Earnings Call: Q4 2016

Jan 26, 2017

Hello, and welcome to SEA's Year End Report for 2016. I am Josephine Edwall, Head of Communications. And today, our CEO, Magnus Groot, will together with our CFO, Frederiks Roestep, go through the highlights in the report followed by the Q and A session. So with this, I hand over to you, Magnus. Thank you, Josephine. So for the full year, organic sales grew by 2% in spite of partly difficult market conditions and also in spite of the fact that we reduced capacities both in hygiene and in forest products during the year in order to increase efficiencies and margins. The hygiene business grew by 3%, forest product had a negative growth of 3% and in emerging markets a healthy growth of 7%. Both operating profit and operating margin increased, and we continue to see strong contribution from efficiency gains and for 20 16 mostly in the hygiene part of the business. And all of this, together with an improved working capital, has together with an improved working capital has resulted in a strong cash flow for the year. We also continue to introduce innovations at a high rate, and the Board of Directors proposed an increase in the dividend by 4.3% to SEK6 per share. The SCA transformation journey continues. In January 2016, we completed the acquisition of the away from home tissue company, Wassa Paper. We also divested SCA's Asian Pacific business to our subsidiary, Vinda, and this integration has progressed extremely well. And during the board meeting yesterday with Vinda, we could conclude that it is now a very strong pan Asian hygiene company that we are seeing coming out of this deal. We have also announced restructuring measures in tissue, specifically in France and Spain and just this morning also in the United Kingdom. And this is following our long term tissue road map where we have the ambition to have the lowest cost and highest quality tissue in every market and in every segment where we choose to compete. We also announced in August the potential split of the group in 2 listed companies, Hygiene and Forest Products. And as a consequence, we presented a new vision and enhanced strategic framework specifically then for the hygiene part of the business. During the year, we also decided to close our baby diaper business in Mexico and to discontinue our hygiene business in India. And these decisions are always very, very difficult. When we have a category in a market that is struggling with profitability and growth, we always try to turn that around to put in our best people to make sure that we can find a way out of it and, of course, improve performance so that contributes in a positive way to our business. But now and then, our conclusion is that it will take too long, it will be too costly, and that's the case in Mexico and also in India. And just before the closing of the year, we entered into an agreement to acquire BSN Medical, a leading medical solutions company, and I will say a few words more about this. An overview of the financials of the full year 2016, and we saw net sales and organic sales growing 2% and faster growth in our adjusted operating profit of 8%. Operating margin, as I already mentioned, increased by 60 basis points to 11.9%. Earnings per share were down by 20% to CHF7.93 However, if you exclude items affecting comparability and a onetime tax effect, the earnings per share actually increased by 7% in the year. And operating cash flow very, very strong throughout the year and ending at nearly SEK15 1,000,000,000. One of our targets is to achieve a 13% return on capital employed. And year over year, we are moving towards that target and getting quite close. So again, a very important step up. And of course, what contributes to this is both our growth in profits, but also the fact that we're using our capital more efficiently so that the efficiency measures that we're taking are really showing here in our improvement in return on capital employed. The dividend, our proposal to increase by 4.3% to SEK 6 per share, completely in line with our dividend policy of stable and increasing dividends and also, of course, taking into account our wish to have a strong financial and strategic flexibility also going forward. So we feel that this is a good proposal from the Board to the Annual Shareholders Meeting. Our strategic framework that I presented before acknowledges the fact that hygiene, health and well-being goes together. This is all linked. And this is the framework that we developed after actually announcing not the split, but even before that when we decided to work in 2 separate divisions, hygiene and forest products. And as a consequence of this new strategic framework, we were had the opportunity to enter into an agreement to acquire BSN Medical because the closing is expected during the Q2. We don't foresee any issues with the closing, but of course, there are some time lags in getting all the necessary approvals. And I will not go through this in detail. We have talked about a couple of times. What's super exciting is that because we are not competing, we have been able to start to plan for the integration work. Of course, we cannot influence the BSN businesses anyway. And this means that we had the opportunity to meet between SCA and BSN. So the working groups, the integration streams, the top management teams. And after these meetings, I feel really, really excited, and I actually am completely convinced that we are moving in the right direction and that this will be even better than we expected when we made this acquisition. And of course, the strategic rationale, as you know, is that if you look at the underlying market characteristics, they are very similar. Also the customers, the channels, the way of selling these products and we see good opportunities for cross selling opportunities and leveraging both SCA's knowledge about consumerization in developing the BSN business in a really positive way, but also taking all the knowledge from BSN, which of course is a medical company with a higher portion of R and D than SEA and use that to leverage our SEA business. So a very good strategic fit. Innovations, 23 of them and a big difference, I spoke about this now for a couple of years, is that we are moving towards bigger launches so that when we have a good innovation, we don't roll it out under one brand in one market. We roll it out as globally as possible. And that's why you can see that, for instance, at the top left there, an innovation that is launched in all our markets under different feminine care brands, Nana, Sotras, Libro and BodyForm in this case. Also to the right at the top, you can see innovation same innovation being launched under several different brands in different markets, so really getting scale into our innovation. Moving over then to the Q4, we continue to see good growth. Net sales growing at 6%, organic sales 2% and adjusted operating profit continuing to grow faster than sales. Adjusted operating margin stable in the quarter. This is a tough comparable to the Q4 last year when we had a very good performance in Forest Products and also this was before the acquisition of Wassa. Earnings per share are down. This is again a difficult comparable because in the 4th quarter of last year, we had the acquisition of the or the divestment of the Industry Vaden shares during the quarter, which had a very positive effect on earnings per share. And again, very, very strong cash flow in the Q4 close to SEK4 1,000,000,000. And with that, we have changed the layout of our presentations a little bit. So I'd like to go straight into the different categories and segments. And starting with Personal Care, we had flat net sales and organic sales decreased by 1% in the quarter and I'll get back to that in a minute. Profit increased by 5% due to better price mix, cost savings and of course negatively affected by lower volumes and investments in increased marketing activities. We have a significant negative K. Pound and the Mexican peso, and Fredrik will show the exact impacts of this, but it has a significant impact both in tissue and in personal care. Operating margin ended up at 13.1%, so a healthy increase here of 60 basis points And adjusted return on capital employed remains then over the target for Personal Care of 30% and climbing up to close to 35%. Looking then into the sales. And as you can see from this picture, the total sales development was very positive in Feminine Care, while negative in baby diapers and flat and incontinence products. In Western Europe, we saw flat sales for incontinence products. Behind this, we have good growth in the retail part of the business, so that momentum continues. We had a slower development in the health care part due to a negative tender balance, which happens now and then when you have a very, very strong market share. We continue to see higher sales for baby diapers in Europe and in also in Feminine Care. So this continues to progress in a very good way. In North America, we had lower sales for incontinence products. However, I want to emphasize that the turnaround process that we have been in now for the last year and a half when it comes to incontinence care in North America has been really successful. And from a profit perspective, we have an important improvement now. And actually, our North American Inco business is now at a much, much healthy level than it was a year ago. So I'm more positive about the future for our North American Inco business than when I stood here a year ago. So behind these lower numbers, a very good development. In Latin America, we continue to see good growth for incontinence products and feminine care and lower sales for Mexico, which is, of course, partly now impacted also by the decision to move out of the Mexican baby business. And in Russia, 30% lower sales. A couple of reasons behind this. One is phasing. All our competitors launched, relaunched their assortment at the end of last year, and we are doing that now. We're in the middle of that right now. So we are expecting to come back here during the second half of twenty seventeen in these categories. Again, a difficult comparable during the Q4 in Russia last year, some of our competitors had out of stock situation, which benefited us significantly during the Q4 of last year. And North Africa then negatively affected by the difficult market conditions in general. Moving over to tissue. Net sales increased by an impressive 10%. 5% out of this is WASO. So organic sales increased 4% in the 4th quarter and adjusted operating profit increased by 14%. And here we see higher volumes, better price mix, cost savings and also a positive impact from lower raw material and energy costs. We are also in this category investing in increased marketing activities, especially in Vinda in China. And again, a very negative impact from the pound and the Mexican peso. Adjusted operating margin increased by 40 basis points to 12.3% and return on capital deployed getting close to the 15% that we have as a target for this category, of course, excluding Wassa, it's now well above 15%. Looking at the sales development, a lot of this comes from volume, which is quite natural. This has 2016 and the Q4 was not a year to do big price increases when raw material prices are coming down. So but a good volume growth here. And in Western Europe, we had lower sales for consumer tissue where we are working with the restructuring and we have reduced the sales of mother reels, which is kind of the semi finished products. And while having a good momentum in away from home now both in Europe and in North America, so developing positively. In emerging markets, you can see behind Asia, there Vinda, they had a super strong 4th quarter. So big differences between the quarters, but overall a very good growth and higher than what we expect to be the market growth of 6%, 7%, showing that Vinda continues to take a large part of the market growth in China. Also Latin America and Russia continues to grow in a good way in emerging markets. Forest Products had a pickup in sales in the 4th quarter. Organic sales increased by 4% behind this volumes in pulp and in solid wood products primarily. Adjusted operating profit is down 10%, so down from $14,800,000 to $12,900,000 And this is due to higher energy and raw material costs and in spite of higher volumes and lower distribution costs. And we also have as a bullet here a biological assets adjustment and Fredrik will talk more about this in a short while. And as usual, I'd like to say something about the outlook for the Q1 when it comes to prices for the most important products in first products since these are global market prices. For publication paper, we foresee stable outlook for the Q1. Of course, in the longer term, we have a bleak outlook for publication paper. Kraftliner, a stable outlook for the Q1 even though we are starting to see some price increase announcements coming now in the market. So looking beyond the Q1, maybe slightly higher prices. And the same for pulp, slightly higher prices in the Q1 and in solid wood products also higher prices. So with that, I'd like to hand over to Frederik. Thank you, Magnus. And as usual, I will give some additional okay, that's unusual. But as usual, I will give some additional flavor to some of the financials that we have presented in the report today. So I'll start with sales. And as you can see here, our growth of sales was 6%. And out of that, 3 relates to the Wassa acquisition and 1 to more translation oriented currencies. So the rest is volume and that comes from predominantly tissue, but also forest. So both of these areas grew in volume quite well, whilst Personal Care was the opposite as Magnus alluded to. If we look at the trend, sequentially, we, of course, reversed that trend. So we now have a positive growth in the second quarter. And this was, as I said, driven by tissue and Forest Products. It's important to note there that the growth organic growth in Tissue is a volume driven growth and the price environment remains competitive and challenging as we've also presented in the report. As to Personal Care, of course, this is impacted by the things that Magnus also talked about, but also just to repeat that, a very strong 4th quarter or tough comp that we had last year. So if you look at the corresponding quarter in 2015, the growth was actually 9 percent. So a tough comp in comparison. Magnus talked a little bit about the weaker pound and the weaker peso, and that has had a very significant impact, as you can see, both from transaction and translation. And if you would look at just the Q4, as you can see to the very left on this slide for pound, you can see that the total impact was SEK 200,000,000 roughly and out of that CHF 135,000,000 was relating to transactions. So basically where we import products into the U. K. This has had a big margin impact. So if you look at Personal Care just isolated, the margin impact in the quarter alone was approximately 50 basis points. If you look at the same number for tissue, it was 25 basis points. But the biggest impact was actually for forest at almost were about 1.1%. So of course, Brexit has had that big impact on margins and total profit. You can see that from this slide that the impact in the 4th quarter and for the full year, of course, in relating to the Mexican peso was also quite significant. But the difference here is that we've been able to compensate to a large degree in Mexico with increased prices. That was not the case in the UK. We've shown this slide before and it's quite telling. As you can see here, the share of net sales in the top graphs and also profit in the bottom pie charts there, you can see that largely comparing with 2,004, we don't have a significantly higher share of sales in emerging markets in 2016 than we did 2 years ago. However, having said that, 2 things. Of course, the acquisition of Wausau has has impacted this and the second thing is that generally emerging market currencies have actually reduced. And so the underlying growth rate remains attractive in emerging markets. You can see here from this slide that we have continued to improve the margins quite substantially in mature markets and that, of course, comes from the things you know everything about, innovation. It comes from efficiency. It comes from price management and corresponding things like that. So it's been a very, very good development. In emerging markets, margins have improved from 2014 and marginally also in 2016. But of course, we are still impacted by the investments we have done in countries like Brazil, in countries like also India. And of course, now as you know, we have addressed many of these issues that have taken the margins to lower levels. We have announced, of course, as Magnus alluded to, the exit from India, from baby the baby business in Mexico, we are addressing other underperformers with our Cure and Kill program. So of course, while we are addressing margins, this takes some time to achieve results in. It's worth noting that all of these issues I just mentioned, the exits from Mexico or India or from other Curacao activities also has an impact on organic growth. So of course, as you for instance, as we go forward in 2017, the exit of Baby Mexico, the exit of India, of course, will have an impact on the organic growth for Personal Care. If you look at the group bridge, so to speak, we've had good contribution in our organic growth from volume, price mix and, of course, also from volumes and from raw materials. So the organic growth in profit here of 5% consists of all of these different parameters. So if we start with price mix, the overwhelming part of that price and mix improvement actually comes from Personal Care, whilst in the volume side, it's much more from tissue. Actually, all of that comes from tissue and forest whilst personal care is negative. The same goes for raw material. That's almost all of it is actually relating to tissue. So a good performance and of course a lot of it comes from pulp. We still have a negative currency impact. So of course, due to the strong dollar and of course other currencies that impact us, we still have a quite significant negative currency impact. So if you just take that number of CHF 184,000,000 within that, we have a positive underlying price impact from pulp of SEK 400,000,000. So it's a significant pulp underlying pulp contribution or price contribution and a negative corresponding negative currency impact of 185,000,000 percent. So that becomes the net, so to speak. And the rest of the difference there is mainly higher recovered paper prices that we have in particularly our away from home business. If you look at the other line, the SEK232 there, that consists of everything else, of course, that we have in our business, including SG and A, etcetera. And here, worth noting is that the negative value here has been impacted by higher A and P spend. So we continue to increase our spending there in A and P. So if you just look at this quarter, we have a ratio to net sales of approximately 4.7% versus 4.3% in a corresponding period last year. So an increase of A and P is one big portion. Higher R and D costs and as usual, we have good efficiency gains going against this, so a good performance in efficiency. If you look at the cash flow, and Magnus alluded to this, the cash flow development, it continues to be strong here. So you can see that the total cash flow has increased, including strategic investment, with approximately 17 percent despite much higher strategic investments. So if you look at the working capital side, this is an ongoing process and we have continuously improved here. So if you just compare the number here at the end of the year, that's just one point of time, but we are now at approximately 7.4% of working capital to net sales. If you look at last year, we were at €8,100,000,000 So this has been going fairly well for a couple of years now, many years. And if you look at the next line, other operating cash flow restructuring, it's a big number, but this was actually impacted by close to SEK 300,000,000 of the payment of a fine relating to the antitrust case in Colombia that we have informed about. So that's a big part of that line. Capital expenditure is relatively high as expected in the quarter. So we ended up as roughly as planned for the full year at about SEK 9,500,000,000. If you look at next year, we expect a number which is higher than that at approximately SEK11 1,000,000,000. Out of that SEK11 1,000,000,000, we expect that SEK 7,000,000,000 will relate to hygiene and approximately SEK 4,000,000,000 to forest. So that's those are the numbers corresponding numbers 2017. Look at the group items affecting comparability. Most of these issues are known to you. And of course, the first one there relates to the closure of our Indian business of €375,000,000 transaction costs relating to BSN acquisition of close to €150,000,000 percent. Wasau Paper and that is perhaps worth pointing out that the integration of Wasau is going exactly according to plan and delivering as expected. And the corresponding cost that we have still for the integration is SEK 50,000,000. And the rest is restructuring that basically we have announced, including Ondeville and also now today as announced in Chesterfield. So that's the cash flow. So overall, plus 17%, so quite strong. Magnus talked about the biological assets, and I would just start by saying what this actually is. And what we do every year is an adjustment or evaluation in accordance with IFRS in biological assets. And the way that works is that based on the harvesting plan that we do every 8 years, We haven't done that this year, but we base the valuation on that harvesting model. What we do is we assess a starting value and then we assess what the inflation is both for the cost and for the wood prices. So in that sense, it's a completely static model. So we assume a starting price and then we also assume that that will increase with a certain percentage every year. And we look at all the costs, including the harvesting costs, replant, etcetera, those kind of costs. And we also assume that they grow with the corresponding number, in this case both for price and for cost with 2% per year. And then we take the net of this for the next 100 years and we discount it back to a starting value and that's basically what we do every year. Now this therefore is not a market valuation because it's completely linear and static model in the sense that we don't estimate any potential future price increases that may come out from higher demand or perhaps more use of biological assets for biologic for biofuel, etcetera, or other kind of things. So we just have a static starting point for our valuation. We have historically used a 10 year model. And if you look at the graph there below, you can clearly see that over the last several years because of many things, including storms and other things, prices of wood have actually come down. So the 10 year average, which is kind of clearly from this graph, is much higher than the corresponding spot price at this point of time. And that means that we have adjusted now and we have gone to instead a 5 year model, which is kind of very close to where the actual spot prices is. And the result of this is that the average price has come down from €467,000,000 to €4.32,000,000 as the starting point of the valuation. We've also done one other change because of the sustained low interest rate environment in which we live. We have reduced our WACC rate from 6.25 percent to 5.25 percent. I mean, if you look at the impact of all of this, you can see that we started with a value of €30,100,000 at the start of this year or 2016, and we ended with €30,800,000,000 So the adjusted WACC has had a positive impact of about SEK 7,000,000,000 and the adjustments of prices and costs of negative SEK 6,700,000 and all other including the result of this year, etcetera, is plus SEK 0.3 So this is what we have basically done as an IFRS adjustment in the Q4. Finally, we have also perhaps somewhat premature because we haven't actually even put forward the proposal yet to the AGM. So this is premature and of course also subject to a decision from the shareholders to execute on the spin off. But subject to that decision, the cost of a potential split would look approximately as you see here. So project and listing cost of SEK320,000,000 We have a one time foreign tax or stamp cost on actually real estate, which is in the hygiene business outside of Sweden. And then we have the cost of rebranding the hygiene company to new names. So those are the 3 parameters. Debt from SCA AB to the hygiene company, which has largely been executed during Q4. So therefore, as you can see at the very bottom of this page, we also have approximately SEK 80,000,000 or SEK 82,000,000 to be exact included in the Q4 numbers relating costs relating to this spin off. Now the wonderful world of accounting is not always easy. So just for your guidance, should this actually be materializing in our books during 2016, you can see at the bottom there how this will actually play out. So totally SEK120 1,000,000 out of we've taken some in Q4 will come in the financial net. There will also be a direct equity adjustment, which will not come into the P and L. So that's actually going to be very difficult for you to see, but it will be there. And then you have the rest, the SEK795 1,000,000 in items affecting comparability. So this is basically what you can see going forward. And with those words, Magnus? Thank you. So to summarize, we continue our efforts during 2016 and of course going forward to create shareholder value in all dimensions, both making sure that our business is increasing its financial performance in every dimension, taking actions for continued profitable growth, but also continuing the SCA transformation journey into a forest products company and a health and hygiene company that will have a new name subject of course to the approval of the split and also through a dividend proposal of SEK6 per share. So with that, we are ready for questions. Okay. Who wants to start? The first yes, over here in the front. Linus Glasern with SEB. Can we start with the discussion around the forest value? You're in the middle of a EUR 7,800,000,000 investment in a new pulp mill at Ostrand. And I would expect that to have, if anything, a positive impact on pricing for wood in the region. I would expect that to have, if anything, a positive impact of any harvesting plan that you have for your forest land. So against that background, I must say I'm a bit surprised by your move from a 10 year historic model to a 5 year historic model. Could you talk a bit more about that? And also, when is your harvesting plan up for review next? Okay. I can start. And I agree with your expectations from the SEK 7.8 billion investment and the positive effects from that. However, this is a model that we produce and that we calculate based on IFRS requirements, not taking into account, as Fredrik also explained, those expectations, but actually starting from the current spot prices and then having very static assumptions about the future growth. So one thing is the expectations and something else is the model and how we do that. And of course, at some point when you have a big discrepancy between the actual spot prices and what we have in our model, we have to adjust the model. Fredrik? No, I can only it's quite easy to understand your arguments and we have no other. This is just kind of simple because if you have a too big gap, you just need to adjust. So this is not a market valuation model. It's as simple as that. This is a static and linear IFRS model. It's no more than that. So it's not an estimate of the value that we are making. It's simply just a calculation. Okay. Very well. And then if I may also ask a question around your very active margin management in tissue and Europe in particular. And you've made a number of actions and you very precisely told us what they will cost. Do you have any kind of guidance what the benefits might be in, say, 2017 on tissue margins from your very active cost improvement work? Of course, we have calculated this as a basis for our decisions and we don't give any guidance. However, I think that the improvement in margins that you see are a combination of all the different things we're doing. It's efficiency improvements in our existing facilities, it's the restructuring, it's of course lower costs or changes in prices and so on. But all of these actions clearly contribute very positively to the margin development. Thank you very much. Olof Gjemarke, ABG Sundal Collier. If I may continue then on the forest side. And it's you gave us some extraordinary costs here in relation to the coming split up. If you could, first of all, please repeat what you've said in terms of what we will get in kind of information regarding that split up, the time line, if you could elaborate possibly about what you will give for information? And secondly, regarding this biological assets, you have deferred tax assets related to this of SEK6.7 billion. Will that go along with the new company or SE? Maybe I can just ask to take the second question first. Yes. Regarding the time line and possible information, what is there? Should you or I because our financial presentations will start to change here in the coming quarters. And what we're planning to do now at the time of giving information for the AGM is to also provide an information brochure on the split. And then of course, the AGM on the 5th April is the big day when the decision is then proposed supposed to happen. And for our financial reporting during the quarter since we will also then present new segmentation for the different parts of the business and so on, I hand over the details to Frederic. Yes. And I mean as we have promised, we will present we've said that all along that regardless of a decision from AGM, we will present more detailed information relating to forest. So of course, you will see that in the Q1 report as promised. So we'll come back to the exact details on segmentation and how the P and L will look, etcetera, but you will get much more information in Q1. But it is on April 5 then. It's not before then. Is that right? No, no. The Q1 report is later in April. So that's when you will see the Q1 report. Report. Nik Aljos, Kepler Cheuvreux. A couple of questions. The first one is around the organic growth rates. I mean, there we see that it's slightly lower in Personal Care. You explained that. Some of your competitors are giving sort of guidance regarding that number. I know that you're not doing that, but can you elaborate a little bit? Is the long term growth expectations for your Tissue and Personal Care segments, have they changed? Or are they roughly what you stated at, let's say, the Capital Markets Day? That's the first question. The long term expectations have not changed. What we saw during 2016 was partly more difficult market conditions. Our categories are in general very resilient. People need our products regardless of the financial climate. However, underlying growth in the economy and especially in emerging market helps our growth. So that's important for us even though resilient. And that's why we also stated that we saw partly tougher market conditions during last year consisting then both of slower growth in some markets and increasing competition. And we don't see really any change for this year, so expect that to continue into this year. Perfect. And then I mean we've seen now that pricing for recycled paper has come up quite a lot during the past quarter. There also seems to be signs around the pulp market. How are you thinking about raw material inflation? And then how are you thinking about the possibility to offset that? Yes. So we have seen recycled paper prices going up. And as part of our tissue roadmap, we're also looking in detail into then what will be our raw material supply going forward. And it's not unlikely that we will see a replacement of recycled tissue with more virgin tissue going forward. And we actually have already examples where we are doing this. For instance, in Chile in our factory, where there's an abundance of virgin fiber, we have actually been able to reduce our costs for the first time almost ever, this is highly unusual, by replacing recycled fiber with virgin fiber, also then achieving a higher quality of the final product. So this is part of our long term strategy, that sourcing part. But you're not giving a number. We know that both recycled fiber prices and virgin fiber prices will be very volatile going forward. So they will change over time. Thank you. Nikka, we give a normally we give a directional guidance as you know on raw material prices for the different parts. So if you look at just Q1, what we have what we estimate, if you look at Personal Care, we believe it's going to be slightly higher. This is chemicals and the sap or super absorbent, basically oil based. If you look at the tissue side, we believe it's going to be stable in comparison once again to last year's quarter. And for forest, slightly higher. So this is or higher. So this is basically our directional guidance. And perhaps in this context, maybe also sequentially is important. What is it going to look like in comparison to this quarter? So for Personal Care, we expect prices to be or costs to be higher, for Tissue stable and for Forest also higher. So that's pretty much the directional guidance. Many thanks. Okay. Next question. Stellan Hassmann from Nordea. First question on the Personal Care business and your organic sales decline. How do you feel you are maintaining market shares in the various markets? And maybe also if you can comment on how you view the tender balance for this year? Absolutely. So the overall trend continues that in Feminine Care, we are broadly gaining market shares in most markets. In incontinence Care, it's quite stable. And in baby, we're actually doing well in our core areas, which is then Europe, Malaysia and Colombia and parts of Latin America where we are having baby businesses. While of course we have a negative growth impact then from the decisions we have taken to step out of some baby positions. So in our core baby areas, we are doing quite okay. And yes, I guess that was the 3 categories. In tissue, quite stable overall with actually growing market shares in China and in Mexico. And the tender balance was? The tender balance has been negative throughout the year, which means that looking at the upcoming health care tenders for incontinence care, we have more to a high proportion of the tenders or ones that we already have. So a higher probability of kind of losing than gaining. And it's been negative this year and it will continue to be negative throughout the first half of 2017 and then it will be easier again. All right, very well. Also a question on the price pressure that you've seen in tissue now. How do you expect that to play out in the coming quarters? And do you expect to see some easing given the higher raw material costs that are coming in this year? I think it's unchanged. No change. We continue to see tough competition in tissue. So we're in our overall efforts to balance growth and margins, I think we are overall feeling okay pretty good about it. We're continuing to see some growth where we need to grow and where we have high margins. And then of course taking out growth like for instance with some of the mud wheel sales that we had in Europe where margins have been low. So I don't see any changes in the market environment. All right. Thank you. Any more questions? Then let's go over to the telephone. Please, operator, you can open up the lines. And your first question comes from the line of Oskar Lindstrom from Danske Bank. Please go ahead. Yes, good morning. Thank you for taking my call. A couple of questions. The first one is around organic growth. And given that you're sort of saying that the difficult trading environment of 2016 will continue into 2017, What measures are you taking to either take market share or drive category growth in that environment? And follow-up on that, what kind of impact will that have on A and P spending? Should we expect A and P spending as a share of sales to continue to increase sequentially in 2017 versus what we saw in 2016? That's my first question. You're absolutely right that the way to grow is, of course, to introduce innovations and to then have efficient advertising and promotion to support that to improve, of course, also in the in store execution, promotion. And we are working in all of these areas improving our go to market, improving our efficiency in all parts of our business. Specifically, your question about A and P and if that percentage is going to increase, I have to ask Fredrik. And my assumption is that it's quite stable. Yes. We don't normally give forecasts on that. All right. If I may, a second question, sort of following up on Stellan's question there around the pricing environment in tissue. I mean, you have cut, as you mentioned, quite a bit of mother real capacity in Europe during 2016. Should we expect that? Or do you expect that to have an impact on the market balance in Europe during 2017? Or sort of what kind of outcome do you expect from Any capacity reduction has an impact even though I think in the big picture this is a minor contribution. The reason why we're doing this is because for us this is volumes are not contributing to enhancing our margins. So then the overall supply demand balance for this year is there continues to be some new capacity coming into the market, primarily in Spain, Portugal and 1 or 2 other smaller plants. But overall, I think we had a big increase of about 2% of supply in 2015 and slightly lower in 2016 and then maybe slightly lower now again. We also have quite some new capacity coming into Russia and Turkey and the Russian volume is not really impacting Central Europe. The Turkish volume could impact European business to some extent. But do you feel that the supply demand balance in Europe as we speak and looking ahead is under control? Or is this a problem for you? Yes. It's not a bigger concern than it has been over the last 5 or 6 years. It's business as usual. Okay. Thank you. And then finally, just you mentioned this information brochure that you will distribute ahead of the AGM. And I presume that that's the one that's going to include more detailed financials for the Forest Products business. So that's the first part of that question. And the second one is also, once you report Q1, will you also change your reporting structure for the hygiene business? Maybe I can answer that, Oskar. The information brochure will not contain that broad information on forest. That will be a Q1 issue as we have stated before. As it relates to the potential future segments of hygiene, we have no answer for you there at this point. We'll work, of course, as part of this entire project or potential split, we're also reviewing how to best present the hygiene business as we go forward. But we believe we present it in a good way today. So this is an ongoing review and we may or may not change that, but we have taken no such decisions at this point. All right. Thank you very much. What is new is that we will have to take into account then the acquisition of BSN in our overview of how we're going to present the new health and hygiene company. Yes. All right. Thank you very much. Those were my questions. Thank you. Your next question comes from the line of Alice Baghjan from Bloomberg. Please go ahead. Good morning. Thanks for taking my question. It's a clarification question really. You mentioned some time lags in getting approvals for the BSN deal. What approvals are those? And do you still expect the acquisition to close in the Q2? We feel highly certain that the acquisition will close in the Q2. All of these approvals relate to competition authorities. And since we don't have any overlapping products, we are not competing. We don't foresee any issues. So it's just a matter of taking the time to process this in various countries. Okay. Thank you. Thank you. And your next question is from the line of John Ennis from Goldman Sachs. Please go ahead. Hi, thanks for taking the questions. I've just got 2 actually. The first one is within the Baby division that declined in the 4th quarter, I wondered what proportion of that was associated with the exiting of certain businesses, such as Mexico. And then the second question, you gave us some CapEx guidance for next year. Working capital was obviously quite a big boost in the Q4. I wondered if you could give us any kind of steer on the working capital line for next year. Your question, the first one was how much was Mexico of the total business, I think, or Maybe a decline in And in general, the other exits that you've had over the course of the year? In fact of that for the total group, yes, good question. That slide we actually took away, Juan. Let me come back to that exactly. But it had a material impact, of course, of the growth because that's where we saw the sales going down. So of course, it had an impact. The second thing on the working capital, we don't give forecast there. We are constantly working to, of course, reduce working capital in all parts, including inventory and accounts receivables and increasing accounts payable. So we have reduced, I mentioned, from 8.1% to 7.4% now in just this year, and we had a corresponding decrease last year as well. So we've had a good performance and of course there's always a limit to how far we can go or how low we can go in working capital. So we've come a long way and of course we will continue to strive for an improved efficiency, but but it's very difficult to give you an estimate of that. Okay. That's fine. Thank you very much. And your next question is from the line of Jan Simpson from Societe Generale. My apologies if this has already been asked, but you talked about EUR 11,000,000,000 of CapEx this year, of which EUR 4,000,000,000 is in Forest. And I think you've also said that the Forest spin off will have $5,000,000,000 of debt. Is that $5,000,000,000 of debt on spin off? And how much CapEx will the forest business carry out post spin off in this year? How much of that $4,000,000,000 is pre spin and how much is post spin? And also, if you could just tie that back to the expansion the sort of Ostrand plant expansion in forest, how much of the total cost of that do you think will be outstanding by the end of this year? How far through that does the SEK 4,000,000,000 take us? Thank you very much. A lot of questions. I will try to give you an answer. If I start with your question on the SEK 5,000,000,000, what's that going to be at spin off? First of all, the SEK 5,000,000,000 was actually at the 31st December 2016 as an estimate. So that means that all cash flow after that date will sort of add to that debt. And when I said add, it's because we expect a negative cash flow from Fares due to the Ostrand investment. So in fact, you can say all of that SEK 4,000,000,000 that I just alluded to in terms of CapEx will actually affect that SEK 5,000,000,000 if you understand. So that's I think takes care of the question. If you look at your first two questions, if you look at your last question, we have spent the total investment of Ostrand is SEK 7,800,000,000 and so far we have spent SEK 2,600,000,000 roughly. So that leaves another SEK 5,200,000,000 to spend roughly. And for this year, of course, a very significant part of that SEK4 billion relates to Ostrand. So hopefully, that will give you a rough feeling of the numbers. That's very clear. Thank you very much. Thank you. You have no further questions. Please continue. Okay. So with that, Magnus, any final remarks before we conclude today? No final remarks. We are looking forward into 2017, another busy and exciting year for SCA. So with this, thank you for joining this conference. Goodbye.