Earnings Call: Q1 2018

Apr 26, 2018

Welcome to the presentation of SCA's interim report for the Q1. My name is Bjorn Lindfelt. I'm SVP, Communications. The report will be presented by our CEO and President, Odf Lars Horn and CFO, Toby Lawton. And after the presentation, there will be the opportunity to ask questions both from the participants here in the room and for those participating over the telephone. Ulf, please? So thank you for that, Bjorn. Good morning, everyone. Happy to give you some more information about the Q1 2018, which has in general been a rather strong quarter for us. Still we have a continued strong market out there for more or less all product areas and still also in all market regions. We had a strong sales growth 11% this quarter in comparison with Q1 'seventeen, and the main reason for that is, of course, prices, price increases. On the other hand, as you can see, we had negative on volume and the reason for that is that we just now have started a big stop in Ostrand in order to prepare for the start up in mid June. And we have been forced to keep volumes in order to supply customers that need our pulp also during this long stop. I will come back to that. EBITDA was up 47% from SEK7.97 up to SEK11.75 and again the reason main reason is prices. Of course, we have had also this year harsh winter conditions and we've seen some negative effect on the cost side for our forest operations. And also when we look into our sawmills, you can see some negative effect from this strong winter. Ostrand project is progressing according to plan and we have now stopped for the final step where we will extend the recovery boiler. And so far up to today, we have invested 80 percent of the total amount of SEK 7,800,000,000. We've seen a stable wood supply during the Q1 and also before Christmas despite harsh winter conditions. And as you know, we are less dependent on external wood supply than maybe some of our colleagues, which have been a good thing this winter. Of course, we can see some effect in the sawmill production and also in the forest operations, as I said. So we will add some extra costs here, but nothing big. And our pulp and paper industry hasn't really felt anything from this tough winter. We can also see that we have improved our product and market mix. And of course, in a strong market, we try to, so to say, move our customers closer to the mill, which we've done in a positive way, in a successful way. Another example is that with this year, I think that we will not sell more than at maximum 3% standard newsprint. We have tried to find new products and we tried to move forward in the value chain also in that perspective. If we then look into some KPIs, as I said, SEK11.75 percent plus 47% on EBITDA level, Our return on capital employed in the industry is 17%, if we exclude the capital that is now invested in Ostrand as we don't have any. So far, we have no positive effects of this investment, but we have spent the money, of course, 17%. When it comes to the EBITDA margin, we have a positive trend, as you can see on the right hand side, close to 27% this quarter and our leverage is around SEK 1.8 billion. We've had a strong cash flow during the quarter, but the Q1 is also the quarter where we pay out dividends. I did show this slide at our AGM recently just in order to show that we do continued investments in a profitable growth in order to maximize the value from the forest. We are happy to say that the production in Tunadal, the new soul line in Tunadal is now up and running maybe better than we even thought. It is the world's fastest sawmill saw line today and is working 200% just now. We will start up the new mill in Ostrand, the rebuilt mill from mid June, as we've said, according to plan. We have now also started up the pilot facility that we have started up in Obbola in order to see if we can extract black liquor from the process and from that produce bio diesel and some other green chemicals and things like that. And now the equipment is working and it's but it's still too early to judge what we can do about it, but it's working now as we also planned that it should do at this time. As you know, we have an installed capacity wind power on SCA land of 2.6 terawatt hours and now we have closed further agreements. So we today know that 2020 we will reach our goal, which is 5 terawatt hours installed capacity in 2020. We have also during the period announced that we will invest another SEK 200,000,000 in our kraftliner mill in Pityo in order to increase the production of white top kraftliner again to move forward in the value chain. And we have also started up permit applications for a possible production increase in Obbola and also at the same time for biorefinery at Ostrand Mill. So a lot of things is going on in this area. We've also announced some management changes during the period. And if we start to the left to the right, Jonas Mortensen, he has become the new President of Forests since 1 April. Jonas has a long experience in the wood industry. He is replaced by Jari to the left. Jari has been in charge of Obbola Kraftliner Mill for the latest 3 years. And before that he has spent many years in the wood business as Technical Director. He's been heading another sawmill and also bolster sawmill. So he's a very experienced guy here. And last but not least, Kristina Nander, she will enter into the position of being President in Pulp from 1st November 2018. And Kristina, she spent almost 25 years in Utvegan and done a fantastic job at that mill. So we're happy to welcome these people into new positions. If we then walk into our segments, start with the forest. As already mentioned, we have had a stable wood supply. We have been able to run our industry to 100% even if we have had tough winter conditions in the northern part of Sweden. In some areas, we have had up till 2 meter snow, which is quite hard to deal with. And also it's been quite cold, which is not the least for the sawmills a problem really in the production. We have now started to see some slight price increases in the region and especially higher prices for imported wood. We don't import too much as we have our high degree of self sufficiency, but still we can feel that it is a price pressure upwards here. Sales was down 1% during the quarter and that is yes, it's more or less flat, so nothing to comment really. EBITDA was down 6% or about SEK 20,000,000. As mentioned, we have had some extra costs in the forest operations due to the winter. If we then turn over to Wood, here we can again say that we have a stable market with continued price increases. Since Q1 'sixteen or maybe since Q4 'fifteen even. And that is also something that we will do in the Q2. We have set prices for the Q2 and we will have another price increase of 3% to 4%, something like that. Low inventory levels, really low inventory levels and sales was up during the quarter 10% due to higher prices and EBITDA was up 90% and prices of course and we've already mentioned that we've had some extra costs related to the winter, but also due to increasing raw material prices. In pulp, we also have a continued strong market with increased prices and we are happy to say that the Ostrand project is running to plan, according to plan. Sales during the month was during the quarter was down 8% and the reason the main reason for that is that we have had lower deliveries due to inventory buildup for ahead of the Q2 stop. So we have to supply some of our customers. They are more or less dependent on supply from SCA and that's the reason why we have built up the inventory. EBITDA nevertheless was up 71%, higher prices of course. We had lower deliveries. We have also some, as we have announced before, some direct cost affecting the project. And in this area, we've also had some negative currency effect, but prices has overcompensated that fact. And as I said, we have now stopped Ostrand for the latest or the final phase in this rebuild of Ostrand Mill. As you know that this project has been run as a sequential start up and that is a very good thing to have because that will mitigate risk, of course. And I can just show you some slides here. This is from the wood handling unit and that one was up and running Q3 2017 And that is today the only wood handling unit that we have. We've been running for 50% capacity up till now, but now from June, we will run it to 100%. But this is I mean, this is already finalized more or less. The evaporation plant, we started up Q4 'seventeen and as you can see, we struggled a little bit in December, but from January and up till March, we have more or less 100% capacity in this plant. Now, of course, again, we have to speed it up to serve the full capacity in Ostrand, but we believe that will be nothing peculiar with that. That's an easy operation, we think. Drying and Packaging, this part is now handed over to SCA from the supplier and again we have tried all parts of this department and it's working well. The fiber line is still under commissioning, which is also according to plan. So that is the work that is ongoing now during the long stop that we have just now. And finally, now we have started to extend the recovery boiler. And just today, as we speak, we are moving the big, big wall and that will take between 2 3 days. But so far it is really good. The white liquor filter is also up and running now. We have now also been able to look into the old recovery boiler. I mean, we have run that for 10 years now and you don't really know what you will find there when you open up and go in. But so far, no bad surprises. So we are happy to say that we think that is working well and it is according to plan and we will start up mid June. Then finally, if we talk a little bit about paper, we have continued strong kraftliner market, again with higher prices. And if you look to the left hand side, you can see that as mentioned before, we increased prices 3 times €50 per ton in last year. Now we have another announced another price increase from this year of EUR 60 per ton. We have also seen some improvements in the publication paper market due to a better balance. Structurally, consumption of publication paper is still going down of course, but it's always a question of the balance. All in all, sales was up 16% and that is more or less 100% related to higher kraftliner prices. EBITDA was up 119% due to kraftliner prices, higher kraftliner prices, also higher prices for publication paper, but from a very low level, as you can see down in the left on this chart, but we've seen some price increases also here. Again, we have improved our product and market mix. And in this area we have also had a very stable cost development because this part of the business has not been impacted negatively by the harsh winter. So, by that, I leave over to Toby. Thank you, Ulf, and good morning, everybody. So, I'll just show you first the income statement here and as Ulf has already explained, the top line increased by 11% up to SEK4.4 billion in the quarter, EBITDA up 47 percent to SEK11.75 billion which is a margin of 26.7 percent. And I think you can see here because we have basically flat in terms of depreciation and financial costs, the drop through from the EBITDA to bottom line is very strong and therefore we've more or less doubled net profit for the period and earnings per share is now SEK1 more or less double what it was in the Q1 last year after the Q1. When you come on to the contribution by segment, here first on the left, you can see the forest and the top line here is very stable. We have a seasonality in the forest business, which is largely driven by how much we harvest of our own forest every quarter and the Q1 is always a bit lower quarter seasonally, but we also had some effects from the winter here in the Q1. So I think without the additional effects from the winter, we would have had a slightly better Q1 in the Forest division. In the Wood division also, we've shown consistent growth over many years. We have a stable EBITDA margin. It's we have a timber supply business alongside our sawmills, which gives us a more stable development in EBITDA margin than maybe you would have in a pure sawmill type business. And here, we have we also have some seasonality. So the Q1 is also seasonally usually a little bit softer than the Q4. But again, as Ulf mentioned, we had some winter effects here as well, primarily driven by slightly lower volumes. Volumes would have been stronger if we hadn't had effects from the winter. In the pulp division, we have a very strong momentum, very good pricing environment. We had a top line slightly down, as you can see, which was driven by the fact that we're building up stock in the Q1 ahead of the stop, which has now started in the Q2 in order to maintain deliveries to key customers now during the Q2. And EBITDA margin has increased now on 30%. There are still here still costs in Ostrand driven by the project, which I will come back to. So it would have been higher without those costs, but it's obviously a stronger development driven by the pulp pricing particularly. And paper also a strong development, top line increased and EBITDA also increased and now at an EBITDA margin of 25%. And the biggest factor here again is kraftliner price development, but also publication paper has developed a bit better versus previous quarters as well. So here the bridge on net sales from Q1 last year to Q1 this year, we have an increase of 11%, 13% is driven by price mix. So by far the biggest effect is driven by prices and here it's positive in all major product areas in terms of price. We have a slightly lower volume. So volume has a minus 3% deviation and the biggest one here is pulp, which is again the building up of stock ahead of the Q2 during the stop. We also have a slightly lower volume in kraftliner, which is not production related. It's really that stocks are now much lower, so production is going well, but deliveries are a bit down on where they were Q1 last year where we had a relatively high level of deliveries. And then currency is a small difference plus 1% and here euro is positive for us. U. S. Dollar is actually negative versus the Q1 last year, but our weighting in euros is heavier than our weighting in dollars, so the net effect is slightly positive. When it comes to EBITDA, again, the biggest effect, of course, is the same, it's price mix, where we have higher prices for all major segments and an improved product and market mix. Volume slightly down, a small negative. On raw materials, we do see some cost pressure on raw materials, in particular, wood costs slightly higher for the wood costs we buy in and chemicals where we see some cost increases. Energy largely flat. We had probably more energy costs, which I'll come back to in the direct costs in pulp, slightly in the Q1 offset by some other positive impacts in energy, but overall largely flat. Currency, positive, again, euro positive, U. S. Dollar negative. And then we have some small negative in other as well, which is really driven. Here we have the Ostrand project costs and also some of the costs related to the winter, which affect the other column. So overall, a 47% increase and now our EBITDA margin in the Q1 at 26.7 percent. On cash flow, you can see we had a strong cash flow in the quarter, operating cash surplus after we take away the effect of the forest valuation, which ends up on SEK922 1,000,000. We had a negative working capital in the Q1, although our overall level of working capital in relation to sales is stable, we do expect an increase in working capital during this year as we build up for Ostrand coming online as well. Capital expenditures, pretty stable at SEK76,000,000 and operating cash flow then SEK591,000,000 for the quarter, where we're almost then financing the strategic CapEx in Ostrand, which is SEK 634,000,000. We're almost financing that from our own operating cash flow this quarter. So now I'll just come to a few details on the Ostrand project and I think a lot of this will be repetition to many people. So here there's no new information on the guidance here we give on Ostrand projects. The start up we expect is in June according to the planned start up time. The ramp up period we expect to take 12 to 18 months. And this year in 2018, we expect the volumes to be in line with last year. So again, the volumes that we lose from the stop, the long extended stop will be compensated by the higher volumes after the start up and we expect 2020 then to be the 1st year at full capacity and 2019 somewhere in between. Overall, the project would double our MBSK capacity to 900,000 tonnes. We expect the fixed cost reduction, which will be the largest impact of some SEK350 per tonne. We expect an improved energy balance where we will go from being a net consumer of around 0.1 terawatt hours before the project to a net producer after the project of 0.5 terawatt hours. And on the other side, we expect potentially there could be some higher wood costs as a result of having to source a higher volume of wood primarily from further away. So there's a higher cost to bring it to the mill. So that's again nothing new with the investment cost SEK 7,800,000,000 And here are some of the impacts in 2018. And again, this is largely also repeating information that we've already explained, but just to make sure people understand, we have 3 different kinds of cost impact, which we've explained. We have the project related costs, which are indirect costs, which have been continuing at a very similar rate during last year and continue during the first two to three quarters of this year as well. And there we expect $60,000,000 of project related costs this year, of which $10,000,000 is depreciation. And as you see here, that's primarily during the 1st 9 months. Then we have the maintenance stop, which is happening now in the Q2, which is obviously a long maintenance stop, which as we show with all maintenance stops has a cost impact. And here, the impact in the second quarter is expected to be CHF 220,000,000 and then we expect a small stop in the Q4 of CHF 20,000,000 euros in terms of maintenance stop as well. And then finally, we have the direct cost impact during the ramp up, which we expect to be around between $100,000,000 $250,000,000 during the whole year due to the effect of higher costs for energy, higher costs for chemicals, some extra wood consumption and a higher share of B grade pulp during the ramp up. So this effect is expected to be some €100,000,000 to €250,000,000 during the year depending on how the ramp up proceeds. We can't be any more specific than that. And we have seen some of this cost already during the Q1, a little bit, €25,000,000 we estimate during the first quarter from higher direct costs, primarily energy related in the Q1. So those and then you can see on the right, we've given the table showing those 3 main cost items. And lastly, we also expect working capital will increase during the year, particularly raw material inventory, and that's due to the higher volumes and higher sales, which will come through from Strand ramping up. A little bit finally on balance sheet. Our book value of our forest is now SEK 31.6 1,000,000,000, a very stable level. We have a working capital just over SEK 3,000,000,000, 17 percent of sales. Our total capital employed now at SEK 43,500,000,000, which means with our net debt of SEK7.3 billion, we have a net debt to EBITDA now of 1.8x. And as Ulf mentioned, our operating cash flow minus strategic CapEx is more or less neutral, but we paid the dividend in the Q1. So that's when we paid the dividend. So that resulted in a slight increase in net debt up to SEK 7,300,000,000 with 1.8 times EBITDA and our net debt to equity is 20%. Yes. And yes, to summarize, again, we have continued strong market in all product areas, all geographies. We had a strong sales growth, mainly due to price increases in the Q1 this year in comparison with Q1 2017. EBITDA was up 47%, up till SEK1175 million. First on the project progressing according to plan, we will have our start up mid June and yes, according to plan, according to time and according to budget, which is of course a positive thing for us. We have had a stable wood supply even if we had a strong and hard winter this year, of course, due to the fact that we are have a high degree of self sufficiency, which is a good thing to have in a winter like this. And we have also been working quite hard with to improve our product and market mix. So Yes. With that, we will open for questions. And please wait for the microphone so everyone can hear you. And please state your name and company when you address the question. Thank you. It's Linus Lassen with SEB. I wonder if you just could clarify just a bit with the winter related burden that you had on the Q1, if you could in any way quantify that? And more importantly, talk about what to expect in the Q2? Are there any reversals of those effects to expect in the near term? Yes. I mean, we it's not so easy to calculate, but I think that we've had maybe SEK 20,000,000 SEK 30,000,000 extra costs. And of course, we will see maybe something in the second quarter, mainly in the distribution, but we have no big things. I mean, we have a good system with our rail terminals and so on. But of course, you need to the big thing for us has been to move harvesters from the coastline into the inland because we've had too much snow and you have to do some replanning and things like that. But I mean, no big things really. Great. Thank you. And maybe a related question, but Toby, you showed on this graph the variable cost inflation year on year that we've had in the Q1. Now as the year progresses, I think you showed DKK 65,000,000 impact year on year. Do you think that number is growing as the quarters progress the rest of the year? It's very hard to give guidance, but I think that was obviously Q1 last year versus Q1 this year. It increased some to some degree during last year. So I don't think we can give guidance on whether that would sort of increase or decrease for the remainder of the year. What we see is based on current prices that is how much more expensive it is now than last year. We see some increase in wood cost and we see chemicals now are more expensive than they were a year ago, but we don't see it becoming any more dramatic right now. And if you rather comment on a sequential basis, talking about wood and chemicals and other variable costs, how would you describe that? I mean, I think risk of repeating, but I mean, I don't want to sort of predict where they're going to go for the rest of the year. Right now, that's the effect we see. We don't see impact that they're going to go down significantly. We do see pressure on the wood side, which Ulf mentioned, but again, we have a high degree of self sufficiency there. So only a limited part of that comes through and impacts us as overall. So yes, the pressure is there. We don't see it increasing dramatically from here. It increased a bit during last year. So whether you would see a higher or lower effect in the second, third, fourth quarter is very, very hard to say. Thanks. Oscar Lindstrom from Danske Bank. A couple of questions. I mean, this quarter, you had very good price momentum and support for your earnings from, I presume, especially the kraftliner side. And you mentioned the €60 per ton price increase that you announced. How much of that was sort of fully in the Q1 numbers? And what kind of momentum are you seeing for Q2 and the rest of the year? I mean, if we start with what we did in 'seventeen, we had 3 announcements of €50 per ton each and they have more or less all come in. The announcement now for this year, I cannot really see that we have had not too much effect in the Q1 and but we hope that it will gradually be implemented during the Q2. But you do feel that the market is strong? Strong, but you never know if you reach all the way. I mean, that's too early. The announcement is €60, €60,000,000 All right. Thank you. My second question, I guess, is a little bit related to the Kraftliner side is the project that you've or the pre project that you've announced for Obbola. What's the status of that project? When do you expect to get an environmental permit? How soon can you move ahead with expanding capacity, starting up, etcetera? It is a pre project, that is what it is. And Pestrahan, who was who is the former mill manager there, He's gathered a big team. So I mean, we will spend between SEK 50,000,000 SEK 60,000,000 in this pre project to do it in a thorough way. And I guess that we will have a good view on this project in the beginning of next year, Q1, Q2 or something like that. And the reason for us starting to work with this environmental permissions is that it is a long lead time. So even if the result of this will be that we will not go, so still you have to start with this process anyway. So that's the reason also why we have done it in Ostrand. I mean, that's more a feasibility project, but still we have to start with environmental permission. So I realize I'm getting ahead of myself or getting ahead of you perhaps, but that's sort of my nature, I presume. But the if you went ahead with this project, would that sort of entail a start up sometime during 2020 then or 2021 at the earliest? Okay. But I mean, if you have the pre project running us now and if we decide to do this in, let's say, Q1, Q2 next year, then maybe we will see something in 2021, late 2021. And my final question is, I guess, also a follow-up on that is the I mean, we're seeing a number of capacity increase projects either already ongoing in the both in Sweden, Finland and also in the Baltics. And you have this potential project as well on top of the Ostrand expansion. How do you see sort of the potential sort of wood supply to support all these projects? I mean, we had the opposite situation in the past. I mean, we have seen lots of closures. And as it is just now, at least in our region, we have a rather balanced situation. So I mean, for us, when we looked into the Ostrand project 2,006 that then we realized that we cannot really fulfill this probably built recovery boiler, but we couldn't really do the full project due to the wood supply situation that we had at that time. Today, when we have now done this project, we feel that we are I mean, we are in a good position when it comes to the wood supply. We have had many big suppliers that really like to come in and to secure that they can supply to the new mill. So for us, it's a good and balanced situation as it is just now, I would say. All right. Super. Thank you very much. Nick Aljos, Kepler Cheuvreux. A couple of questions. The first one relates to Oskar's question in a bit. I mean, we see that recycled papers are coming down quite sharply as a result of Chinese new restrictions. We haven't really seen how the testliner price increase announcement are going through yet. So my question is really, what's the link between the recycle based liner market and your products, if there is a link at all? I mean, obviously, you have a link between testliner and kraftliner to some extent. And so I believe if at least in the past, they don't follow each other in a perfect pattern. But I mean, they follow each other in one way or another, I think. Okay. All right. Thank you for that. Just I mean, I think on the one hand recycled paper is a big input cost into test liner and test liner and kraft liner go there's some degree of substitutability. So there's there are links on the other. So from a cost side, there are impacts, but from a demand side, we see very strong demand and demand growth for Kraftliner has been not met by capacity in recent years. So we still see a very strong on the demand side. So yes, exactly how it plays out is hard to predict. No, no. Thank you. And then final question. You mentioned that wood prices seem to be starting to go up now. Could you just sort of remind us where are the current wood prices in relationship to your long term DCF book value valuation of the forest? Is there sort of in line or above or? I mean, we base our valuation of the forest on a 5 year average of the wood prices. So we feel like we even out. Think right now this quarter, we would be a little bit above, but it's not dramatic. Perfect. Thank you. Do we have any more questions from the room? Otherwise, we will go to the participants that will ask questions over the phone. And could we first ask the telephone operator to instruct the participants to press the right buttons for getting access to us? And the first participant over the phone is Christian Kopfer, Nordea. Yeah. Thank you very much, Johan. You have partly already answered this question. But just a follow-up on the market side here, primarily on the kraftliner side. As we have we've seen the strong markets continuing here in beginning of 2018 with a lot of price increases. Are you do you have any fears that you will see backdrops on the demand side for these products as prices have increased so heavily? I mean, we have a strong demand as it is just now. But I mean, we don't know about the future. But as it is just now, it is a really strong and stable market. And if we could produce more, we could sell also more. That's the current situation. Right. And a follow-up on that as well. You are looking into expanding your volumes on the kraftliner side. Obviously, do you think it's a risk that the market will be oversupplied of kraftliner if you look not in the short term, but if you look 4, 5 years ahead? I mean, long term, I think that the demand of packaging material, good quality, mainly fresh fiber based packaging materials, the demand for that will increase due to e commerce and things like that. So the long term trend is, of course, positive for the Packaging business and not the least for the kraftliner business, I think. Right. Thank you. And finally, maybe for Toby on maybe I missed this, but to clarify, if I understood it right, that you have hedged around 60% of your expected cash flows in euro, that you have hedged the euros at around 10% or something like that? Yes, we've hedged well, 70%. So in euro, we've hedged 70% for the rest of this year at 9.9 6%, yes, thank you. And we've also hedged 30% of our U. S. Dollar flows for this year as well. What kind of currency on the U. S. Dollar? I think it's SEK8.11 billion, yes, if I remember right. I think that's in the report as well. So you can read the figure the exact figure in the report if I'm slightly wrong, but I don't. Okay. Thank you very much. Thank you. Then we have Alexander Berglund, Bank of America. Thank you. I have a follow-up for Mikael's question on the kraftliner and testliner spread and the risk have you seen any indication of increased substitution to test liner? And I mean, just looking at kind of consumption of linerboard generally, I mean kraftliner is already quite a historical low looking at the total consumption. Might it be that we have reached kind of a limit where there is no real scope for substitution to the need of fresh fiber and also the application requirements where you need to have kraftliner? As I said, I think if we could produce more kraftliner, it would be easy to sell it in the market as it is just now. And the demand again for high quality packaging materials is really increasing. And again, the reason for that is the e commerce not the least. I mean, if you should send a package over the world, you like to have a package that is in good condition when it arrives to the customers. I think it is a good momentum for Kraftliner and the general trends supporting fresh fiber based material in general. Thank you. Thank you. Then we have Robin Santaveda, Carnegie. Thank you. Regarding Ostrand, you plan to reach full capacity in 2020, you said. So 2 years out, that seems as a quite long time to reach full capacity. Is the reason technical or is it commercial? And is it sort of a conservative plan? Or is it simply how you realistically see it? That is the plan that we have just now. You need to have a plan and we have been looking into other projects. And I mean, from that we have judged that between 12 18 months and I think if you think it's conservative, I don't think it's conservative. I think it's quite aggressive to be honest. But I mean as far as we know up till now we are positive because as mentioned before we have had a sequential start up and we have many different parts of the mill is already up and working in a good way. And I mean, we have had no bad surprises even now when we have opened up the recovery boiler that has been used for 10 years. So no reason for us to believe that we will not have a good start up. But I think it is quite ambitious to say between 12 18 months. But we will do our best for sure. Can we do it faster? We will do it. I can guarantee. What do you think is sort of a large limit for sort of reaching that whether it will be sooner or later? Is it technical or is it commercial? Definitely, it's technical in that perspective. And I mean, one thing is to produce the volume. But for us it's really important that we will serve the market with high quality pulp. So I mean we will not start up with some B grades and things like that. We will fine tune the process so that we can deliver high quality pulp. But I mean it's a tremendous demand out there for pulp just now and not the least due to the restrictions that was mentioned in China now for recycled fibers. So it is a really strong momentum for pulp. It will be up and down, of course, but as it is just now, it's strong. Exactly. Related to that, have you agreed on with customers about the new volumes? And will it be mostly in China or any additional volumes in plant in Europe as well? I mean, we are today, we are more or less 100% based in Europe in this business. And at an early stage, we did plan for bringing at least a couple of 100,000 tons out of Europe as it is just now. I think it would be possible to sell everything in Europe. But I think long term, it should be a good balance. So some of the volumes, I believe, that we will place in China, but also in U. S. And in a project like this, it's so easy us to focus on, let's say, the production part, but we have really been putting efforts in the marketing side. So we feel that we are really prepared also on the market side. It's easy to sell 1,000,000 tonne of pulp, but the tricky thing is to do it so you can make good money out of it. And I feel like we are very well prepared also in that area. Good. Thanks. And then finally, just a question on harvesting. At the moment, so what are the conditions now after sort of a bit of a problematic winter? It's spring also in the northern part of Sweden. God, thanks. Well, are you so the floods are flooding? But the positive thing, we've had a lot of snow. It was rather cold in this winter, but I mean, the snow came before we had the coldness. So I think, what you call the fall time will be rather short, so which is of course good for us. And we have also our railway terminals and we have a good stock now. So I think in that perspective, in the wood supply perspective, we have no danger left. So now we are in a controlled situation again. Okay. Thank you very much. Thank you. And then finally, we have Martin Melbier, ABJ. Yes. Good morning. You mentioned price increases on kraftliner and wood. But if you summarize each of the business units and the price increases yet to come, I. E, not already in Q1? I think Ulf mentioned the wood part when we went through the slides with was it 3% to 4% we expect to come through. Kraftliner, we expect there's a bit of a time lag, so there will be some time lag effect coming through into the second quarter for kraftliner. Beyond that, I think we don't give sort of speculation on But what we can say in publication papers, we've reached some small price increases from the Q1. I think it was €15, €20 per ton. And I think that we have also seen announcements now on coated papers from this summer of 3% to 4%. And in pulp, you know with fixed prices nowadays is $11.30 and we've seen announcements now for May on $11.70 So that's the current situation. And of course, in Kraft Heinz, I mean, we've done these announcements and then we have to wait and see what will come through. So it's still under negotiation. Great. And these wood prices that are moving up, can that impact your forest EBIT in a meaningful way or not really? I mean, what we have done ourselves is that we have announced plus SEK 20 per cubic meter in both pulp and sawlogs and that will, of course, have a positive impact on our EBIT level in the forest. It will have a negative impact on the industry side. But as we have a degree of self sufficiency of about 50%, as Tori mentioned, we will have a limited effect. Excellent. Last question, the next 10 year forest plan, when is that due? Yes. You mean the survey, I mean, I think we are in the middle just now. So I think we will have it in 2019, 2020, I think. Yes, around 2020. 2020 maybe. 2020. Okay. Thank you. That was the end of the list of questions, which means that we will now conclude this session. We hope to see as many of you as possible on the 22nd May when we will have a Capital Market Day dedicated to the forest. And since we've had quite a few questions on wood and forest, that will be a good opportunity to have deeper insight in the mysteries of forest operations and wood supply. So thank you and look forward to seeing you soon again.