Earnings Call: Q2 2016

Jul 19, 2016

Hello, and welcome to SCA's Second Quarter Report 2016. My name is Josephine Edouard. I'm Head of Communications. And today, our President and CEO, Magnus Groot, will together with our CFO, Frederic Rystedt, go through the highlights in the report followed by a Q and A session. With this, I hand over to you, Magnus. Thank you, Josephine, and thank you for coming here in the middle of this beautiful summer day. So, SCA had another solid quarter with a strong organic growth in adjusted operating profit, primarily coming from the hygiene part of the business. We had good organic sales growth in the hygiene business and especially in the emerging markets and this resulted in a strong cash flow. We have made significant provisions for ongoing antitrust cases and tax cases and none of these cases are new. We have reported about these cases in some instances for several years. And even though these are historic cases that we have announced before, we take all issues like this extremely seriously. And I want to underline that I've learned that several times before during these quarterly reviews. I want to underline again how seriously we take this so that we don't end up in situations like this again going forward. And previously, we have accounted for this as contingent liabilities and we have informed about this in various ways. But for this quarter, we have decided to make provisions in our P and L for the full effect of ongoing tax cases and antitrust cases. And as I already mentioned, they are ongoing, but our estimate is now that there will be a higher than 50% probability that these cases will in the end be ruled against us. And we base this on changes in practice that we see in some other instances relating to other companies in similar situations. So with that, let's talk more about the business situation. And overall, our organic sales growth was 2%. Again, hygiene had a solid quarter with 5% growth in Personal Care, 3% growth in tissue, while Forest Products had a negative growth of 7%. The adjusted operating profit improved by 9%, leading to an improved operating margin of 0.7% to 11.7%. And earnings per share then was negatively affected as already mentioned by these provisions due to the tax and antitrust cases previously mentioned. If we would deduct these provisions, earnings per share would actually be increasing by 18% based on the underlying performance. And operating cash flow remained very strong and increased by 21% compared to the same quarter last year. Our adjusted return on capital employed improved by 0.5% to 12.1%. So we are steadily moving closer to our long term target of 13%. And in this number, there's a negative impact from the Wassa acquisition. It's still early days and we're still working very hard with realizing the synergies and integrating Wassa. That's, by the way, progressing very, very well and ahead of plan. But that has a slightly negative impact on return on capital employed initially. But in spite of that, we are now up to 12.1% on return on capital employed. As you know, I'd like to talk about innovations. And this quarter, we have some quite important innovations. One of them is the TENA Overnight Underwear that you can see on the slide. I will also show it live here. And it's important because this is something that we are selling in retail both in North America and in Europe. And it's a product that differentiates us from the competition and that we're using to be even more successful in the battle that we are now in, as you know, since several years when it comes to the retail business in Europe and in North America. So this is an important launch that's ongoing now. Another example is an ongoing launch of a dispenser range for under the Torque brand. And this is a range that is has very good properties in wet environments. So it's a very sturdy dispenser. Without going into all of these tissue launches, I'd like to see the similarities here between the different packs. So in spite of launching products under different trademarks in different markets, we are becoming more and more global both in actually how we present the products, how we the packaging and also rolling out innovations on a broader scale throughout different markets. As an example, the CEVA and Reggio, just one products that you see there down on the right hand corner are is a product that we have been selling in Europe for quite some time, but we're rolling it out now in East Europe and in Latin America. So with that warm up, I'd like to hand over to Fredrik for some more numbers. Thank you, Magnus. I'll start with the usual slide on net sales. And as Magnus already said, we grew with just over 2% in organic growth and hygiene with approximately 4% and forest with minus 7%. And price, as you can see, contributed positively and about 1% for both Tissue and Personal Care and forest, as we also had in the Q1, a negative of 3%. Volume very strong remains strong I should say in Personal Care and Tissue with approximately 2%, also good growth. We had lower volumes in forest with approximately 4%, and roughly about 2% of that decline in forest has to do with the mother with the closure of the paper machine in Utviken and the other 2% has to do mainly with maintenance planned maintenance stops during the Q2. We look at the tissue growth there for a second, 2% is slightly lower than we've seen before. Although still good, it's slightly lower and that has to do with a little bit lower mother reels sales and also a somewhat lower growth than for Vinda than we've seen in the previous quarter. If we look at a little bit longer perspective on the organic sales growth, you can see that both Tissue and Personal Care during the quarter actually achieved growth rates within the target range that we have set for these businesses. And underlying volume growth and mix improvements remain at good levels. During 2015 and also in the 1st part of 2016, our organic growth in Hygiene in more general terms were partly driven by price increases that we made during 2015. And those price increases we made on the back of very significantly higher raw material and adverse currency changes that we reported to you during last year. Many of those price increases are now part of the comparable quarters that we use as comparables now. And therefore, of course, the growth levels are coming down. And of course, this will also be the case in Q3 when the big price increases that we made during Q3 of last year in tissue in Europe will actually be part of the comparable numbers. If we look at the growth rate here for forest, I already mentioned the volume side, but price levels on pulp, on kraftliner and to some degree also on solid wood products continue to be lower this year than the average of last year, although we can now see that the price levels are generally stabilizing. If we look at operating profit, on the organic growth, we see a growth of 9%, so a stable and good growth in comparison to quarter 2 of last year. Price contributed with €140,000,000 for Personal Care, €215,000,000 for Tissue and as I already alluded to negatively with $150,000,000 roughly for Forest. Volume contributed positively, so about €300,000,000 or so for hygiene and of course slightly negative €20,000,000 for Forest. For the first time and you can see that here for the first time I think it is in 5 quarters we've actually seen a positive impact from raw material And most of this benefit that you can see on this slide, this €70,000,000 here relates to our tissue business. And we expect this to continue also for Q3. So if you compare Q3 of 2016, we expect that to be positive in comparison to Q3 of 2015. For Personal Care and Forest, raw material prices are expected to be slightly lower, not a lot, but slightly lower and for tissue, clearly lower. And some of you I know are also interested in the sequential development on the raw material. And there we look at actually a slight increase for Personal Care and for Forest and also up for tissue and slightly up for tissue. So not a great deal sequentially, but slightly up for tissue and this has to do with increases in recovered paper. As you can see and to the same as in Q1, energy prices are still very low and contributing to the profit. Now you see the other bar there minus 368 and the other bar generally it actually includes all items that are not included in either price mix volume raw material or the other items listed on this slide. So of course it contains A and P or SG and A or other cost of goods sold etcetera. And this quarter it's an exceptionally high number that we're normally lower than this. And that's also despite the fact that we've had continued good efficiency gains. So what we have done is also continue to invest in growth. So we have higher A and P and we also have higher sales costs. So SG and A is going up not least in Latin America and also Vinda to a great degree. And then in addition to that, we've also had fairly high inflationary cost. Also here, Latin America is with relatively high salary cost inflation partly on the back of currency. And the final item there on this in this number of 368,000,000 is also cost relating to transportation of the fixed or finished products. So we import, for example, into Brazil and the currency movements make those the product costs simply be higher and that's part of that negative impact. If we look at cash flow, this is a slightly different number than you saw on Magnus' slide previously because this also includes capital expenditure that we do. And if you look at that, capital or operating cash flow is increasing with approximately 1%. So you can see that operating cash surplus is continuing to do well and contributing favorably to cash flow. Change in working capital is normally negative. We build typically working capital during Q1 and Q2. But despite that fact in the quarter, we've had a slight positive contribution and that's also despite the growth we've seen in the group. So this is a very good performance. And if you look at each individual working capital line, so inventory, accounts receivables, etcetera, all of them are performing well in terms of percentage of net sales. So we're quite pleased with this development. Capital expenditure. If you take the total amount €1,900,000,000 or just under €2,000,000,000 here and you also look at Q1, you can see that we've spent approximately SEK 3,500,000,000 in capital expenditures so far this year. Now we've given you a guidance of SEK 9,500,000,000 which is significantly higher than we've seen in the previous year. All this has to do with the Ostrand investment or primarily with the Ostrand investment. So what you can conclude from this is that we have higher strategic investments than last year, which has to do with Ostrand and we will spend more in strategic capital expenditure during the second half of the year also relating mainly to Ostrand. We talked about the items or Magnus talked about the items affecting comparability. And as you can see, there are quite a few during this quarter. The biggest one is, of course, the €964,000,000 for the antitrust cases. And approximately €500,000,000 of these €9 64,000,000 relates to antitrust cases where a verdict has already been delivered. And the remaining €464,000,000 roughly is related to our own estimations of outstanding cases that no verdict where no verdict exists so far. Of course, the final amounts here remain uncertain. So this is the best judgment that we can make on expected costs going forward. So in addition to those antitrust cases, we've also continued restructuring efforts in closing one plant in Spain and another one in France as you can see here. And then we've continued our integration efforts with Wassa which is going according to plan. And of course the estimates that we have both relating to synergies and integration costs remains the same as we have communicated before. So this is very much in line with the plan. And then finally, we also have a positive number here of EUR 218,000,000 which is relating to a capital gain when we sold our recycling or our shares in the recycling company IL Retur Taper. So with those words Magnus? Thanks Frederic. Digging into the different businesses in some more detail. In Personal Care, we had organic growth of 5% and an improved operating profit of 10%. And we continue to see better price mix, higher volumes and cost savings, so all the levers that we want to pull to achieve improving margins and improving volumes. We're also, as Frederic mentioned, investing more in advertising and promotion to keep growing in the very profitable categories of Feminine Care and in Continence Care primarily in Latin America. Adjusted return on capital employed actually came above our target of 30% and was 31.1% in the quarter. And again, the margin improvement was nearly 140 basis points from 11.3% to 12.7%, so a big improvement in margins in Personal Care. And this volume and margin improvement actually is more or less coming from many parts of the business, which is good. So as you can see here, we had good growth both in mature and in emerging markets and also in all the different segments in Personal Care, 4% in incontinence, 4% in baby and 9% in Feminine Care. Behind those numbers digging down into some more geographic detail, it's worth to mention that in Europe, this is now the last quarter where we have a significant growth comparatively to the same quarter last year from a big private label contract that we gained almost 2 years ago now. So with the rollover effect will be complete after this quarter. However, we still see good growth in other parts of the European Baby business. In emerging markets, a mixed picture. Latin America is performing well. Asia is performing very well. Russia had a little bit of a slower quarter and also baby diapers in Latin America, but overall a positive development. And we continue to look at different positions in different markets to see what we can do to improve because as you know we are working actively to have good growth and good margins in all the geographies and all the categories where we are active. Moving on to tissue. We had organic sales growth of 3%, which is in the range of our target, which is between 3% 4%. And adjusted operating profit improving 8% benefited again from better pricemix, volumes, savings and for the first time in 5 quarters from also lower raw material costs. The operating margin improved by 70 basis points to 12%. And if we move on then to see the breakdown, there's quite a difference here where actually growth in mature markets was close to 0, while we continue to have double digit growth in emerging markets. Between Consumer Tissue and Away From Home, both show good growth, 3% in Consumer Tissue, 4% in Away From Home. And then looking one step in more detail. In Western Europe, we had lower volumes for Consumer Tissue. And if you remember last quarter, I was saying that we were at the end of a long period of quite tough price increases due to higher raw material costs. And I feel that we have managed this transition now that we see much, much lower raw materials quite well in balancing volume and margins. We focus very, very much on margins over the last year or 2 before volume. And now we are looking forward moving back to also getting a good balance of margin and volume. So that's something I feel confident about will develop well going forward. In Away From Home, we had higher sales in Europe and slightly lower sales in North America. And as you can see in all emerging markets, we had growth slightly lower in Russia in this quarter. Forest Products, finally, where we had an organic sales growth that was negative 7% consisting of a mix of price and volume. Fredrik mentioned that approximately half of this volume decrease comes from the closure of tape machine number 2, the publication paper machine in Utviken that we announced last year and the other half from maintenance stops during the first or during the Q2 this year. Also operating profit was lower 16% due to lower prices, lower volumes helped by lower energy and material costs. So altogether, operating margin of 12.4% for forest products. Looking forward, we expect a stabilization of prices in the various areas. So no big changes expected going forward for the next couple of quarters. So with that, I'd like to hand over to Josefina, nearly said, and we can use this slide. I think we already went through most of these bullets. To summarize, we continue to see a solid performance in the hygiene business, good growth momentum, improving margins, resulting in good cash flow. In the Forest Products business, we are also doing well when it comes to our investments, our big projects, in our savings, but we're negatively affected by the price developments compared to a year ago. But we expect this to level out going forward. Now, Jussi Wijn. Now with this, let's open up for questions. Who would like to start? Yes, Michael. Thank you. Mikhail Jovs from Kepler Cheuvreux. Two questions. 1 is around raw material pricing and where you're saying that you now start to see some gains from lower pricing. How difficult will it then be to sort of maintain your end product pricing? Or are the stabilization on the raw material substantially due to the price increases we did last year until the beginning of this year and the downturn now of raw material prices in this quarter. We foresee that there will be some more price pressure. Of course, also our customers and consumers see that raw material prices are coming down. And this is something we will have to manage. But I feel that it's a better position to be in than vice versa. But it's a situation that we will manage going forward, also balancing with volume growth. Thank you. And then my last question. You mentioned there about higher recycle paper pricing. I mean, this has been quite stable for some time. Do you have any particular reason why we see higher RCP prices? I don't. It's actually a demand supply demand issue. So with recycled, sometimes you see volumes being exported out of the relevant markets and you see higher prices. So we've actually seen that trend going up. So there it's more of a demand supply issue. That's mainly the reason. Perfect. Thank you. Next question? So if not, do we have anything on the telephone conference? Do we have any questions operator? We have a handful of questions. And your first question is from the line of Celine Panattu. Your line is open. Yes, good morning. Well, my first question, it's trying to understand the others. Frederic, you gave a list of items in your presentation. I see that in tissue the others was quite meaningful in fact €270,000,000 Could you give a bit more light of what is there and to which extent this recurs or not in the coming quarters? That's my first question. Yes. I can do that Celine. There are actually quite a few items. We've I mentioned most of them, but we see many, many different things. And one of the bigger items there is actually the salary inflation or the fixed cost we have in the production facilities. And a lot of it is actually coming from Latin America, as I mentioned. So that's part of it. We also see quite a lot higher cost and some of you may have also seen the Vinda report this morning. We see quite a lot of higher cost for sales and administration as an example. And of course, that's a result of very strong growth rates we see in Vinda. So there are many different items that we see in that line, pretty much in line with what I said. And they're also small and big. So I'll just take an example there. We have somewhat lower production volumes as an example. That's not a main contributor, but we reduced production volume to actually take down our inventory and to make ourselves sufficient. And there is also in the tissue side some stock value adjustments on the back of lower prices. So there are quite a few different items there. But many of them are sort of of a permanent nature, some are more temporary. So because when you talk about these fixed costs and the higher salaries, I mean, all of that seems to be part of the ongoing business. So I'm a bit surprised that it has come such a big acceleration on a quarterly basis. If you look back a few years Celine, you will see that Q2 is typically high on the other line there. So we normally have higher costs in Q2 on all the other items there. This has to do with many different things. First of all, we typically have a wage negotiation reset. So you may, for instance, negotiate wages and then you have retroactive pay for the full year. That's one example. The second, there is quite often you have launches of new products with additional A and P spend and the same thing goes for sales and administration. So we normally have higher other costs in the Q2 of any given year. So from that perspective, it's just unusually high in comparison to the normal Q2 level and this was higher than normal. Okay. My second question is for Personal Care. Growth rate remains quite strong. So first thing is could you a bit give us an idea of how you are tracking versus the market from a market share standpoint? I mean I was quite surprised how well you didn't match your market. And the second part of that question is Russia down 2% was quite a surprise. Is it are you rolling back price increases from last year? And should we expect this therefore to continue given the high comp in the second half? Overall, we're doing well on market shares. We are, in general, positive gaining market share in Feminine Care, stable to positive in incontinence care and gaining market share in Baby in Europe. So in general, that's doing quite fine. In Russia, we are seeing some temporarily increased competition. So some of our competitors are investing right now to regain some market stated before, it's difficult to draw long term conclusions from what's going on during 1 quarter. And I don't foresee that we are giving away prices here. But however, going forward, again, the comps will be become more difficult since we made price increases second half of last year and we will compare to those now moving into second half of this year. I think maybe on the Russian side also just adding, Celine, you already know that, but we've had fantastic growth numbers in Russia for quite some time. So we've really strengthened our business there. And now of course also ruble has strengthened in comparison to the euro, which is also having an impact. So this is part of the story. All right. And then last question. On your adjusted EPS came up 18% and I think it was quite a bit versus consensus. Could you flesh out the drivers of that? It seems to be lower minorities and as well lower net financial to which extent those are also recurring? Thank you. Yeah. The main if I may, the main contributor there is the financial net that you can see is very low for the quarter. So it's unusually low. It has to do with currency impact from this divestment or the integration of our Asian business into Vinda. So we have a positive impact. We actually had a slight negative impact in the Q1 and we now have a positive impact in this quarter. So it's unusually low in this quarter. But if you take the full year, it's roughly okay if you put it like that in the financial net. And of course, in the quarter, that's the main reason for the EPS deviation from the expectations, if you put it that way. Thank you. Your next question from the phone lines comes from the line of Ian Simpson. Your line is open. Thank you very much. Just a quick question from me if I may. Some of your competitors have flagged a slight increase in price competition in European diaper. I mean that sounds like a market you're pretty happy in, but I just wonder if you could talk about the price dynamics in European diaper at all. I know you flagged that you lapped some pricing, but I was just wondering what you're seeing in the overall marketplace. Thank you. In the overall marketplace, there is not that much new capacity in Europe, but quite a lot of capacity has changed hands. So market rates have shifted quite significantly over the last 2 years and mostly to our benefit. So we're very happy about that. And at some point, of course, that drives to some extent price competition. But I would state that price competition is always tough in the baby category and there's not a big difference there. Thank you. Your next question from the phone lines comes from the line of Linus Larsson. Your line is open. Thank you very much and good afternoon to everyone. Just a couple of more questions on price if I may. Last year in partly in high inflationary environments, you were able to hike prices. Just want to hear if there are examples where such price hikes are now being rolled back. And then on a more general even more general note, I guess, are there any price hike initiatives ongoing in any of your categories? Thank you. Starting with then possibility for price hikes. We're looking at opportunities, especially in away from home, since the raw material cost for recovered paper has increased slightly. So that's an area where we are looking at price increases. And especially in North America, we see some price increases also in the market. Another geographic area we're looking at is the U. K, of course, as a result of the Brexit, where we, like everybody else, are affected both by transaction and translation impacts. Transaction to the extent that we are importing raw materials and translation because of the weaker pound of course any profit is translated back at a lower rate. But we're in a reasonably good position because we produce tissue to a high extent in the U. K. While personal care products are imported into the U. K. So that's something we're looking into at this point in time. Price decreases, I see a discussion about an increasing price pressure on Consumer Tissue in Europe in general due to the lower raw material prices. Last year, we had the added effect of also quite a lot of capacity coming into the market. And most of that capacity has actually been absorbed now except for Spain maybe. So yes, we expect to have discussions about price decreases rather than price increases going forward. And that's a situation that I think we can manage. Very good. That's very helpful. And the away from home tissue price hike in the U. S, the timing and magnitude of that? I don't have that detail today, but that's something that we are looking into. Great. And then maybe also just a clarification if possible on the other items that we discussed previously on the call the DKK 270,000,000 year on year impact. It sounds to me as if much of it is recurring. But do I understand it right that some of it might be falling away in the Q3? I think there are items Linus, there are items there that of course also temporary in nature, but most of them are as I mentioned salary increase for instance are of course there. And the higher A and P spend is likely to continue. Of course, that's paying off for us. SG and A costs and those three are the main parameters there. Of course, they will also stay. So most will stay as I mentioned before. Great. Okay. And then just one final check on what you've said before regarding your changed accounting from the 1st or changed disclosure from the 1st January next year? Anything to add there? Is that project still on track? And anything you want to share with us on how that disclosure will appear in the Q1 results in 2017? There's nothing new to report about dividing the group into 2 separate divisions. That work is ongoing according to the time plan that we have previously communicated. Excellent. Thank you. And your next question from the phone lines comes from Stellan Halfordhoorn. Your line is open. Yes. Hi. I guess most of the questions have been answered. But I would like to also come back to the cost increase in tissue on the other line here. And just to understand it correctly, is this salary inflation that you're seeing in some emerging markets, is that coming with a lag relative to the price increases that you've made? Or how does that work? And then also on A and P spending here, is it some phasing going on in the quarter? Or is it a higher level that we see? Thanks. Yes. I mean salary inflation is just something that has sort of come into the numbers. So higher salary and wage costs have come in, in particular this quarter. So that's not really tied to the price increases. Personal Care and to some degree also in in Personal Care and to some degree also in Tissue. So there is really no phasing there. Q2 is normally a big month for A and P, but this is compared to last year of Q2. So we have increased the level overall, SG and A in particular. Were you okay with that? Or did you have another question? Where is the connection? Ellen, your line is still open. Then operator, I think we take the next question and Salen can come back. Thank you very much. And your next question comes from the line of Oskar Lindstrom. Your line is open. Hi, good afternoon. My first question is around cost savings. You've now closed 2 plants, 1 in Spain and 1 in France. And I realize you work continuously with cost savings in your operations. But I mean, do you feel that these cost closures and perhaps ones that you will do in the future, are they enough to just counter cost inflation? Or will we see some underlying cost takeout as well? I can start and then Frederic can correct me. We have an ambitious plan for cost savings and efficiencies going forward and we see as much opportunity for savings and efficiency improvements going forward as what we have achieved historically. And during the Capital Markets Day, we described our tissue road map that for the first time we have actually set up a 10 year plan for how to develop our tissue, which is of course the most asset intensive part of our hygiene business, our tissue business over the next couple of years. And the closures you've seen now are examples of that. We are closing old, small, inefficient facilities and only investing in big, efficient facilities in the right locations. And specifically, these closures that we're announcing here, we don't see the effects of the savings from that yet. That will come in the coming quarters. But I feel that there's a lot to be done in general both in tissue, but also in Personal Care and in Forest Products going forward. So we have plans in all these three areas and targets of course. If I may ask, I mean, you previously when you've had cost save programs or plans, you've actually set them out in formalized cost save programs and guided us on what to expect. What is the reason for not doing so now? Yes. And this is something we stopped reporting end of 2014, if I remember correctly, when we had a couple of savings programs both in hygiene and in forest and we also had the GP integration program. And we said that we think that of course, we have programs internally and we follow-up rigorously every month and every quarter on those programs. But they tend to start to live their own life if you report them externally. And we want to have a very we don't want to see any double accounting in this area when it comes to savings. And then it's better to keep them internal. And to show the effect on the bottom line, we also want to make sure that the savings and the efficiencies that we do hit the bottom line and don't come out as some kind of project numbers. So that's the reason. Thanks. I can maybe add there because I think you can always any company can produce a cost program and most companies will deliver on those cost programs because what you do is you set a specific number of activities and then you calculate the benefit relatively conservative and then you track them and off you go. But what is actually important is the total cost development of the group, the total COGS development or SG and A whatever that is. So of course, if you have the correct cost culture with continuous improvement, if you have the capability of tracking your productivity improvement all the way down to the bottom line. And thirdly, that you have all the right activities then it's much more efficient over the longer perspective to run it like this and not contain it in the part of a cost program. Because if you do the cost program, you can improve there, but you lose in the other end. What we are trying to do is to actually achieve a good cost development on the totality of things. And that I think we have the measures as Magnus alluded to in the tissue road map. Thanks. If I may come back to this issue, which the other people have asked about is the pricing on tissue. I mean, you had still in Q2 quite good momentum on pricemix year on year. And you now mentioned price pressure or going on in the market. I mean, how soon should we expect that to hit your tissue business? Or is that not a given? That's definitely not a given. We're doing everything we can working with, of course, innovation and partnerships with our retailers to show that we are creating value for them and for this category and to work with other ways of not focusing primarily on prices. So we work very hard to and I mean price pressure also it's nothing new. It's something that we're facing continuously in all categories and at all times. There's more of discussion when there's a sharp drop in raw material prices, but after a while that normalizes again. And we have different ways of negotiating with different retailers in different countries. Sometimes it's annual. Sometimes it's ongoing. You can change prices at any time after negotiations. So there's always a lag from any negotiation regarding price increases or decreases. All right. Thank you very much. Those were my questions. Your next question comes from the line of Eilam Edri. Your line is open. Hello, everybody. My question is considering the lower prices in major markets for tissue. You mentioned the price competition, but could it also be linked to private label price decrease? What could we expect on this private label owned brands split for the future? The price changes appear quicker on private label than on owned brands. But it's one thing is that we are expecting more price pressure going forward than we've seen over the years when we had increasing raw material costs. But we also believe that this is business as usual and something that we will manage. So I cannot give you any prediction if and when something will happen when it comes to the outcome of increasing price pressure. Ilan your line is still open. Then I suggest we take next question. No problem at all. Thank you very much. And your next question is a follow-up question from Ian Simpson. Your line is open. Hello there and thank you very much for allowing me a follow-up. Just on Vinda, you mentioned that that was going a little bit slower than it had in the past. Clearly, that's a business that has done incredibly well for you in recent quarters. I just wondered if you could comment about the slowdown at all. Is it just the sort of beginning to lap the rollout of international brands? Or is it a marketplace thing? Thank you. Yes. I can start, Frederic. It's definitely a marketplace thing. We believe that the Chinese tissue market, as we have communicated before, is growing roughly in line with GDP. So that would be around 6%, 7%. Vinda has taken a large part of that growth over the last couple of years and gained market share actually and we are now the number one branded tissue player in China. So that's all going well. We believe that underneath these 6% to 7%, the 3 big established players will actually keep growing faster because they will take market share from the smaller player as the markets consolidate. Nevertheless, this is a slower growth than historically due to the new normal of China. So this is just an effect of the market development when it comes to the launch of our international brands like Tempo in Mainland China. That's going extremely well and we're seeing high growth numbers which is good because those are also high margin segments within the tissue category. So that's going well. And also in Personal Care, just to mention that the integration with FDA's Pan Asian or Asian business is also developing well. And we saw good growth, as you could see on the previous slide, in our Asian Personal Care business now managed by Vinda. Thank you very much. Your next question is from the line of Celine Panattu. Your line is open. Yes. A follow-up from me. First, in terms of your guidance about the discussion we have had about tissue, there seem to be this question about the pricing discussion, which we may not see right away. But at the same time, you're talking about the potential from volume acceleration. I was wondering whether you could share with us what kind of volume growth you see right now in the market and what could be a kind of run rate growth, especially in developed markets? That's my first question. Run rate growth rate hasn't really changed in developed markets. It's still a few percent 1% to 2% annually. And so there's no change there. When it comes to SCA's growth in these markets during the Q2, it was 0 because we had focused very, very much on price increases. And what we're doing now is we're finding the balance between pricing and volume. And that's what we are focusing on now in our discussions with retails going forward. It's very difficult to specify what that will lead to. I just feel confident that these are discussions that we always have with our customers, especially in the retail part of the business. It's more stable in away from home actually. And also the underlying raw material prices are more stable. So I think we can manage that and find that balance between margin and volume. All right. Just also on tissue, you mentioned that away from home was negative in North America. Did I understand well? And can you maybe give a few comments on Wassa? How is Wassa progressing? Wassa is progressing better than our integration plan, so both when it comes to synergies and when it comes to their margins. So we're super happy about Wassa and how that business is going and also the integration. We had a slightly lower or negative growth partly because of performance of some of our distributors. In Away From Home, we work mostly through distributors. There could be an impact from ongoing integration work. Of course, that takes some focus maybe from going for volume. So that's something we have discussed intensely in our North American business that we need to keep our eyes on the customers and consumers and not lose that focus while we are integrating. So we have that discussion continuously. And my last question, I promise. You I mean, there was a few question on the calls about these others, which came a bit stronger than expected. I understand they are going to recur, but maybe there was an extra impact for the quarter. At the same time, you seem to see further benefit from tissue raw material tailwind in the coming quarter at least. Overall, I presume you see what the market expect for margin for the year. Do you think which is 12.1% for the year, which is 80 basis points, you did plus 100% in the first half. Do you feel that's a realistic expectation? Julien, we don't make any. I'm trying. Okay. Thank you. Your next phone question comes from the line of Justin Jordan. Your line is open. Thank you. I've got two questions unrelated. Firstly, just on Brexit. For SCA, 9% of revenues from the U. K. You talked about, I see, tissue being as well as the insulated just of the translation, I suppose, translation FX headwind going forward. But on Personal Care, are you aiming to recoup essentially all the sourcing raw material FX headwinds that you now have going forward through price increases? Or do you think that will be a battle going forward? And should we anticipate a margin impact in the U. K? I'm sure it will be a battle. And again, it's always a battle. And most retailers in the U. K. Have stated that they will not try to recover any losses they see from the Brexit from their consumers. So they are of course they are saying that they're going to take that negative impact and that makes it more difficult for suppliers to these companies. All suppliers are more or less in the same situation. So to what extent this will have an impact? Or how long will it take you until it balances? I don't know. But it's something that we are working with, of course, continuously. Thank you. Just moving divisions as it were to Forest Products in terms of outlook for the back half of the year, you talked about stable price outlook. Just specifically on one product, krapliner, some of your peers have talked about achieving a €20 a ton price increase in, I think it's 1st July or so. What has SCA achieved? Approximately the same. Thank you. Yes. It was maybe an average. With publication prices, they actually came up for a while for the first time in many years, slightly coming back again. And you know that story in publication paper, while pulp is expected to be quite stable. And when it comes to solid wood, we are seeing some slight increases also in prices. So some differences between the different segments, but overall quite stable. Yes. And again, we're comparing here when we talk about price movements against last year's quarter. So we've seen a decline in solid wood products and kraftliner and also during last year softwood pulp. So that means of course that the average last year is higher and that's why you see this impact on the price this quarter. Now we see a slight uptick in kraftliner as you just alluded to. We also see in softwood pulp, it's not a lot, but $10, dollars 15 per ton. So there is some stabilization or even positive movements. But of course, the average last year remains higher than this year still. Thanks for clarifying. Okay. I understand this was the last question from the telephone. And we have one more question from the floor. Just a question on Vinda. Are you allowed to augment your holding by buying over the stock exchange? Or do you only have the possibility to make bids? Vinda is a quoted company, I mean. To buy shares in Vinda, I don't know. We have our Felix, can you answer that? We're not doing that over the stock exchange. We're not buying shares of the stock exchange. So I guess your question is whether we have such a big stake that we would be subject to a bid situation. We have to come back on that question. It's not a relevant question. It's a hypothetical question for us. We're not buying on the stock exchange. To add to that, we're very, very happy with the current ownership situation and we expect that to last for the long term. So we have a very good balance between us having the majority, still having the founder Mr. Lee as a very strong owner and afloat on Hong Kong Stock Exchange. We think that's a great setup. It is a relevant question, but it may not be in your cart. Of course. Okay. So no more questions from the floor. So any final remarks Magnus before we conclude this press conference? Thank you for a good discussion and look forward to seeing you next quarter, which is coming up soon as always. So thank you very much. Thank you and goodbye. Thank you. Thank you. That does conclude your conference for today. Thank you all for participating. You may now disconnect.