCA's report. We look forward to seeing you again after the year end on the report for the Q4, January 30. Thank you very much.