Status Update

Aug 24, 2016

Press Release

Hello, everyone, and welcome to this SEA Telephone Conference Call. On today's announcement that SEA plans to split the group into 2 listed company. This conference call is also audio casted on sea.com, and we have it live, and we will have a replay after the call. In the end of the call, we will also have a Q and A session. So with us here today, we have the host of this call, our President and CEO, Magnus Grot Furthermore, Fredrik Groot Stepp, the Executive Vice President and CFO of STA, is here. And Magnus Groot will also present Ulf Larsson, who has been announced Executive Vice President of SEA and is today President, SEA Forest Products. So with this, I hand over to you, Magnus. Thank you, Josephine. And I would like to start with a historic perspective. Since SCA has been on a transformation journey ever since the company was founded back in 1929. And the abbreviation SGA, as you know, stands for Svenska Cellulosa Aave or Swedish the Swedish cellulose company. So it started out as a forest products company in Northern Sweden. After that, the company grew rapidly. And through great vision and execution, the company started to transform in the '70s to also add the hygiene business and the packaging business. And during this time, these other businesses grew to become more than half of the overall business. And then during the last decade, the focus increased on hygiene through further acquisitions and very strong organic growth, while the packaging business was divested and 2 publication paper mills were also divested. Ending up in the SA that we have today. And looking at our current business after the first half year of twenty sixteen, 57% of sales is related to tissue sales in the away from home category and consumer tissue, while 29% is related to personal care, including incontinence care, feminine care and baby care, while our forest products business today accounts for 14% of the business. And within forest products, we have the forest holdings, of course. We have Pulp publication paper, solid wood, kraftliner and energy. And 1 year ago, we announced to divide the group into 2 separate divisions. And since then, we have worked with this separation and we have realized that these two different businesses, the hygiene business consisting of tissue and personal care and the forest products business are very strong and attractive companies with strong financials and strong strategies. We also realized during this process that actually the links between these different parts of the business have become less and less important and that the separation actually doesn't include that many things that need to be separated because the operations are already operated quite separately. And this has brought us to the conclusion that we are announcing today, which is to list 2 companies in 2017 by splitting the current group. And we do this to create further value for our shareholders. And the way of doing this is to distribute the group's hygiene business to shareholders. And that means that on the day of the distribution, the SA shareholders at that day will receive another share, which then relates to the new listed hygiene company. And all of this, and this is important to note, is subject to a decision at the Annual General Meeting of Shareholders during next year. And if this proposal is then agreed and supported by a majority at the Annual General Meeting. The listing is planned for the second half of twenty seventeen. So to summarize then what S. A. Will look like after the split and after the AGM 2017 is that we will have 2 very attractive separate listed companies on the Stockholm Stock Exchange. 1 company will be a hygiene company, which is a leading global company in the areas of personal care and tissue. The CEO will be Magnus Groot, myself. The company will have a new name yet to be decided and will be registered with headquarters in Stockholm. The 2nd listed company will be a forest products company with an efficient and well invested forest products business, including all the forest land and all the industry operations. The CEO will be Ulf Larsson, who is today the current CEO of our Forest Products business. The company name will be SCA, which is quite natural considering meaning of the abbreviation. And the Forest Products Company will be registered and have its headquarter in Sundsvall in Sweden, very close to the Forest Products operations. To say something more about the equity stories of these two attractive businesses, Essay's hygiene business is a leading global business offering products and services that might make life easier every day for millions of people around the world. We are active in approximately 100 countries today. We have 2 global market leading positions with our TENA incontinence care brand and our Torque away from home tissue brand. We also have very strong regional brands in a number of markets in baby, feminine, consumer tissue and a number of number 1 or 2 positions in most of the markets where we're active. And this part is benefiting from the increasing awareness of the relationship between hygiene and health and, of course, also from the fact that we have a growing and aging population globally, which creates an ever growing demand for hygiene products. And down at the bottom is what the Hygiene business looked like in 2015 to give you an overview of the size of this business. Moving over to the Force Products business. This is founded and based on the fact that SA's Forest Products business is Europe's largest private forest owner. It accounts for about 10% of Swedish forest land or 6% of the surface of Sweden. So for anyone who is interested in investing in forest assets, this is a very attractive opportunity. And the value created in this forest land is then further value added in a world class, efficient and well invested Forest Products business. This means that we have very well integrated value chain that creates a competitive position for the Forest Products business. And added to this, looking into the long term future, we see a long and stable and growing demand for fiber based products, where SCA Forest Products has a very attractive position, especially in the softwood part of this market and has a long history of very responsible and sustainable forest management with a net growth of the forest land. And now looking into the longer term future, we see attractive opportunities in areas like liquid biofuels, green chemicals, renewable materials and, of course, energy. And there at the bottom again, you have a little box showing the approximate size or the exact size of the Forest Products business in 2015 to give you something to relate to. The Board has also decided on a number of organizational changes to support this process. And effective immediately, the SSA directors have been appointed directors also in the hygiene company that will become the parent company of the new listed hygiene business. And I myself have been appointed also the CEO in this new hygiene company that will become the parent company of the listed hygiene business, while the Board of Directors have also appointed Ulf Larsen, who is currently the President of SA Force Products and member of the executive management team of SEA to, in addition to his current assignment, become Executive Vice President of FCA. And this means that when this split happens, Ulf Larsson is already employed in the company, which will be the New Forest Products company. And that means that Ulf Larsson then will be appointed to the CEO of the listed Forex Premier and again subject to a decision at the Annual Shareholders Meeting. I would also like to mention that the main shareholders of SA have voiced their support of this split of the group into 2 separate listed companies. With that, I would like to introduce Ulf Larsson, and maybe if you could briefly present yourself. Thank you for that, Magnus. Well, I've been in the company for more or less 25 years. I started up 1992 in the forest part as I'm an educated forester. I had several positions in the forest operations. 1998, I turned over to the Wood Mechanical business. And since 2,001 up till 2,008, I was responsible for that part. And from 2,008 and up till now, I've been heading Forest Products. So that is very short what I've done in the company. Thank you. So a long experience in Forest Products, but also you have been a member of the executive management team of SCA for a number of years since 2008. Thank you, Ulf. So with that, Josephine? Yes. So with that, we open up for questions and answers. So please, operator, can you help us with the questions, please? Our first question comes from the line of Ian Simpson. Please ask your question. Thank you very much. Good news about the split. I was just wondering why have you decided to structure it by spinning off the hygiene businesses, which is the much sort of larger part of the business? It would perhaps seem slightly more normal to spin off Forest, which is much smaller? Or are there any sort of implications around keeping the name or tax or anything? The answer is that most of the Forest Products business is in the current Forest Products subsidiary of SCA. However, a major part of the Forest Land Holdings are in the current parent company. So by spinning out the hygiene part, we gather all Forest Products operations and all Forest Land in one legal entity. So that's the reason for doing it this way. Thank you very much. Thank you. Our next question comes from the line of Linus Larsson. Please ask your question. Yes. Congratulations to these developments. And could you talk a bit about your thinking around balance sheet for the respective entities, what's your thinking around that? And will there be any on that note, if you could also address, will there be any offering of shares? Or will this be a very straightforward distribution of share to the existing shareholder base without any other type of complication or sophistication? Thank you, Linus. This will be a simple distribution of new shares in the new hygiene part without further complications. And I will hand over to Fredrik to say something about the asset base. Yes. Hi, Lino's. As you know, SCA is currently a very strong company in financial terms. And we haven't finally concluded on the different balance sheets for the 2 new listed companies, so to speak. But of course, with that strategically and operationally. So we'll come back on more on those details. Because there are a number of things to consider, obviously. And what's your thinking around the Ostrand project, just to mention one of the significant ones. The mill is scheduled to start up in May 2018. How will you ensure that you have the right capital structure? I mean, not too strong and not too weak balance sheet for the Forest Products division? Yes, Linus, of course, the investment in represents a very significant investment. And we're very much aware of the cash flows that, that will require. So we will structure both of these companies to ensure that we can cope with these investments and all other operational aspects. So we'll conclude that analysis as we go forward now towards the AGM. But of course, just to add there, Fredrik, we're really excited about this project to expand the pulp capacity in the Ostrand Mill. And the project is unplanned and on budget and will create a lot of value for anyone who holds a share today in SCA or in the future in the Forest Products Company. Right. And just one final question, if I may. You said previously that the main shareholders are supportive of these initiatives. Will the main shareholders also maintain an unchanged ownership in both of these new entities? This is a question that you will have to ask the shareholders. Fair enough. Thank you very much. Thank you. Our next question comes from the line of Jeremy Fialco. Please ask your question. It's Jeremy Fialco. I've got three questions. So the first one is if you can make any estimate of what the additional central costs are likely to be in the transaction costs associated with and having 2 separate companies? The second question is if you can comment on the likely total dividend that the 2 companies will pay out, particularly on the forestry side, given that you've got this very large piece of capital investment? That means it could be a cash flow negative company for the early years of its life. And then the third part is on the Hygiene business as a stand alone company. Will that still have an A and B share as SCA does today? Okay. To start with your first question, yes, all current A and B shares in FCA will give a right to get then an equivalent A or B share in the hygiene company as it is distributed. And the reason for this is that all shareholders should retain what they had before the split. So that's the first question or the last question. When it comes to central costs, we foresee that the current headquarters will be part of the hygiene business since they are clearly mostly supporting this global business. This is something that we will work with the central costs until the proposal to be presented to the AGM next year. I don't foresee any big increases, but this is some work in progress and we'll have to get back on that. And finally, when it comes to the dividend, I can just refer to FCA's dividend policy. And as you know, any dividend proposal will be based on the performance financial performance during 2016. And that's again subject to the AGM beginning next year. So I don't have anything more to say there. Okay. Thank you. Thank you. Our next question comes from the line of Oscar Lindstrom. Please ask your question. Yes. Good morning, gentlemen. My main question is around, I mean, you mentioned in the press release that this will create more shareholder value. And I was wondering if you could maybe sort of explain a little bit how you where you see this additional shareholder value being created, both referring to the Forest Products business and to the hygiene business as a consequence of this proposed split? Thank you, Oskar. In two ways, first of all, the boards and the management teams of these 2 separate listed companies will be entirely focused on their respective businesses. And I'm sure that this will drive value for the shareholders since they can then really focus on increasing performance in those very different businesses. And from an investor perspective, I think just a clarity of the different businesses and what they are doing and what the business is will also generate value. If I may, a follow-up question on this. You mentioned sort of the increased transparency from an investor's perspective. When you were considering this split, did you at any time sort of consider splitting up forest products into a forest land business and a forest industry business, given that those 2 have very different properties from the perspective of investors? We have worked very intensely during the last year to look at a number of different opportunities and structures and alternatives and evaluated the pros and cons of all of them. And the conclusion we have today is to split the group into 2 separate listed companies. Specifically regarding the Forest products business, of course, as I started out, the business is based on the forest land. Without the forest, there would be no industry. And the huge investments that have been done and that will create a lot of value would not be possible without, of course, having the wood supply. So there is a strong connection between these businesses. And do you think there are things you can do to sort of highlight the full value of these forest lands other than just having a separate forest products business? What we have announced today is to split the group into 2 separate listed companies, 1 hygiene company and 1 forest products company. And this is what we will work with now so that we have a proposal to bring to the Annual Shareholders Meeting next year. All right. Thank you very much. Thank you. Our next question comes from the line of Mats Rosendal. Please ask your question. Hello. I would just like to ask what do you expect will happen with the capital markets steps that you have, the euro corporate bonds and the seg corporate bonds? What is more likely that they will be in the hygiene company or will they be in the old forest product company or can you comment on that? It's somewhat of a premature question. We have announced today that we will initiate this work. And of course, part of the process as we go forward is to analyze how and exactly where these bonds will end up. But of course, as I said previously, we have a very strong balance sheet at this point of time. And we will ensure that both of these balance sheets, as we go forward, also will be appropriately strong. So we will manage this process as we go forward. Will you be able to keep the A- rating, do you think, from S and P? I mean, we if you look at the current balance sheet of the group will just be distributed. So the combined financial strength of these two companies remain the same as you can imagine. So we'll work on Our next question comes from the line of Saul Cassadio. Hi. Thanks for taking my question. It's essentially a follow-up on a couple of previous question regarding this, the allocation of the financial liabilities between the 2 entities. I appreciate it's early stage, but if you can give us maybe some raising of the 2 entities, at least in terms of target. I know it's early stage, but at least give a sense how you're going to be thinking about splitting the liabilities between the 2. This is Fredrik here. I don't think we can give more comments because we have not concluded on this. We have announced today that we will initiate a work to work out a proposal to the AGM. And of course, part of this work that lies ahead of us now is to look at these balance sheets, look at our debt structure and discuss and analyze how to distribute this debt. So we have nothing further to add at this point of time. But at least will you I don't know if you can add some color on this. Will you target the same rating for the 2 entities? Or is it possible that one entity will be higher rated compared to the other one? I can't comment on that simply for the reason that we have had very limited discussions yet with rating agencies. And we haven't, as I said, concluded on the different balance sheets. So to have a view on ratings for the respective company would be too premature. Okay. Okay. Thanks. Thank you. Your next question comes from the line of Stellan Helstrom. Please ask your question. First, I just wondered if you foresee any tax effects from this, but I will hand over to Fredrik. But I mean, in general, we are doing this through what in Swedish is called Alexasija, which is a common way of distributing shares that is considered to be quite tax efficient. And one of the reasons why we have chosen this mechanism to split the company into 2 separate listed companies is because it has low relatively low transactional risks and relatively low transactional costs. But with that, I hand over to Fredrik. Yes. Hi, Stellan. As Magnus alluded to, this is from a Swedish tax perspective. This follows will follow the so called Lexasia rules. And that basically means that the distribution itself does not trigger any taxation consequences for Swedish shareholders. So that's for Sweden. And then if you look at other countries, there are very similar rules in most countries. So from a general perspective, a transaction like this is tax efficient. But of course, we will, as we go forward, evaluate all of these different tax consequences. And they may be individual and of course, depending on the specific situation of the investor. But generally speaking, Lexus Sia is what we will follow in Sweden and it's generally tax efficient. Okay. And the provisions that you have for tax in the forest operations specifically that is not triggered any payments out from this deal as well. No, that's right, Stefan. That is untouched here. Yes, very good. Then finally, also if you do you foresee or anything, you can comment now on any changes to how the forest business operates? And maybe I'm thinking particularly on the relatively low cash flows from that business given that you only harvest a part of your growth in the forest? Hi, Stellan. Magnus here. I think this is premature. We have a very good strategy for our Frost Products business today and a benefit now with, again, this split into 2 separate listed companies during the second half of next year is that there will be an increasing focus on a number of strategic questions and opportunities. And I guess this is one of them, but we have no further information at this time. Very good. Thank you very much. Thank you. Our next question comes from the line of Peline Benotti. Please ask your question. Yes. Good morning. My first question is, try to understand the thought process. A year ago, you announced that you were going to separate I mean, separate the division's accounts and starting to do that next year in 2017. And you seem now to bring that forward, or let's say, faster by deciding to split. So what was the thought process behind these 2 distinct announcements? That's my first question. Thank you, Celine. You're absolutely right about the description of these time plans. And we have now spent a year looking into the strategies of the different parts of the businesses, the synergies, efficiencies and also the differences and into the future how these businesses will develop. And we have come to the conclusion that synergies are very limited. And when we looked at the separation part of the work with dividing us into 2 division, we realized that there was very little to separate. We are more or less already working as 2 different companies. And realizing this, we concluded that we could take this step, you could say, already now. But we've actually spent 1 year now analyzing the different thought to make sure that we arrive at the right solution. Okay. And then my second question is about creating value, especially in forest. You mentioned to an earlier question the asset value, which, by the way, I don't think you have revalued your FERC for quite some time. So how should we, shareholders, look at it in terms of trying to figure out what the value of forest is? I mean, in terms of what is, to start with, helping us on the book value of forest And second, to which extent that will be a way you something you will put forward to the market to try to explain and for the market to value that part of your business? Thank you, Celine. I guess this is something that we are working with continuously to be as transparent as possible. And as we now initiate the work to create these 2 separate listed companies, we will be able to provide also exactly the type of information that we will then make official in these 2 separate companies going forward. So that work continues. And I guess we will be able to find more information as previously communicated Q1 next year on this. And specifically about the Forrester book value, Frederic? Yes, Celine. It's we actually do updates on the forest book value quite regularly. And the way we do this is that with some regularity, we do an update to the harvesting plan. And the last time we did that was actually just a year ago. And that harvesting plan is the basis or forms the basis for a cash flow valuation that we actually do on a yearly basis. So the value that you see in the books is actually a fairly recent value. Then of course, things vary such as WACC rates, etcetera. And to be able to provide transparency on the book value as relates to changes in, for instance, WACC rates. We have information in our annual report where you can calculate the impact of changes of WACC rates as an example. So we're actually quite transparent already at this point in time, but we were also evaluating as part of this process whether we should further expand on the transparency. But we'll come back on that particular issue. Yes. And in fact, another point would be when you announced the CapEx investment in the new plant last year, You have given your views that you will be quite an efficient producer in a few years' time. But can you help us finding out what kind of value creation we should expect from this €8,000,000,000 or €9,000,000,000 in Swedish krona investment? What is the added value to Forests? I can maybe start there and maybe you wish to complement Magnus. But just in general, we don't expose specific IRRs, for example, for our investments in more general terms. And of course, that's for competitive reasons. But we've already communicated that the Ostrand investment is a very attractive investment. We believe very strongly that it will generate good shareholder value. So it's a very positive investment, Celine. Interesting to know what kind of value creation we are talking about. The information we have provided, Celine, is that with this investment, we will have one of the lowest cost positions for many years to come for softwood delivered in Rotterdam where most of our pulp actually is traded. So that will give us a very, very strong position for actually not only the years to come, but for the decades to come as we see the future. And this is backed up by a fundamental underlying growth in demand for this type of pulp, which is driven by increasing trade, increasing e commerce, which then requires more packaging materials and an increasing demand for tissue products. So an underlying demand and the fact that we have a very attractive fiber base and that we will have a very efficient integrated and large scale operation when this is in operation. So all of that together makes us convinced that this is a very attractive investment. And then one final question, if I may. You mentioned that there would be changes or let's say nomination in terms of the changes do you expect this will be over the next 12 to 18 months? And how do you assure that operational performance is going to be in line with expectation? So Celine, this is how it's going to work. The current management team and current Board will continue to operate and do our best every day to improve the performance of FCA AB. In addition to this, already today, the current shareholders of FCIB, the ones who have been nominated by the shareholders are also shareholders of the hygiene company the Board, sorry, are also now Board members in the hygiene company that will become the new parent company for the hygiene separate listed hygiene company. And I, now today being the CEO and President of FCA, already today in parallel is the CEO of this new hygiene company that after the split then will be the parent company of the hygiene company. So from that respect, we already have a Board and we already have a CEO of the hygiene business and it's the same. So it's an experienced Board of a big listed company and it's the same CEO who's running the overall business as today. While on the Force Products side, Ulf Larsson is already today and since several years the President of the Forest Products part of SEA. And today, in addition, we nominate him as the Executive Vice President of the SCA Group, so that he is in a position at the day of the split to take over as the President of the separate and listed forest products company. And when it comes to the Board of the forest products company, the nomination committee of SCA will do their work just as usual up until the AGM when they will then come with a proposal to the new shareholders meeting. So actually a large part of the governance structure is already set today, not only on group level, but also in these two different entities. All right. Am I right as well to believe that there will be no link between the 2 companies, ultimately, so I know across shareholding? It will be no link. That's correct. It will be 2 completely separate listed companies. Our next question comes from the line of Ian Simpson. Just a couple from me, if I may. Firstly, can you give any indication as to what the likely annual CapEx of the hygiene business as a standalone is likely to be? I mean, just looking at historically when you've reported it by division and backing out the your forest spending plans from your guidance, it looks like CapEx in hygiene would sort of run along at about SEK 5,000,000,000, 6,000,000,000 a year on an ex Forrester basis. Is that sort of the right number? And then secondly, you seem to have very low borrowing costs relative to some of your peers. Is that in part because some of your debt is secured against the forest assets leading to a lower rate? Or I'm not asking you to comment on the balance sheet of hygiene as a stand alone business with that lower asset base. Yes. Your question on CapEx, we normally give guidance relating to the group as a whole for the year to come, so to speak. And we have done that also for 2016, so in the range of SEK 9.5 billion roughly. And of course, that's very much impacted by the U. S. Dollar investment. That's why it's higher than it was last year. And we haven't made a split between hygiene and forest publicly. So of course, as we go further in our communication at a later stage, we will, of course, split that. But we haven't done that so far. When you look at the borrowing cost and your specific question there, are we using the forest land as a pledge or we borrow directly against the forest land? And the answer is no. That's not the case. So we generally use our sort of corporate numbers to do that. So the low funding costs that we have for the group as a whole is more a function of the financial strength and of course, the cash flow characteristics, etcetera. So not specifically the forest land. The next question comes from the line of Vrinda. Sorry to get back to the allocation of debt, but given that Ostrand investment is pretty much done when this transaction is executed. So what would be the reason to not have as much debt as possible in the forest products operation, which is relatively stable, which has stable cash flows and potential for higher cash flows in the future and have as strong balance sheet as possible in the Hygiene operation, which has growth and growth opportunities and therefore maybe a scope for M and A. Yes. Kari, once again, we will of course look at the different needs of the businesses as we go forward. So we cannot adequate balance sheets for their respective needs. Just one clarification there, Kari. You said that when this transaction is executed, the Eurostar investment is actually done. That's not correct. What we have communicated previously is that the investment of approximately SEK7.8 billion is largely done in 2016, 2017 2018, just as a clarification. All right. Fair enough. And then a follow-up on timing. What's the reason of not having an extraordinary general meeting maybe later this year? Is this process still going to take some such an extended period of time that it's better to wait for the AGM next spring? The reason why we are today announcing the intention to start working on this split into 2 separate listed companies is that we need this time to reach out to all the different stakeholders and to work together so that we can have a very strong and solid proposal to the AGM next year. We need this time for that. And we see that all of the different work streams are quite straightforward actually because of the structure that we have decided, but we just need this time to make it happen. Thank you. Next question comes from the line of Robert Weltzmidt. Please ask your question. Good morning. I actually wanted to ask 3 questions, if I may. Given the decision is to be as efficient as possible and to minimize costs, I presume you've taken some advice about the actual cost to separate. And if you could illuminate us on what you expect the proposed cost could be. 2nd point would be, I presume, at least for some period of time, there'll be some dual running costs of shared central costs, I. E, accounting, HR, etcetera, whilst you go about developing that for the 2 entities separately? And then the third question would be what, if any, mechanism are you considering to deal with shareholders who may not be able to own one of the respective shares once the split has happened, I. E, you're in certain indices now. It may be that certain shareholders have restrictions about holding the class of shares, which doesn't suit their mandates? Thank you. Okay. Should I say something about deal costs? And we don't have a number to give you. But compared to other alternatives that we have looked into, we see that deal costs are relatively low to other alternatives, making this an efficient way of splitting the company into 2 separate listed companies. When it comes to dual costs, we don't foresee any significant dual costs actually because we already have most of what we need in hygiene and in forest products. So I don't think that, that will have any major impact on the financials. And then when it comes to the mechanism, I mean, this is very straightforward. Everyone that owns an SCA share the day before the split will then receive another share the next day, which is related to the distributed hygiene business so that they will have 1 Forest Products share and then one hygiene share. And then it is at that point a decision by every shareholder. I think this is very fair and very transparent and very open to make a decision whether they want to keep their shares or expand their holdings or change them in any other way. And of course, we hope that all shareholders would like to keep on investing in these 2 companies and buy more. Right. But I mean, it could be possible certain shareholders, say, for example, that own the shares for the hygiene business may not be permitted to whatever mechanism is in their mandate to hold forest. Would you propose to have any mechanism to reallocate or otherwise buy those shares yourselves? No. Thank you. Our next question comes from the line of Adam Kindred. Please ask your question. Good morning. My question relates to pulp and timber sourcing because under the existing scenario, there is bound to be some sort of political pressure for you to source or pay good prices to the forest products company. And now that you're demerging, surely this opens up the opportunity for you to put your sourcing needs to whichever company can offer you the best prices, Would you therefore expect some sort of sourcing gains post demerger? This is not a correct description of how we operate. We have an arm's length completely commercial relationship between First Products and the Hygiene business today and since many years actually. And it's not a small part, but also not a large part of our pulp needs. SCA is today one of the biggest, if not the biggest pulp buyer in the world. So we source pulp from all suppliers globally and we work extremely hard to put pressure on all our pulp suppliers, including SCA Forest Products. And this has been the case for many years. So we don't foresee any difference there. All right. Good. And then can I come back on the book value of the forest assets? Because the last time I looked in your legal documents or on your report, it seems some of the assumptions are a little bit unusual, if I may say so. I mean, you're using a discount rate of only 6.2 5%. And it also seems to me that you're not discounting the cash flows to perpetuity. You're only discounting the next 100 years. Can you maybe comment on these two assumptions, which I think are very different to how most investors would approach the DCF valuation? Yes. Here we I can give you some brief comments there. First of all, the discount rate, there we are using €6.25 currently. And of course, if you look at competitors that is within the range, so to speak, perhaps somewhat on the high side, but within the range. And there, we're constantly reviewing what is an appropriate WACC rate. And to provide sufficient transparency there, we also give data relating to changes in WACC rates. And therefore, of course, investors and others may use the WACC rate they feel appropriate and also calculate the consequences. When you come to the issue of perpetuity or 100 years there, we're just using the method of biological assets that is good accounting practices. And it's true that we are using 100 years. And of course, you could always adjust for perpetuity, but we are using the standard method of 100 years. So are you saying then your evaluation is basically relatively conservative because you said your discount rate is on the high side compared to competitors. No. When you look at different forest companies and how they would use the different WACC rates, you would find many different levels. And we are within the range, as I said, of most forest companies. There are examples of lower WACC rates, there are examples of higher WACC rates. But again, we provide sufficient data to be able to calculate impacts of changes of WACC rates. And can you give me some indication of the range of competitors' discount rates? I think there are many forest companies around the globe. So it's difficult to give you. There are many examples, and you can look at both Nordic competitors and, of course, North American and others. So I can't give you data here, but of course, we'll be glad to provide you where you would also be able to find it on the respective home pages or annual reports. Sure. Thanks. That's helpful. Just one last question. Do you have a precise date for the AGM next spring? No, we don't. Typically, we have our annual shareholder meeting in April, but we haven't set the date yet. It's going to be somewhere like mid April, I would guess. Again, typically, we have our AGM in April and we see where we end up. So we'll have to get back on the exact date there. The next question comes from the line of Mikael Tatz. A little bit of follow-up on the pulp situation. I mean, a year ago, you said, if I remember correctly, that this new Ostrand facility or expansion would mean that on a group level, your self sufficiency rate would go to from 23% roughly to about 46%, if I remember correctly. And then as you, of course, state, this is pulp that goes to the market and you buy from the market. So in a way, this is a financial hedge. And long term, the only thing we know is that pulp prices are very volatile. They go up and they go down. So the question is really here, how are you thinking around this? Are you trying to sort of hedge? Are you trying to do long term commitments around this part of the cost base that is changing a lot? Or are you just sort of happy with being in the same position as competitors? That would be my question. So if I start and maybe I'll also hand over to the first perspective from Ulf. But no, we don't hedge our raw materials whatsoever, because we believe that gives us the maximum also price signals to our sales and marketing organizations. And with the size we have, we don't believe that that's efficient. And when it comes to self sufficient, it's a smaller share that we actually procure from FCA. So the number you were referring to was actually, again, from a financial purely financial perspective. And then going forward, once SCA has been divided into separate listed companies through the distribution of the hygiene business, then I guess these 2 separate companies with their separate boards will look into this in the future. I don't know if you have something to add there, Rolf? No. I mean, we have not already today, as mentioned, we are working with a market price between those two different operations. And going forward, when we have a stand up and running, of course, SAA hygiene will be a very important customer for us as it is today already. Our next question comes from the line of Saul Carzario. Please ask your question. Hi, thanks for the follow-up. Just a quick one. Could you give us an indication when you will you are planning to come back to the investors to give a better idea of the balance sheet split? Is this going to be like a conference call before the AGM? Or we'll have to wait for the AGM next year? Yes. I think the I have no real concrete answer to that question. I think the short answer is that we will, of course, present the final proposal with the prospectus that will be distributed after the AGM. But of course, we will be back with more details on the different balance sheets in time for AGM. And of course, we will do the analysis and we'll come back as soon as we have more to say also prior to that. So it's going to be I mean, from what I understand, probably it's going to be close to the AGM, nothing like we shouldn't expect anything in the next, let's say, 3, 4 months? No, I don't think you should expect that to happen. We will conclude this analysis as we approach AGM. The next question comes from the line of Kari Brendler. Please ask your question. Yes, thank you. Just a quick one on the technicalities of this Lex ASEA. I mean, firstly, if we look at the relative valuation between Hygiene and Forest Products, does it make any difference to you sort of any tax implications on how these 2 different assets are valued in the split up? And then secondly, from a shareholder perspective, what are the implications of relative valuation at the moment when he or she is then maybe selling their shares in SCA Haijin? Because this is I mean, you must have looked into this more than what we have had time to do. So is there anything that you can comment at this point? Yes. The first question for Swedish tax holders, there is no implication, of course, what the different valuation. The technical way to do this is that after the listing of these two companies, then you observe the market prices of these two entities. And then you get a distribution of your initial acquisition cost. That's how it's technically done. So there is no taxation for Swedish shareholders as a consequence of the distribution. And of course, then there are similar or at least related rules also in other countries, but they work a little differently. So it varies by country to country. And of course, also as I said previously, it varies individually by investors. Then on your second question, Kari, no, we have not specifically made an analysis based or analysis on the distribution of the share or equity value of the company. We have not made that analysis. Okay, thanks. Thank you. The next question comes from the line of Caroline Broguelles. Please ask your question. Caroline Broguelles from Allianz Global Investors. Thanks for taking the question. Just a clarification on regarding your answer on the previous question on the balance sheet. Is it correct to understand that you intend to keep to have the same credit ratings for both companies in the future? No, we haven't given that answer, Caroline. We have said that we have a very strong balance sheet at this point in time, and we have also a very strong rating. And as we approach the AGM and as part of the process that lies ahead of us, we will analyze the needs of these 2 different future companies. And we will make sure that both of these balance sheets are appropriately strong and adequate for both strategic and operational needs. So we haven't concluded anything and it's actually a premature discussion when it concerns rating. We'll come back to that as we come further. Today's announcement relates to a decision to initiate the work to prepare proposal for the AGM and nothing else. Okay. So meaning that given the indeed the different business profiles and CapEx intensity of both businesses, we could end up potentially with different ratings. Yes, of course, that could be the case. And it's possible that, that would be the outcome. But it's very difficult to speculate on that issue at this point of time, and we'll work with those issues as we come closer to the AGM. Okay. And you mentioned that you will meet the different stakeholders in the coming months of the Delta TMC bondholders? Yes. That's part of the process, of course, to have discussions with our counterparts and different stakeholders, including bondholders. So thank you so much. Now we will finalize and conclude this telephone conference call. So I hand over to you, Magnus, to make the final conclusion. So to finalize, the Board and executive management team of SCA is very excited about this opportunity to create further value for the shareholders of SCA and doing this by initiating the work to propose to the Annual General Meeting in 2017 to decide on a split of the group into these 2 listed separate companies that we have been talking about. And we feel very excited about the prospects of these 2 separate listed companies, and we believe that the way of doing this is very efficient and, again, will create value for shareholders and exciting strategic opportunities for these two companies. And with that, I would like to thank everyone for calling in and listening and for your questions and conclude the conference.