Earnings Call: Q3 2017

Oct 31, 2017

This presentation on SCA's report for the 3rd quarter. My name is Bjorn Rynfeld. I'm Senior Vice President, Communications of SCA. This is the first report of a full quarter as an independent forest products company. We will present the report. The presentation will be made by Ulf Larsen, President and CEO and Toby Lawton, our CFO. And after the presentation, there will be time for questions and answers. Please, Bertrand. So thank you for that, Bjorn. Happy to give you some more details about our Q3, which is stable and strong quarter, I would say. We have continuous good market in all regions. We see a good market in Europe, but also in U. S. And in Asia. And for all product areas, more or less, we also have strong market and price increases with an exception for publication papers, as we've mentioned many times before, where we have structural challenges. Sales growth during this quarter was 12%, driven by volume and price to some extent mitigated by a negative currency impact. EBITDA was up a little bit more than SEK200 1,000,000 or 25 percent, main driver again volume and price. But also, we have seen during this quarter a limited effect from maintenance stops. If you remember, quarter 2, this year, we had almost SEK150 1,000,000 in negative result impact. This quarter, yes, SEK16 1,000,000 and quarter 3, SEK16,000,000, it was about SEK46 1,000,000. We have still continued planned extra cost related to the Ostrand project. And again, that is training personnel in order to prepare them to be ready for the start up in June next year. We also have some operational costs. It is a challenge to run the old mill at the same time as we try to build up the new one, but it is according to plan, I would say. Last but not least, we have had a stable cost level during the quarter. And also production has been on a good level during this quarter, which is, of course, really interesting when we also have a strong market. Ostrand project is progressing according to plan, both when it comes to money and to time. And we will be able to start up quarter 2 next year in June. And up till today, we have spent about 60 percent of the total budget for the project, but the whole project according to the plan. When we have a strong market as we have just now, it is really important to focus on cost and also productivity, cost efficiency. And that will also be our main focus now going forward. And at same time, of course, we have a strong focus on delivering on the big project in Ostrand. By that, I turn over to our 4 segments and start with the forest. And we have a really stable situation in the forest. We have a good supply and availability of wood. Price is quite flat in our region. We have seen some price increases in the southern part of Sweden. But in the SCA region, we have a flat price development. We have also now started to prepare for the startup of the new project in Ostrand next year. So by that, we'll be I mean, we do what we can to prepare logistical systems. We've also started to buy a little more wood and we also increase inventory step by step and up till June next year. Sales remained flat this quarter in comparison with Q3 'sixteen. EBITDA was up a little bit, but that is connected to higher share of harvesting from our own forest. If we then turn over to Bud, we have a strong quarter. We have a strong underlying market. And as you can see on the left hand side, we have been able to increase prices by between 1% 2% per quarter since the Q1 2016. That has also been the case Q3 'seventeen in local currency, but then we have had a negative currency effect during the Q3, and that is mainly connected to the British pound, but the strong market step by step increasing prices. Sales was up 19% this quarter in comparison with Q3 'sixteen and EBITDA was up 31%. And as told before, we have been able during the past 20 years to increase the sales in the new business by 10% per year in a profitable way. And the driver us now is the exposure to the BM trade. And that is a special business. And today, it is 45% of what we do in wood. In that business, we supply 50% from our own sawmills, and we buy 50% externally. It can be wood, but it can also be sheet materials and other things just in order to offer a complete portfolio to our customers. When we trade from external companies, I mean, that give us a good return on capital employed, of course. But on the other hand, it will have a lower margin than our, let's say, traditional business. Yes, we turn over to pulp. And we have a strong pulp market. And as you know, fixed prices today are at $9.20 per tonne. And we have now seen announcement of 9.60 dollars As mentioned before, we have some negative impact on the result from the big project, training personnel, operational costs and write offs and things like that, which is absolutely according to plan. Sales was reasonably flat this quarter in comparison to Q3 'sixteen and same goes for EBITDA. We have had, as mentioned earlier, also in Kurdistan, we had a substantial maintenance stop in Q2. This quarter, we have we haven't had any impact from maintenance stops. We will also later on give you some more details about the project, and Torbjorn will provide you with that in a couple of minutes here. In paper, you know that we do about 50% of the sales in kraftliner and 50% in publication papers. And in kraftliner, if we start there, we have really strong market. And if you look on the graph to the left hand side, you can see that we have been able to increase prices quite substantially since quarter 3 'sixteen. We've seen announcements of €50,000,000 plus €50,000,000 for Ambiage Kraft during 'seventeen. And we have seen at least 2 third of that coming through to EBIT level. And that, of course, give us a positive effect when it comes to both net sales and also EBITDA. In publication papers, we still have a challenging market and not the least for coated products. And in our case, we do 2 third of we're doing publication papers. We're doing coated papers, LWC. We had a price decrease in the beginning of this year with about 2%, 2%, 3%. And then you see also on the graph that we have had the continuous negative price development, and that is more related to mix and other stuff. But it is challenging in the publication paper market. It is a little bit better on the uncoated side, where we do then produce about 250,000 tons. Sales nevertheless was up 13% and EBITDA was up 51%, and that is mainly due to higher kraftliner prices. So by that, I leave hand over to you, Toby. Thank you, Ulf. Good morning, everybody. Firstly, I can show you our profit and loss account for the Q3. And you can see here we had a net sales in the quarter of SEK4.2 billion, a growth of 12% versus the same quarter last year, which, as I presented, is primarily driven by prices and volumes. EBITDA, SEK 1,449,000,000, a 25% growth in EBITDA, which is the strong price effect that's driving improvement in EBITDA, which then gives an EBITDA margin, you can see, of 24.8 percent for the quarter. Year to date, we now have an EBITDA margin of 21.6%. Our EBIT is 7.76%. And you can see we have no items affecting comparability this quarter because we earlier in the year, we had the silver project, which was splitting the company and the items affecting comparability. That's now closed and completed. So we have no items affecting comparability this quarter. We have financial items of SEK11 1,000,000. Last year, of course, we were still in the comparable figures, we were still a part of the bigger SCA. So the financial items then are not really relevant as a comparable figure. But we have net profit this year then in the quarter of CHF627,000,000 euros If I move on to show you a bit the development per business unit, a bit trying not to repeat too much what Ulf presented. But you can see in the forest segment, we had a very stable top line, stable volumes, stable prices. In the bottom line, we had a 25% EBITDA margin. And here, it's slightly better than last year, slightly lower than the Q2 this year, and that's always driven mainly by the share of harvesting of our own forest. And we had a slightly higher share than we did in the Q3 last year, but a slightly lower share than we did in the Q2. Then when it comes to the Wood segment, we have a strong growth versus last year, 19% versus last year. There's a bit of seasonality versus quarter 2, which is usually the strongest quarter. And then on bottom line, we have a 12% EBITDA margin. So the effect of some higher volumes and higher prices coming through with bit stronger EBITDA margin, but also a pretty stable development in EBITDA margin, which is also reflecting what Ulf mentioned that our share of sales in the building materials trade gives us a more stable development when it comes to margin than we would otherwise have. When it comes to the pulp segment, we have a slightly lower top line than we did last year, a bit driven by currency, a little bit volume but helped by the higher prices we have this year versus last year. And the margin, you can see we're now 25% EBITDA margin. And the biggest effect here is actually that we had a big maintenance stop in the Q2, which we haven't had in the Q3. But of course, the pricing environment is also helping a bit when it comes to margin. And then paper, we have a strong growth as well in paper, primarily pricing on the kraftliner side. On publication paper, we have had stronger volumes in deliveries in the Q3, but that's primarily due to phasing of deliveries. It's not really due to an underlying volume growth. And then EBITDA margin, of course, a strong EBITDA margin in the Paper segment this quarter, really driven by kraftliner pricing. Just to come to then the waterfall on net sales. And here quickly, you can see it's driven by price and volume, but positive pricing for wood, for pulp prices and for particularly for kraftliner prices. And then in terms of volume, we've had growth in volume in the voice segment and publication paper, pretty flat for volumes in kraftliner and a bit lower volumes in pulp and a small negative currency effect in the quarter. But when it comes to EBITDA, quarterly EBITDA deviation, by far the biggest effect is in terms of price mix. And in there, you can see, as it says on the slide here, it's really the higher prices for wood, pulp and particularly kraft liner that are driving the increase. Volumes is a positive effect, but a smaller effect. So those 2 are really driving the improvement in EBITDA versus last year, the 25% improvement that I mentioned. And when it comes to the cost side, raw material cost and energy are very stable, a small improvement, but that's driven mainly because the pricing is actually slightly higher for raw materials and energy, but the efficiency and the yields have offset the higher pricing environment. So we have a slightly better performance, very small, slightly better performance than we had last year. And currency, a negative effect in the quarter versus the Q3 last year, also slightly negative effect versus the Q2, by the way. And then on the fixed cost side and the other side, we have small negative, which is really driven by the project costs in Ostrand. So aside from the project costs in Ostrand, when it comes to fixed costs, we have a stable development and a focus on keeping stable cost line is there. So the EBITDA margin, as I said, has gone from 22.3% to 24.8% this quarter. Then a little bit on cash flow. We had a cash flow of, you can see there, SEK525 1,000,000 in terms of operating cash flow in the quarter. We had a strong operating cash surplus coming through from the profitability. The working capital change has been negative, which is primarily driven by growth in terms of volumes and prices. When you look at working capital in relation to sales, it's stable with the last year period. Current CapEx, we have about €400,000,000 year to date, €129,000,000 in the quarter in terms of current CapEx. We can see at the bottom here, we have strategic CapEx, which is the Ostrand project where we've invested SEK2.1 billion so far in the year. And now a couple we have a bit more information in the report on Ostrand, and I'll present a couple of slides to give a bit more background to Ostrand. And of course, the main background is the growth in the lead softwood kraft market, which over a period of a few years has been growing now for 1.5% to 2% per year on average over recent years. And that's the background to the investment. And of course, we expect that growth to continue, and we expect it to be driven by the growth in demand for virgin fiber, which is both in tissue segment, particularly in packaging segment. So that's the background. And when it comes to the investment, we as I said, we've invested DKK2.1 billion so far this year. In total, so far, we've invested DKK4.7 billion. And so we expect another DKK1 1,000,000,000 to come in the Q4 this year and the remainder to come over 2018 2019. So you can see there SEK1.6 billion in 2018 and SEK0.5 billion in 2019. And when it comes to the timing and cost, we have a start up which is planned for June of next year. And we expect a ramp up period of the new mill to come up to full speed of some 12 to 18 months. So when it comes to next year, 2018, we expect the capacity to be pretty much in line with 2017. And that's because we will have an extended production stop in connection with the startup, which will be around 45 days. And the volume loss during that startup period, during that production stop will be compensated by the increased capacity in the mail after the startup. Then once during the start up period, we also do expect there will be some increase in direct costs, particularly with some increased maintenance costs, increased costs for chemicals and energy in connection with the start up. So the start up period, especially initially, will have some cost effect. And then in 2020, we expect to be the 1st full year where the mill is at full of new capacity. So 2019 will be somewhere in between and 2020 will be the 1st year where we will be at the capacity of 900,000 tons of NBSK. When it comes to the cost position, we expect the cash cost per ton for the pulp mill when it's up and running at the full new capacity will decrease by approximately SEK350 per ton based on primarily indirect costs. So that we expect to be the main change in terms of cost position on indirect side. And that will put Ostrand in the top quartile amongst softwood kraft pulp producers globally. Then when it comes to working capital, as Ulf mentioned, we do also expect, of course, an increase in working capital in connection with the start up as the business grows. And that will come probably quite some effect in the first half next year as we proceed towards the start up. And finally, a little bit on the balance sheet. Our capital employed at the end of September was SEK42 billion, an increase versus the year end last year, which was around SEK40 billion primarily due to the Ostrand project. We have a net debt of SEK5.8 billion at the end of September, which is 1.7x EBITDA. And our net debt to equity at the end of September, 16.1%. Okay. So I think Yes. Thank you. To summarize, we have strong stable market situation in all regions. We have increasing prices in all areas except from publication papers. We had a strong sales growth in this quarter and also EBITDA was up a little bit more than SEK200 1,000,000 or 25%. The big project is progressing according to plan. And main focus just now in a strong market will be cost efficiency and, of course, to deliver on this big project. We have seen a lot of interest in our forest, which is nice to see. And we also get a lot of questions around the forest. So we have also decided to perform a Capital Markets Day with a forest focus in May next year, and that will be held in Sonzval. And we will also, in the beginning of next year, send out an invitation. So hope you can come there. And so by that, I think we opened up for him. Yes, that was the presentations. Now we will open up for questions. There will be microphones close to you. So if we start over there, Andreas, could you provide the microphone? Thank you very much. It's Linus Larsson with SVB. Congratulations on very strong set of results for the Q3. I wonder if I could just ask a bit about as it appears a very strong market environment and how it's whether there is something extraordinary happening here or we should expect this level of volume going forward? Maybe that's the first question. I mean, the volume growth this quarter is mainly connected to what we do in the business merchants trade. And then you have the seasonal effect. I mean, the strongest quarter for BM is in the Q2 and in the Q3. So that is one reason. Also, you could see on the slide that we had we've had increase in prices and that has also, of course, have had a positive effect on the growth. And I mean, for us, the most important thing is to keep up the profitability. The growth is not the main focus really. But if we can find a way to grow and do it in a profitable way, then of course, we will do it. But maybe that's an answer. Yes. So I mean, as we go into the Q4, there is nothing if we look on a year on year basis, I mean, we should expect a continuously strong performance in wood. No. But I mean, we have a reasonably strong market out there. So no big things will happen, I think. You could also mention we had a big investment phase in our sawmills in recent years. And particularly last year, there was still some of the ramp up going on in particularly Bolstad and Tunadal as well. So there's been some of that volume from those investments is coming through this year as well. Especially in Tunadal, I mean, it is the 1st year with the Tunadal up and running, and that has been a success. We do the ramp up curve was quite aggressive, but we do a little bit better than we thought. So some in to another is working well. And it is the fastest sawmill in the saw line in the world. We can now we can see it with our own eyes, which is positive. Great. May I also ask on the kraft climate side? And I mean, there as well, you had a very strong market environment. And could you tell us a bit about the phasing of the price increases and what to expect in terms of your P and L in the Q4 primarily? Are there further price improvements coming through in the 4th quarter? I mean, as I said, we have had the free price increases, €50,000,000 plus €50,000 And I can say that we have seen about €110,000,000 coming through up till today. And I think that we have something left in the Q4, something left. And finally, I don't know to what extent you can or want to answer that, but we're approaching the year the end of the year. And focus will turn to dividends. Is there anything you would like to comment around or your dividend at this time of the year? Just a couple of questions from my side. Firstly, just a follow-up on Lina's question on kraftliner. You mentioned that about €110 per ton was realized. Yes. So was that realized for the full Q3? Or was it in steps realized? It has been gradually implemented. Okay. So if prices stays at that level, then profitability should increase? A little bit. Okay. Fine. And on FX, how much of the because there has been a lot of moments on the FX side as well. How much of that was approximately realized in the Q3? Sorry, on the FX side, on the currency side. Because you mean how much due to hedges and so on, how much are the latest moments? We've hedged around onethree of our euro flows through the year. So it is offset to some extent by hedges. But I mean, the currency differences have not been that big when you look quarter versus quarter last year. So it's not I mean, we price kraftliner both in primarily in euros. So that does have an impact. So if you look going forward, you need to take that into account. But on group level on currency, not just on paper side. Is it the same thing there that most of the FX was most of the currency fluctuations was No, I think so a third was hedged in the result, but the 2 thirds comes to the result. Okay. And when do you expect to announce financial goals, leverage ratios? What do you expect over time as well? We as we said, we do not have a plan to announce financial goals. We yes, so where we stand, yes, when it comes to the dividend, for example, that will obviously be clear at the start of next year. But we have no current plans to announce financial targets. We have the ones that we had before, I mean, in order. So that is what we stick to just now. And then finally for me then on round wood prices. We've seen them coming up in the southern part of Sweden, but you have managed to hold them stable, as you say, in your parts. What is the main reason for that? Yes, Norman, I mean, it is a supply demand and we have good availability of wood as it is just now. So it is a stable market. You're not seeing any signs of increasing prices? No, not just now. No, it's stable. Okay. Thank you very much. Thank you. Please. Olof GMRK, ABG Sundal Collier. Questions on the Gazprom project, please. You have a slide now showing that the cash cost per tonne will be reused, say, €350 per tonne once in up and running. You didn't give us the starting point. Is that on purpose? Or can you elaborate about that one? I mean, I think when it comes to the indirect cost, indirect cost is something that the biggest impact in the project with the indirect costs. And they are the impact from the growth in the volume without a big increase in indirect costs is SEK350 per tonne. The starting point or whichever year you look at is impacted in our results by wood prices, by pulp prices, by energy prices. So there's a lot of other impacts on the result. But the impact from improving the indirect cost coverage is going to be GBP 350 per tonne. If you look back, I think we've given 4 years of history now for Strand in results. A couple of years have obviously been impacted by the project, and we've explained how much of the cost is impacted by the project. So yes, you can judge with a bit of history. And then of course, it depends on the pricing environment and you need to take your own assumptions when you look at what you think the pricing environment is going to look like. Fair enough. Just briefly then, how do you define indirect cost because that varies a lot within the between different companies? It's the fixed cost. So it's not wood, it's not energy, it's not chemicals, but it's primarily the people, and the other fixed costs around the middle. And in terms of what you have to do left until start up, when will be the most critical months, so to say? Can you please tell us about that one? Yes. I mean, so as announced now, we will have 45 days stop. And that stop, we need to extend the recovery boiler. I mean that will be challenging, no doubt about that. And we have done all preparation that we can do. And I mean so far so good, but it will be challenging period definitely. The positive thing, Asrat, is that otherwise, we have a sequential start up. We have already started the wood handling department and different parts of the mill. But I mean, the recovery border would be the big thing. Please? Oscar Lindstrom from Banske Bank. A lot of good questions here already. I wanted to ask a little bit about your forest operations. And you mentioned that one of the reasons behind the stronger results in the group was higher harvesting in your own forests compared to previous quarters. And on that note, is this going to be a new mobile level? And how does that work? So if you increase harvesting in your own forest, presumably, you would have, at least on EBIT, a negative impact from lower revaluation of forest land values. I could take the first part. And that is, I mean, you see a seasonal effect that, let's say, the level the harvesting level is the same as it's been before. But that has been disturbed in the past years due to a couple of storms that we had. I mean, also 'sixteen, we were impacted by the storm. So I would say that now we are in the normal level, and the seasonal pattern is also quite normal. Yes. I think on the second part, we I mean in the forest, we both source externally sourced wood from our own forest. And when we source externally sourced wood, it's passed it's sold on to the industries without a markup. So it's at cost sold on to the industries. But when we harvest and sell on from our own forest, of course, the margin from that comes through to the bottom line. So the proportion that we're harvesting from our own forest has a pretty strong impact on the bottom line performance. And then it is offset slightly by the revaluation because if we're harvesting more of our own forest, the growth the net growth is slightly lower. So you will see when we harvest more of our own forest, the revaluation effect is smaller. But overall, it's still a bigger effect from on the bottom line. Could you sort of give some guidance on the sort of rough relationship if you increase harvesting in your own forest by, let's say, 7% or 5% or 9%? I think it's all to Sabahat, 7% or 5% or 9%? I think it's hard to say. But I think we it's primarily a phasing impact is what I'd like to say because I think we're clear about how much we expect to harvest during the year. I think it's 4.3 1,000,000 cubic meters this year. And it will phase during different quarters depending on when we choose to harvest. And that that we stick to the annual harvesting plan, but it's the phasing changes. All right. My second question, if I may, is on pulp and the Ostrand project where, I mean, you, like everyone else, your average realized price is at discount to the RISI or PIKS list price. When I look at this over time, it seems like this discount is increasing. So my first question is, is that a correct observation? And second, going forward, when you start up the new mill, is there any reason why we should expect a change to that discount in either direction? I mean, you have a discount. You're absolutely right about that. And the trend in the past has been increasing discount rates. And now we have a really strong pulp market. So I mean, it's always a negotiation, of course. But you have a connection between the official price, so to say, the fixed price and the discount rate, that's for sure. But I think that you will continue to have these discounts. And what was the other question? That was When you start up and start delivering from the middle with sort of increased volumes, should we expect that to have any impact on the discount? No, I don't think so. I think it will have an impact on the discount. We will increase our share of sales to markets further away. That's and that means we will have some higher logistic costs, which would impact net mill prices. But yes, we have no reason to believe it's particularly discount related. But depends on the price level for the business. If I just may then, the sales number reported for your pulp division, does that reflect net mill price after logistics costs? Or is it a gross sort of number? No, it's before logistics cost. So logistics costs are just taken up as any other cost? Yes. All right. Thank you very much. Thank you. Then we have a question from the telephone. Martin Melby from ABG. Please. I'm thinking about the Forest asset value. So you've got the SEK 31,000,000,000 kind of set by the previous management team. When you look at this valuation now at the year end, the balance sheet, what are you thinking about SEK 31,000,000,000? Because they did fairly big changes before you took over, but it ended up at the same old DKK31 1,000,000,000. Yes. So I wouldn't do a particularly big change, but there was a change to the discount rate last year. We it's too early to say what assumptions we have at the end of this year. But when we look, I mean, for example, the pricing environment, we're very much in line with the pricing that is assumed in the accounting valuation of the forest today. So we don't see any particular sort of indicators that there will be, yes, big changes when it comes to that. And on Ostrand, say, at a day like this, stock is up 6%. Is it should we put in some safety measure there and assume some kind of ramp up cost and direct cost in 2018? Well, I mentioned, I think, as I went through that there will be some impact on direct cost during the ramp up, which is due to the ramp up, which is things like the energy cost as you start up, it's the chemical cost as you start up. It's a lot of maintenance cost during the start up. So yes, there will be next year, there will be a lot of costs associated with the start up. Okay? I won't specify a number. No. At this stage, it's too early to say a specific number. Then we turn over to Alexander Baylon, Bank of America London. Just a quick question on your wood sourcing. I believe on a full year now, you have about 60% from your own forest. Just thinking a bit with around how is this going to change? I guess you're not going to be able to keep up that 50%. So is it going to go a bit lower? That's the first question. And also just following up, what does this mean for your costs on timber? With Ostrand becoming larger, does that mean that you get a better cost position because you get a better more prices should go up because you need to buy more from that region? Okay. I mean, it's obvious then when we start up Strand, we will need between 2,000,000 2,500,000 cubic meters more pulpwood. And I mean, the plan just now is to buy that in the neighborhood of Sunchvall from small private forest owners. And that we have already started that work. And we also bring in some wood from Norway. We do some import from the Baltics where we have our own company for that purpose. And we also buy some wood from Scotland. So I mean, we are rather well prepared. So I think it will be a rather stable situation. As you know, some capacity has been closed down in Sweden during the past years, And we have rather balanced situation. And I mean, we will not speculate, but wood cost, we have a good base, slightly less than 50% when we start up Ostrand. But I think that we have a really good position when it comes to supply Ostrand in a safe and cost efficient way. Okay. Thanks. Very clear. Thank you. Then we turn to Robin Santavirta, Carnegie Health Thinking. Yes. Could you comment on in terms of pulp, where do you sell? How much do you sell, for example, in Europe? And then how much do you sell in China? And how do you expect that to change? I think Toby said that after the year start ramp up, you will sell probably more to China. I mean, today, we are 100% focused on Europe, more or less, one can say. And in order to place 500,000 tonnes of MDSK, I think it's fair to guess that we need to put at least maybe 200,000 tonnes outside Europe. But I mean, that will, of course, be the balance. We will not destroy the European market. But today, we're 100% focused on Europe. Right. And then perhaps on 200,000 tons sold outside of Europe. I mean depending on the market. Just now, we have a strong market. And if we have more pulp, we can sell much more in Europe. And so it depends on the market. We have to be flexible there, I would say. I think we're going to have attractive products that some Far East markets will be quite interested in as well. So but as we see us now, I mean, it is a strong market. And we have after us, we have new no new capacity on stream. So I think it will be a fairly stable market going forward. Thanks. And then could you comment on the prolonged maintenance, the 45 days? As I understand, you will then start probably early May. Could you provide some kind of ballpark number, there's a cost for that maintenance stop? I think it's like I said earlier, it's a bit too early to give a number in terms of the cost impact, either the maintenance stop or the cost impact during the start up. But of course, you can count the 45 days out of 365, and you can see the volume impact that, that will have in terms of, if you like, lost production volume. So that's obviously the biggest effect. Right. Could you share some kind of view related to what kind of average capacity utilization you would have in H2 when you start up the new production capacity, higher the average for H2 than the run rate at the end of the year. If I do the math, I mean, just really simply, I reached sort of an average capacity utilization of 70 percent if production capacity would be in 2018 the same as in 2017. Is that number totally wrong? No, I think that's not too far away. But you have another factor also, and that is the quality. I mean, one thing is capacity and volume. But when you start up a newbie like this, we need to take care of all quality issues. So we will not produce volume with bad quality. Then we have to do what's needed to handle that. I understand. Of course, yes. Could you comment what is usually the amount of capacity at this stage you need in that kind of mill in order to reach breakeven? I think, obviously, during the start up curve, it's a lot of work to get it up to the new that's obviously the bottom line is, that's obviously the bottom line is all else being healthy, then the bottom line is healthy. So I think we're not particularly focused on a kind of breakeven volume. We're more focused on making sure the start up goes as smoothly and as quickly as possible. Of course. Thanks. I understand. Those were my questions. Thank you. Then we have Mikael Doepel. I hope I got that right. Handelsbanken, Helsinki. Please. Yes. Thank you very much. I have two questions. First of all, on Ostrand, when you mentioned the cash cost, which will be SEK 3.50 per tonne lower once everything is in place. Now when I do some calculations around this and assuming in the current roughly speaking, current pulp prices and currencies, I end up with the return on capital employed or basically return on the $7,800,000,000 investment of around 10%. Could you confirm that this is in the ballpark at least? And then secondly, on the kraftliner market, what we have seen now is that the recycled paper prices have come off a bit in Europe, given the take on the situation in that market right now in terms of pricing? So I'll take the first I mean, the first point. I think we're not going to give a return figure or our own internal calculations. It, of course, depends on many factors outside our control like pulp pricing, not the least of them. But as we tried to explain, the biggest effect is the effect on indirect cost, which is this SEK 3.50 sept per tonne, which we've explained. And that's what we want to give you in terms of estimating the biggest effect. But when it comes to other effects, that you need to make your own judgments there. And then on the second question, I mean, you're right. And I mean, we were not speculating what's going to happen in the future, but we have seen a little bit lower recycled fiber prices in Europe for the moment being. On the other hand, underlying growth is really, really strong just now. And as I said, for pulp, if we have more kraftliner, we could easily sell it wherever also to China. So far, we haven't seen any effect. We haven't seen any further price increase announcements but needed the opposite. So it is a stable market now with a good underlying demand, I would say. Okay. And can I just add one question to the pulp outlook? As you mentioned yourself in your presentations, there's some further price hikes announced now and also for November. Do you expect these hikes to go through? Yes. We don't speculate in prices. We have also seen the announced price increases. And if they come, we will follow-up. Okay. Those were my questions. Thank you very much. Thank you. And we have no more questions in line. So I'd like to thank you all for taking part in this presentation. I would also like you to put a note in your calendar for the 22nd May, and I hope and look forward to seeing you in Sonnstad next spring. Thank you very much.