Earnings Call: Q1 2017

Apr 27, 2017

Hello, and welcome to SCA's Press Conference for the Q1 2017. As you probably have noticed today, we have released several reports. Due to the fact on the decision on the AGM in April this year to split the company into 2 separate listed company, 1 Hygiene and Health company, SIT and 1 Forest Products company, SEL. So today, we have, of course, our CEO, Magnus Groot, who together with our CFO, Frederic Rustad, will go through the reports. And in addition, we have our Executive Vice President and President for Forest Products, Ulf Larsson, who will also present followed by a Q and A session. So with this, I hand over to you, Magnus. Thank you, Josephine. And starting now with the last slide that we will show on the combined SEA. And we continue to see a positive development with net sales increasing with 4%, organic growth was 2%, and adjusted operating profit increase of 5% and a very strong cash flow for the group. Most importantly, after the end of on the 5th April, after the Q1, the annual general meeting of the shareholders, and I'm now going to use this word, decided unanimously. So everyone agreed to split the group into 2 separate companies, SCA, a well invested and efficient forest and products company and Essity, a global leading health and hygiene company. And we have progressed to work with the split and can now today announce that the split will actually happen during June, so quite soon. And as you already know, we have also changed the segment reporting as you will see throughout this presentation. Starting then with the future Essity, today's hygiene and health company, SCA. We saw organic sales during the quarter of 1% improvement in spite of challenging market conditions, slowing growth and increasing competition. Adjusted EBITDA improving 4%, leading to an improved margin with 20 basis points. Operating cash flow was very strong, an improvement with 60% compared to the same quarter last year. During the quarter, we also announced a couple of significant initiatives. We have now discontinued entirely our businesses in India, so that's done. And we announced 2 investments to strengthen our supply chain and product offering with high quality premium products in Europe with new baby lines and in Mexico with a premium tissue line to support our fast and profitable growth in Mexico, where we recently became the biggest brand in the consumer tissue market. After the quarter, we completed the acquisition of BSN. And as you know, this is a big strategic shift for us in the hygiene part of the business that now becomes a hygiene and health business. And less than 1 month into actually now being in control of the company, we are as excited and positive about the opportunities together with BSN as ever before. So that's progressing very, very well. And Fredrik will soon talk about our new financial targets for Essay Hygiene Essity. Our adjusted return on capital employed continued to show a positive trend, up from 15.5 to 15.6. And we had a high pace of innovations during the Q1, and I'd like to focus specifically on the relaunch of our entire Libro baby assortment in Russia. And as you know, we had a weak performance in the Q4 in Baby Russia continuing now also into the Q1 this year. And with this relaunch, we feel very confident that we will recover and move into a more positive development in this category going forward. And in the other categories, we are active with all our hygiene categories. In Russia, we are doing quite well. But this is an important launch for us. And as you can see here, the 2 babies, the happy baby is using the new Libro product. So it seems to work really, really well. First indications. Something then about our 3 segments, starting with Personal Care. And as of yet, BSN is not included. That BSN will be included from the Q2. So this is still Personal Care as you know it. Net sales increased 3.8% and organic sales 1.1% and we had a significant increase in our EBITA of 26%, resulting in an adjusted EBITA margin of 14.5%, which is probably the highest margin that we have recorded in Personal Care, so a very positive development there. And the EBITDA improvement comes from better price mix, higher volumes and lower raw material costs, but a very important contribution also from activities that we have been talking about now for about a year. One is the turnaround of our incontinence business in North America, which is progressing well and the positive effects from exiting our baby business in Mexico and our hygiene business in India, which is now also showing clearly on the bottom line. Organic sales benefited both from pricemix and volume, but with a significant negative impact of 1 and from the closures in Mexico and India that I just mentioned. In the mature markets, we had slightly lower sales in the quarter. In incontinence products, we saw a mixed picture with very good growth in the retail area, but a weaker development in healthcare and this is in line with our previous guidance that the negative tender balance that we have had in healthcare throughout last year continues into the beginning of this year, but then reverses during the second half of this year. And very positive development in North America. Last year, we saw a turnaround when it came to profits. And this year, for the first time in several years, we also see a positive growth in incontinence care in North America, both in retail and health care. So an important next step in that process. In emerging markets, Latin America grew with 3% in spite of then discontinuing the baby business in Mexico. And in Russia, we had another weak quarter in Personal Care. As you will soon see, it was much better in Consumer Tissue. And with the relaunches that we are undertaking as we speak, we believe that we will turn this going forward. Consumer Tissue then with the net sales increase of 2.3% and an organic sales increase of 0.6%. EBITDA increased with 7% due to high volumes, lower raw material costs in the Q1 last year. However, for the Q2 this year, we are seeing significantly higher raw material prices for fresh fiber that will then impact our business mostly in Europe. We continue to work with cost savings, and we had slightly lower prices due to increasing competition, primarily in Europe. In the emerging markets, we are typically very fast in being able to recover raw material price increases or currency changes with price increases. Adjusted EBITA margin then improved by 50 basis points to 11%. And looking at the sales mix, pricemix was negative 0.3% and volume positive 0.9% with Western Europe accounting for the negative price mix and also lower sales. But this is something that is very much in line with our strategy to focus on margins before volume. So again, another quarter where we have had actually good growth in our branded business and in some markets, better market shares, all time high market shares, While when it comes to private label and the semi finished mother real businesses, we have been quite strict then in discontinuing businesses that don't provide the margin that we expect and need. So this is part of our strategy. In emerging markets, across the line, we see continued good growth in all areas. Professional hygiene, away from home, net sales increased 8.6% with organic sales increasing 1.2 percent. However, in Away From Home, adjusted EBITDA profit decreased by 7%, and this is to a large extent explained by significantly higher raw material costs than expected. Most of the raw material that we use in away from home or professional hygiene is recycled fiber as opposed to consumer tissue where we are mostly depending on fresh fiber. And recycled fiber has had a huge increase over the quarter and for us somewhat unexpected, over 30% in North America, over 15% in Europe. So a big negative impact there on our margins and our EBITDA. And we were not able to compensate through better price mix, higher volumes and cost savings. But of course, we're continuing to work very hard in all these areas to compensate for these higher raw material costs. And looking forward then into the Q2, we expect to see still higher prices compared to the Q1 when it comes to recycled fiber and significantly higher prices for recycled fiber compared to Q1 last year. EBITDA margin was down 190 basis points to 11.3%. Organic sales increased 2.1% with a mix of price mix and volume in the mature markets. We saw a flat development, however, a positive development in Europe and negative development slightly in North America. And in emerging markets, a very strong development. Of course, this is the segment where we have the lowest part of our shares, as you can see there in the box coming from emerging markets, but starting now to really be a more important part of our away from home business with 17% of sales. So that's what I was planning to say about our 3 segments in SCA Hygiene to be our future Essity very soon in June. And I'd like to welcome then Ulf on the stage. Thank you, Magnus. Ulf Larsen, responsible for the Forest Products, part of SCA, and happy to be here and give you some more details about our operations. We also had a strong growth in the Q1, partly due to increased volume, mainly in kraftliner and partly due to increased price and mix in mainly wood wood business. Our adjusted EBITDA margin was down 1% or SEK6 1,000,000. And one thing is that we had, let's say, onetime effect on electricity certificates, and that had a negative impact of €40,000,000 during the quarter reevaluation. And the second thing is that we have some higher costs related to the Ostrand project. One thing is training, education of the people that are going to run the new mill from next summer. 2nd thing is some write offs due to old spare parts and also to the fact that we will start up the new wood handling department in the middle of this summer. So we need to increase the speed of write offs. And then we have the third thing, which is also that now when we are starting up the new wood handling department this summer, we have some extra costs when it comes to distribution of raw material. We need to distribute in a slightly different way. Otherwise, the project is on plan, both in terms of time and cost. We have so far been investing SEK3.1 billion, which is approximately 40% of the total investment that shall be done here. We can also say that we now have committed credit facilities in place of totaling SEK 9,500,000,000. Many of these numbers are maybe already commented, but if we look back to EBITDA margin, we can also add that and I mentioned the revaluation of certificates, some extra costs connected to Ostrand, but we also had some extra costs in terms of raw material and mainly in recycled fiber also for our case, we use some recycled fiber in Munksund and Obbola. On the other hand, we had a strong positive contribution from price and mix and volume during the quarter. When it comes to earnings per share, we can this is this refers to continuing operations, so in this case, just the forest part. And also, as you can see, the operating cash flow was quite negative during the quarter, and that is related to increased volume and also increased prices. And on top of that, we also have a VAT receivable due to the Ostrand project, but that is more a timing effect. So that will come back in second and third quarter. If we then walk over to our 4 segments, starting with Forest, one can say that we have a balanced market in our region for the moment being. Good availability of logs, both sawlogs and pulp logs. During the quarter, we have increased the sales, and that is mainly due to high volumes and price is quite flat for the moment being. Adjusted EBITDA margin has increased by 11%, and we have harvested a little bit more on our own land this quarter in comparison with the Q1 2016. But also, we have had a good winter. We have had good conditions. It has been mild, not too much snow, and that has a positive impact, of course, on the cost side. So and the adjusted EBITDA margin is quite stable on slightly below 25%. Then we have the 2nd segment, which is wood. And as you can see to the left hand side, price has increased quite substantially during this year. In 1 year, we have increased prices by close to 10%, 9%. And the market is still strong. During the same period, also the production in Europe has increased by 10%, but still we feel that we have a good momentum in the market and the further price increases is also announced for the Q2. So market is strong. EBITDA also has increased substantially with close to 70% due to higher prices. We have seen some high raw material costs, not for the sawlogs, but reduced prices for byproducts like sawdust and chips and things like that. So that is one reason. We have also seen some increasing distribution costs, and that is due to lack of capacity overseas. So we have a problem to get access to containers for mainly Japan, China in this business. Prices has went up. We can see that things are stabilizing a little bit, but still we are also hit a little bit by increasing inventories, not due to the market, but due to lack of access to container capacity. Adjusted EBITDA margin close to 11% during the quarter. Pulp. Yes, I've already mentioned a couple of things that has impacted the result for the quarter, reevaluation of certificates, extra costs related to the big project that we are just now running in Ostrand. On the other hand, we have a strong market in pulp. We have seen announcements now for 8.90 during June made by SODA. On the other hand, we know that capacity will come on stream during the 2nd part of this year. Enerkoski will come up in Q3, adding 700,000 tons of capacity. UPM Mill Kyme will come up in quarter 4 and add another 170,000 tons of capacity. So yes, let's see what kind of impact that will have. In terms of adjusted EBITDA, it was heavily down during the quarter, as already mentioned. We will start up the new wood handling department during this summer, and that is the first part of the big part at least of the new big of the big investment in Ostrand. During the quarter 2, we will also have a maintenance stop, and we will stop for at least 10 days during week 'nineteen. We'll start week 'nineteen, and that will have a negative impact of about SEK 60,000,000 during the Q2. It's a planned maintenance shutdown. It is a little bit extended due to the fact that we're running the big projects. So we have to prepare for the start up next summer. Last but not least, Paper. And if we look at sales, we can see it's quite flat. It is a little bit divided between our kraftliner business and our Publication Paper business. We have a really strong momentum in our kraftliner business. We have seen price announcements of plus €50 per ton just recently, and we think that they will come through during step by step in the Q2. On the other hand, in publication papers, we have seen that prices has already gone down by a couple of percent, 2% for coated paper, LWC, which is in publication paper, 2 third of our portfolio. One third is coated paper, and today, that is a little bit stronger market for that. But all in all, we know that the consumption in publication paper will it is continued to decrease by, let's say, 5% as an average for all grades year by year. So that is something that we have to handle. On the other hand, we can see that kraftliner business is really strong. We had additional capacity in Warkaus last year, Q1, 370,000 tons, and that is more or less taken up by the market. So we have a really strong balance in the kraftliner market going forward. Well, and the adjusted EBITDA margin is slightly lower than we had Q1 last year. Also here, we will have during the Q2 2 big maintenance stops. 1 at Utviken has already started and one in Mung Soren. So all in all, about SEK 80,000,000 with negative impact during the Q2, and that is also planned maintenance stop. I also like to mention, finally, that we will have an Investor Day, 31st May, in where we will give some maybe more detailed information and also give possibility for study visits in our industry. So most welcome to that one. By that, Fredrik? Thank you. I will give a bit of extra flavor, and I will do that for both the Essity or hygiene business and also for forest after that. So starting with net sales, as you can see, the sales grew by just over 4%, and roughly about 3% of those refers to, of course, the normal translation currency and the 21 days of Wassa we had last year. You will remember that we bought Wassa on the 21st January. So this is actually the last time you'll see Wassa in in slides like this. But on the other hand, next quarter, you will see BSN here instead. So if you look at the organic growth, we had a good contribution both from price and mix and volume from all of the business areas in hygiene with the exception of price and mix for Consumer Tissue. And this is mainly the price pressure that we've had in Europe also previously that we have reported. Organic growth of EBITA, approximately 4%, and this is better price and mix, higher volumes. And you can also see that this quarter, we have showed the cost savings. Many of you have asked that question, what are the cost savings? So we have chosen from now on, we will show basically cost savings. Worth noting though that this is cost savings in cost of goods sold. Of course, we, on top of that, have occasional saving efforts in SG and A and other parts. So this is cost of goods sold. If you look at the price and mix there, we had a very good contribution from Latin America price increases. We have talked about that before. But we also have a good really good mix development in Professional Hygiene, both in Europe and actually also United States. And as I previously mentioned, a negative impact from price in Consumer Tissue. I think both Magnus and Ol, if you talked about the raw material impact, so I'll speak a little bit about those trends on the next slide when we look at the raw material trends. But you can see that we had a slight negative impact of approximately €40,000,000 in the quarter. If you look at the other line, this is, as usual, everything else that's not on the other bars of this slide and particularly so you have A and P there, you have SG and A, general things or indirect cost. And roughly about slightly more than a third of this increase has to do simply with two facts: it's basically A and P and the fact that we have grown also the ratio of A and P slightly. So that's about a bit over onethree. And the rest is relating to other general and administration, so typically linked to growth and indirect cost. We don't specifically mention this on this slide, but of course, the weak pound is still impacting us. So Brexit, although it's been some time, is still impacting us. So totally in our result, approximately €90,000,000 is impacting the result. And out of that, €54,000,000 is relating to transactions, so impacting the margin. So it's actually still quite significant. Once again, raw material, and Magnus mentioned it before, you can see on the left hand side, this is sorted office paper in the United States and also Europe. And these are the grades we typically use for our away from home or professional hygiene business. And you see the lower line there, that's the same line for Europe. So if you look at this is indexed, so the increase here is 35% or even above. And if you weight it with all the grades we use, it's approximately about 30% to 35%. So it's a very, very significant increase. And it's been going on for some time, of course, very rapidly now in the last 6 months. And of course, this is impacting us significantly. If you look at the right hand side here, this the lower line or eucalyptus or hardwood pulp, this is what we use predominantly in Consumer Tissue together with MBSK. So the blend there and approximately about 60% on the bottom line. So clearly, what you see here is a fairly sharp increase. But if you actually compare Q1 of this year to last year, you can clearly see that we have had lower prices. So if you think about the negative impact of €40,000,000 approximately in the quarter, that means that we've had a very significant negative impact of roughly €120,000,000 in Professional Hygiene, but a corresponding positive impact in Consumer Tissue. And then also slightly positive in Personal Care. So the net basically the €40,000,000 So very clearly from this slide, what Magnus talked about before, you can very easily see that Q2, we will have significantly higher raw material cost in comparison to last year for both Consumer Tissue and from Professional Hygiene, we will have also higher cost for Personal Care. And that's also clear from this slide that fluff pulp is increasing, oil based material is increasing. So partly, we're back to the scenario that we were in 2015. The cash flow increased a lot. As you can see here, 87% if you look at the total cash flow. So a really, really strong performance. And of course, one very noticeable change here is the change in working capital. So typically Q1, Q2 are negative in terms of development of working capital. We normally consume cash flow or working capital here and we've done that to a much lower extent here. So if you look at the working capital level of the group, we now have, after Q1, basically 3.8%. Last year, we had 6%. So this is actually a fantastic performance. It's also in a few ways abnormal. So you should not expect this to actually repeat itself. On the contrary, in Q2, we will reverse. And this is basically due to several reasons. We are very low on inventory in a few different places. So you will not see this in Q2, but of course, it's super good for cash flow in Q1. You can see here for capital expenditures also low. We structurally, we normally consume less cash flow in terms of capital expenditure in Q1. We have previously given an estimate for SEK 7,000,000,000 for the full year and that's still valid. So if you just take this times 4, you will be too low. So we still expect SEK 7,000,000,000 of capital expenditure, including BSM. Again, you've seen this from the reports, I won't spend too much time on it, but you can see and we've announced this what we call the spin off cost or silver cost, as we call it internally. And this quarter, it's €460,000,000 We talked about this main item here, €450,000,000 out of those €460,000,000 is the cost related to the foreign tax outside of Sweden that's triggered as a consequence of the spin. Now from a cash flow perspective, this will be most likely that €450,000,000 will be most likely triggered in Q3. But since, of course, it's much more likely than not that the spin off will occur, we basically take the provision now in the Q1. So that's the main €460,000,000 The other restructuring Wassa, it's in accordance with our previous announcement. And then we have this other item of $265,000,000 very significant. And during last year, you may remember that we took a fairly big provision to the result on the back of anticipated losses in a few antitrust cases. And one of these cases in Poland has now been settled with a much lower loss than we anticipated in that provision. So basically, the €265,000,000 you see here is simply a release of that provision to the extent, of course, not needed. And then the final one is an impairment, so a noncash flow issue of the acquired assets from many years ago. So it's just an adjustment to the balance sheet with no cash flow implication. We have defined new targets and we have as previously, we have chosen to use organic sales growth and return on capital employed. And the reason we have chosen to remain with these targets is that we believe it has served us well both externally, but also internally. It's very consistent with our internal management model. So we have chosen to remain with those 2. We have, however, done a couple of changes or basically 2 main changes. The first one is that we have put targets only for the aggregated group. Previously, of course, we had it for the different business areas. Now we have it aggregated for the group. So it's the first change. 2nd is that we have redefined return on capital employed to adjusted. So basically, EBITA excluding amortizations divided by the full capital employed. In reality, if you look at Q1 or historically, this has had very, very little difference. But as we go into the Q2 and when BSN comes in with very significant amortizations, as we previously have reported on, EBITA divided by capital employed makes much more sense. Now the levels here is very simple. It's just basically an aggregate or a weighted average of the previous targets we had. And then we've also added BSN or our assessment of the return. So in that sense, these levels are not they don't represent a change of ambition. They're simply just taking the previous targets onwards into a new format. And of course, if you look at the return on capital employed for Q1, it is actually higher than 15%. So you may think this is not very ambitious. But don't forget, if you have if you look at the numbers for BSN, you can clearly see that BSN has, in that sense, a lower return on capital and will impact that. So this is these remain as ambitious as the previous targets. So a few words on forest. You can see here that the growth was and you have already talked about that, Ulf, but it grew with 5%. So good contributions actually from all areas. Higher volume, pulp and paper price mix contribution was really, really, as Ulf talked about, strong from the wood part. The adjusted EBITDA, once again, Ulf, you have discussed those issues, but it declined with 1% and the 3 main items. Despite this very, very good volume development, the raw material raw material for recovered paper, the electrical certificates that you've seen of approximately about €40,000,000 and then the additional cost that we have related to Ostrand. So that's basically part of the development. Forest cash flow, you talked about that. And it's actually interesting, of course, when you look at this if you look at the capital expenditure there of SEK640,000,000 approximately In the quarter, about €500,000,000 of that relates to Ostrand. So of course, as Ulf said, 40% of Ostrand investment has now been taken. The change in working capital is very significant. But if you actually think about 2 things. Last year, volumes were actually lower than the year before that and the prices were also much lower. And this year is just the reverse. So that explains the absolute majority. And then you talked about the VAT. And as we pay the invoices for the Ostrand investment, we will, of course, also pay VAT, which we reclaim occasionally. So we will have a VAT balance as we go on. This particular quarter, we had approximately about €100,000,000 related to that in cash negative cash flow. And of course, as time goes by, that will come back. So with those words, I'll leave back to you, Magnus. So to sum up, positive development in both our SCA hygiene business, our future Essity and in SCA Forest Products, the future SCA. And also very, very exciting time ahead of us in both these companies that are both financially strong, exciting prospects, very good underlying market conditions and of course, important opportunities also now in the near term with BSN transforming Essity from a hygiene company into a health and hygiene company with fantastic opportunities going forward and with SCA, the forest company, moving closer and closer to finalizing the huge investment in Ostrand and all the positive results that, that will bring to the forest products business. So with this bright outlook for both these companies that will then be born sometime in June, let's have some questions. Hello. Nikka Liavos from Kepler Cheuvreux. I have two questions, one a little bit long term and the other one shorter term. The longer term is that you just showed us your new return on capital employed target. And then you also talked about your tissue road map and your Cure or Heal program. So how should we, as analysts, think about this? I mean, you are, as you pointed out, at 15.8% already with a target 15%, of course, with then including BSN, it will go down. But how should we think about this long term? What could it bring to the table? And I know that you can't be specific exactly, but that's the part 1. And then the part 2, we see the higher raw material costs. Normally, the industry is able to raise end product prices. And then a couple of words on that topic, please. Okay. I'll start with the return on capital employed. And Frederic, please fill in. Before now we changed our goals. We were getting close to our previous goals on return on capital employed, but we didn't actually achieve the goals yet. And I believe that before you have actually achieved the goals you have for some sustainable period, you shouldn't increase them. So that's why we have decided to actually set the goal for Essity based on then the aggregate of the business, including BSN. So that's the underlying logic. You want to add anything there, Fredrik? Not really because you can you know the previous targets and you can see it for tissue that we are not there. It's obvious that if you combine Consumer Tissue and Professional Hygiene compared to the old target, we still have some time to go. And you talked about tissue road map, of course, that's very instrumental, especially Consumer Tissue to achieve those targets. So we still have some or a lot of work to actually get to where we want to be. And then when it comes to the raw materials, all the big players in the U. S. Have announced price increases in away from home tissue in professional hygiene. We believe that those increases will actually come through kind of at the end of the second quarter. So no significant impact during the second quarter, but for the second half of the year. And just two follow ups. Can you mention the level of those increases? 8% to 10% increases in North America price increases on away from home tissue. And would that then restore the margins when fully implemented? It depends on the development of the underlying recycled fiber prices. So that has been softening a little bit here just in the last couple of weeks, but that's the size of increase that we believe that we can actually ask for at this point in time. Maybe, Mikael, just to add that, if you look at the history from 2015, you can very clearly see that there's a time lag. So of course, we strive to increase prices. The extent is always difficult, but it takes time. And of course, we compensate in many other ways, cost savings, all sorts of different things. So it's really difficult to say if it will restore or not. Thank you. Ulf Gjerammarck, ABG Sundal Collier. Coming back to this new target for the new Essity Group, sales of 3% and RUSA of 15%. You mentioned that it, to a large extent, is based on history and that BSN had a negative impact on the ROSA target. Shouldn't it be a positive impact on the sales target from the BSN acquisition? Yes. I mean, once again, we have not really it's always difficult to assess the future and we have not widely changed the organic sales targets and we don't give estimates on that. This is our very simply calculate approximate impact. You know the EBITDA number. We have communicated that. And as you know, we have communicated impact. You know the EBITDA number. We have communicated that. And you know the purchase price. So the actual impact is quite easy to calculate. So if you weight all those together, this is basically what you get. So it's very kind of weighted average. Fair enough. And then a question to Ulflaarsen, please. Coming to this Forest division within your company. You mentioned a 25% adjusted EBITDA margin and a strong sales growth, 11% year on year. And you also mentioned a weak winter having some kind of positive effect. That's not necessarily positive in my world for your kind of operations. To what extent does this quarter mirror a normal quarter for Forst? I think it's quite normal. But mild winter is just due to costs. If you run the harvesting operations, it's better to do it when it's not too cold. And also, if you have a decent snow level, that is also positive for cost. So I think it's quite normal. Q1, normally, we harvest much forest from private forest owner. And second, third quarter, we harvest more on our own land. So you also have a kind of mix there. So it's quite normal then for the quarter? For the Q1, I think it's quite normal, yes. Okay. Thanks. Stenel Helstrom with Nordea. First, I'd like to ask about the price pressure in Consumer Tissue and if you can elaborate a bit on the market dynamics here in terms of earlier raw material cost decreases and new capacity? And also here, maybe if you can comment on how this can be offset by pricing potentially and the time line for that? Yes. So there's no real change when it comes to new capacities coming into Europe. So that's then partly good news. Then of course, coming to compensating for raw material changes. As you know, raw material prices came down throughout last year for Consumer Tissue in Europe. And as a consequence of that, we saw increasing price pressure, and this was also coming from a situation with quite good margins in Consumer Tissue. And now, of course, with the reversal of the fresh fiber prices, we will start talking about increasing prices again immediately, and we're already doing that to compensate for that. So as we always do, we need to compensate with price increases. That takes time. And in the shorter term, we're doing everything we can to compensate also through lower costs. And is there any difference that you see compared to the situation in 20 15? The price increases are not as substantial as in 2015. They're somewhere in between last year's prices and 2015. Very well. Then also just a question on the Personal Care where you had it seems that you had quite significant cost savings from the business you exited. And if you can just say to what extent the savings you achieved in this quarter is representative for what you expect on a full year basis? Fredrik? Yes. I mean, the all the Curacil efforts that we have done now in predominantly Personal Care has been the main reason for the improvement. And of course, those hopefully will be sustainable. I mean, we have no other reason to believe differently. Okay. Are there any more questions from the room? Seems not so. Please operator, you can open up the telephone lines. Thank you. Your first question from the phone lines is from Celine Pennuti from JPMorgan. Please go ahead. Yes. Good morning. My first question is on the bridge slide that you show where you showed the savings benefit. Can we have a bit of an idea of how much restructuring savings we should get in the remainder of the year? Should I take that and multiply by 4? Or is there any phasing throughout the year? And could you as well tell me if this number, the 214, includes I mean, where are included the benefits from exiting Mexico and India? That's my first question. Then my second question, coming back on the overall sales target and the environment, I'm still a bit surprised by above 3% as a sales target if you say that you still have the previous target, which were 5% to 7% for Personal Care and 3% to 4% for Shu, it seems that there is a dilutive impact of adding BSN. So where is the math wrong here? And also, could you talk about the growth environment that you see in the 3 different divisions? Okay. If I start with the sales target and then let Frederic talk about the savings. We're not having 3% as our target, but above 3% as a starting point. So we hope to do better than 3%. And we used to have a range. And of course, if you look at the lower end of the range of 3% for tissue and 5% for personal care, BSN has had a very good growth over the last number of years, which has been a mix of organic growth and acquisitions. And I feel that we need to learn more about that company during the next number of quarters before we have a feeling for what the underlying growth rate is. And taking all this together, we have ended up with this target, which is then to be above 3% in growth. Can you put this in relationship as well to the market exposure that you have? I mean, a lot of other consumer companies have spoken about a bit of a deceleration. But specifically, is it possible to share with us what kind of growth you see in the market in each of the different division? In each of the different divisions, then you have to look at geographically as well. I guess we are also seeing a slower growth continuing into this year. We had that also last year than in 2015. Of course, in 2015, a large part of the growth came from price increases due to raw material increases and exchange currency exchange changes and so on. And the target that we have now is very much based on cleaning for this and looking at volume growth. But in general, of course, we expect to see higher growth in Personal Care than in both the tissue categories or tissue segments also going forward. Celine, your question on the savings, we call it total cost productivity or total cost performance, TCP, those $214,000,000 And that includes basically the savings we do on many different fronts. So and of course, also measurable directly to EBIT. That's how we measure it, and it's also a net number. So included in that $214,000,000 is also inflation that we have within cost of goods sold. So the actual gross savings are higher than €214,000,000 This is the way we typically measure. We don't specifically disclose the different parts of Tisipi. You asked about restructuring, and we don't as a separate part of that, Tisipi, we don't do the or segregate the components, so to speak. Your question on exiting India and Mexico, are they included? The answer is no, they're not. This is on the existing business, the cost savings within cost of goods sold. All right. I have a follow-up question. In fact, on the new targets, you said that you decided to keep sales growth and return on capital employed because that's how you did it in the past. Now if I look at some of your public competitors that are focused on hygiene, they are talking about top line and margin. Obviously, as well, some of them are return on capital employed, but they have also P and L targets. Why is it something that you've not considered? Or if you've considered what you did why are you deciding not to choose these as a main target? Of course, we looked at the targets from comparable companies in different areas. And we believe that with these two targets, we actually cover a number of different areas. Growth is always important in the categories where we're present. And then return on capital employed covers both our margin ambitions and also then how efficient we are in utilizing our capital and that, that gives a good summary and also gives enough guidance for you to break it down into those two components, if you wish. Frederic, do you have anything to No, it's exactly like that because basically return on capital employed is just basically margin time capital turnover. And of course, capital turnover for a relatively capital intensive business such as we are, it's super important to maintain good control and efficiency also in the capital base. So leaving capital completely outside of the equation is not something we would like to do. And it's we don't believe it's creating value for shareholders to leave that outside. So it's exactly what Magnus said. And of course, the main change parameter when you look at changes of return on capital employed is, needless to say margin because although we can make ourselves more efficient, the predominant factor is margin. So you basically get the full lead with that measure. Your next question is from Ian Simpson from Societe Generale. Please go ahead. Thank you very much. A couple of questions from me, if I may. Within Personal Care, it looks like other items drove half of that very significant increase in adjusted EBIT. I just wondered if you could sort of break that down a bit and give a bit more color. Secondly, you're seeing very different input cost trends in sort of Personal Care Tissue and in Professional Hygiene. Just intuitively, I would have thought that recovered paper costs and pulp costs would be broadly correlated, but that's clearly not the case. I just wondered if you could go into a bit more color there and whether we should expect a convergence at any point. Maybe I can start with the first one. Yes, I mean, exactly where profit comes out in the bridge is an art, but you spotted a very good point because if you look at the Kurokill exercises and the value of the exits, it basically comes out to a large extent in others. So this is the reason. And when it comes to the raw materials, there is to some extent a substitution and correlation. However, recycled fiber is much more volatile than fresh fiber. And I'd like to hand over, maybe this is my last chance to an expert in this area, Ulf. So I don't know if you have any comments on the correlation between fresh fiber and recycled fiber. I don't think that you have too much of a correlation between fresh and recycled fiber. It's different markets. Your next question is from Linus Larsson from SEB. Please go ahead. Thank you very much. Maybe on the theme of raw material cost increases. If I understand you correctly, you will see you are expecting to see sequentially rising raw material unit costs in all three of your divisions. Is that correct? That's my first question. And maybe second to that, if you also could talk about Personal Care. We haven't covered that in the same detail as the other two divisions when it comes to price compensation as we move forward in the next couple of quarters, please? Yes. So the answer to your first question, yes, we expect high raw material costs, both fresh recycled fiber and oil based products, so for all our segments. And to your second question, typically, we have an easy situation in compensating with price increases in emerging markets. And Personal Care has a larger portion of its business in emerging markets. And it's also easier to compensate with price where we have a larger share of our branded business, and this is also the case for Personal Care. So easier to compensate in general in Personal Care than in tissue. Also in tissue, easier to compensate in away from home tissue, professional hygiene than in consumer tissue. Maybe I can just add, Linus, on the raw materials sequentially. That was your question. It's higher for personal care and for professional hygiene and significantly higher for consumer tissue. That's great. Excellent. Thanks for that clarification. Also, now that as it seems the split is fast approaching. Could you just reconfirm the net debt allocation between the two entities, please? We did that in our Q4 report. We allocated SEK 5,000,000,000 to forest and the rest, of course, to hygiene. And as of end of the year, and you saw the cash flow figure here from forest and from hygiene. Of course, that accumulates debt. Excellent. And to be perfectly clear, that's the SEK 5,000,000,000 as per the end of 2016. That's the reference point here. Yes, true. But one thing that is worth noting, you saw that also in the information brochure and in our communication that the dividend to be paid by SCAAB since we are still one group will be paid by hygiene. So you can basically to estimate the net debt of forest, you will take that €5,000,000,000 and then you will accumulate the cash flow from the forest operation. Absolutely. That's perfect. And maybe a follow-up on that, maybe to Ulf, and that's the Ostrand CapEx split. If we assume a June split, as you've said, you intend it to be today, How much of the Oresund CapEx will happen before? And how much will happen post split if we look at the total SEK 7,800,000,000 of CapEx? Up till today, as mentioned, we did $3,100,000,000 And I mean, we will have some additional, of course, in the Q2. I don't have the exact figure really. Okay. No Berlin, as we said that if you look at the profile 2016 sorry 2017 2018 will be the large year, so to speak. And so of course, there is much to come. And then exactly when you pay the invoices is always super difficult because it depends on the day of invoicing. So it's really to say that exactly is impossible. But you have the approximate number for the full year. Okay. Okay. That's great. Thank you very much. Your next question is from Ian Wood from Redburn. Please go ahead. Hi, thanks for taking my questions today. Two questions for me just into the business. So in the tissue market, I'd be interested in hearing how you're seeing growth in Europe in terms of private label versus branded products in the consumer category. And then the second question, I think we saw maybe it was a few weeks ago an announcement that you're going to launch a line of diapers in France under the Lotus brand. I'd be interested in hearing what kind of strategy you're going to go for there, what kind of price point you think you'll be coming in at. Thank you. Thank you, Frederic, for showing here on stage. And thanks for reminding me of this very, very exciting launch that we are super happy about. And I think it shows our confidence when it comes to our performance in Baby in Europe where we are doing really, really well and where we have a dual track strategy in the same way as we have in Feminine Care and in Tissue in Europe in Consumer Tissue. And we have concluded that in France, where we do not have a strong partner for retailer brands, there is a very good opportunity to enter with a branded offering. And since LOTUS is the absolute number one tissue brand and household name in France and also previously was a baby brand, and we're still selling some baby tissue products under the name of Lotus. All our market tests have shown that there's a huge acceptance for this product. And it's also based this launch on the fact that we now feel that we have a very, very competitive assortment, both when it comes to quality and consumer preferences and when it comes to costs. So that's why we have an opportunity. And we will price ourselves and we're already on shelf in line with other branded offerings and in line, of course, with the assortment of value and premium pricing. So in line with other branded alternatives. And your first question, tissue and the mix, private label tissue and branded tissue in Europe, how that's developing, it's quite stable over the last couple of years, a slight increase in some markets in private label tissue still, but not significant that it's really influencing us. We are, as I already also spoke about, taking a tougher stance when it comes to private label, of course, working together with our partners to develop the retail brands in our private label offering, but otherwise prioritizing our own branded products in order to improve margins going forward. Great. Thank you. No further questions. Thank you. Okay. So I think that was the last question. Any final words from you, Magnus, before we close this press conference? Thank you for coming. And next time, you will have to split into 2 meetings when SCA, the forest company and Essity, the hygiene and health company will report separately. Thanks for listening.