Earnings Call: Q3 2015

Oct 29, 2015

CEO and President, Magnus Groot, who together with the CFO, Fredrik Rystedt, will go through the highlights in the report. And afterwards, we will have a Q and A session. So with this, I hand over to you, Magnus. Thank you, Josephine. And we continue to have good momentum in most segments and in most markets in our business, which is very positive. During this last quarter and also after the end of the quarter, we have also continued with several strategic initiatives for two reasons. One is to accelerate our profitable growth both through acquisitions, but also investments in our existing businesses. At the same time, we're also addressing a number of low performing parts of the business, primarily in the Forest Products business, as we will talk more about today, but also in the Baby business. So this is something we will go through in more detail and also the financial effects of this. Looking then at the numbers briefly and Frederic will talk more about this. We have continued sales growth organically of 5% and an operating profit before items affecting profitability of 10% leading to an improved operating margin of 50 basis points. Looking at earnings per share, it's significantly down. And this is, of course, then after items affecting profitability. So if you add that back, we actually see an underlying earnings per share growth of 20% quarter over last year's quarter. And we continue to show a strong cash flow development. And as mentioned, we have a number of important events since we last met after the Q2. And looking at the first one, dividing the group into 2 divisions, this is a project that we have 1st January, the 1st January 2017. The new hygiene organization is actually also in place and working and this has gone very smoothly. There's always some concern when moving into new organization if there will be a loss of momentum. But I feel that on the contrary, we have a lot of new energy and it has finalized the organization. The final bullet point here, we are included in the Dow Jones Sustainability indices as an industry leader, which makes us very proud. So we are the leader in the Household Products Group also. This relates to our code of conduct work and sustainability work and social responsibility work. And this is something we work with very, very hard every day. And I want to bring up also in line with this some news that came out just last night regarding an antitrust process in Chile that we announced already in May this year where there's been another step in this process. Still, we don't see that this is a material financial impact on the group in any way. But just again being transparent it's very important for us to state that this is completely unacceptable, whether it's a fully owned company or partly owned company. And that we are also always cooperating fully with the governments and the bodies that are working with this. So I just want to bring it up no financial material impact, but still. Moving on then to our strategic priorities. And this is a picture that we stick to. And I think some examples over the last quarter is when it comes to profitable growth is our acquisition of Warsaw Paper in the United States, our investments in the pulp mill in Ostrand in Sweden and our investment in Brazil in Continence Care. Moving over to efficiency, some examples of work we have done to improve efficiency in the group is, of course, the restructuring of the Utrecht and paper mill that we announced today. Again, the pruning of the baby positions that we have done over the last 6 months and also the divestment of Brahma Business Jets, which we announced a few weeks ago. Today, we also announced that we are divesting our Asian Pacific business to Vinda. And as you know, we are the majority shareholder of Vinda with a 51.4% stake. And this divestment and integration, actually, I am absolutely convinced, will have a very, very positive impact in all these three areas because we will achieve synergies on the cost side. This will increase our growth because this will make it much easier for Vinda to expand in tissue personal care in China because we have very strong positions in Malaysia, for instance, and also the exchange of product innovations, not only then with SCA Group, but also between these two entities. So those are some examples relating to our strategic priorities. And then I have 3 slides on these some of the 3 major strategic initiatives that we have taken recently. And the acquisition of Warsaw is actually very, very complementary to our business, both in terms of paper qualities, where they have a premium paper quality that we do not provide currently in any large extent in the U. S. So very strong complementarity there. And also when it comes to customer segments, we are very strong in restaurants and catering in North America and they are very strong in washrooms. And the initial response from customers is very positive because they see the benefit of a one stop shop that the combined entity can really provide them all types of qualities and also products suitable for all different types of segments. So initial response from our customers and Wassa's customers, what I hear, we are, of course, competing vigorously is positive. I also want to note that we have signed this agreement, but the completion is subject to Warsaw Paper shareholder and regulatory approvals, which we expect then at the end of the Q1. Then over to the divestment of SCA's Asian Pacific business to Vinda. And I think you have the number. Again, I think it's important to note here that this agreement is also subject to approval of the independent shareholders of Vinda, and we expect closing Q1. We had the board meeting yesterday and of course the independent shareholders have the representatives and participate. So but still to make this clear. And again, I see this is a very, very positive development for our Asian business in total. And finally then, the intended closure of tape machine number 2 at Utreken followed by an impairment of the entire Utreken mill. And the paper machine that we are closing is the oldest and smallest machine with a capacity of 135,000 tonnes. After this, we will still have a capacity of 7 65,000 tonnes. It will still be one of the world's largest publication paper mills. But we see that we can achieve a huge efficiency improvement by focusing on the remaining 3 bigger and more modern machines going forward and that this plant will now be very competitive going forward. Okay. Frederic, if you want to get into the financials. Yes. I will do that, Magnus. And I'll start with net sales. And as you can see from the report, we grew our net sales by 9%, out of which 4% is simple currency translation mainly coming from the Swedish crown. And you've noted perhaps also in Q1 and Q2 that price and mix were significant contributors to our growth in sales, and that is the same also for this quarter. In fact, if you look at all our business areas had a positive development in price and mix, and especially so in this quarter for personal care. We have raised prices in many different places. We've done it predominantly in Latin America. We've done it in Russia. We've done it in the European away from home business and now in Q3 in the consumer tissue business in Europe. So from that perspective, we have been able to compensate a large portion of raw material impact and, of course, adverse currency impact. Volume was also positive. For tissue and personal care, both grew by 4% each. It's slight difference for forest. We had actually slightly lower sales coming from publication paper and that we'll talk some more about later. We look at the growth for organic growth level for the group and the different parts of the group for this year, we had a strong quarter. So both Q1 with about 6%, Q2 and now Q3 with about both being 5%. That is, as before, driven to a large extent by innovation. And in personal care, also new customer contracts that we have alluded on before. And we've also, of course, for personal care and tissue, both had a significant contribution from price throughout this year. You may, of course, remember that Vinda is a fast growing company. So particularly for tissue, that's certainly helping growth and the organic growth level for tissue and for the group as a whole. If you just look at Vinda and take that as a part of the total group, it accounts for approximately about 1% of total growth. So again, a strong performance by Vinda in terms of growth. If you look at the operating profit, we increased by, as you can see here, 14% and 10% roughly is organic. So if you exclude the pure translation impact from currency, we grew organically by 10%. And we did that despite a very significant raw material impact. This actually accounts for approximately 25% of the quarterly profit. So it's a very significant raw material impact. And a large portion of this comes from tissue. So if you look at the tissue operation, it is, of course, the fact that pulp is denominated in U. S. Dollars. The U. S. Dollar is strong, and that causes, of course, a very significant increase. So approximately of all the tissue impact of €560,000,000 roughly 90% is attributed to currency. And if you look at Personal Care, it's approximately €110,000,000 So actually even more than it's a very, very negative. And we've been compensating in other areas such as oil based products for taking it to the full level of increases in Personal Care. So very significant. We have compensated, as you can see, with 1,000,000 in price increases. And this is particularly strong for personal care. So 320 out of these 688 relates to Personal Care, 258 or 260 in that ballpark is relates to tissue. And for us also has a positive price and mix. So price and mix is continues to be very positive. You may wonder savings. We have said previously that our ambition is to continue to save approximately in line with what we have done in the previous couple of years, and that's also the case in this quarter. It's a good result in savings. You will actually find that in the other line here, the minus €51,000,000 And of course, it doesn't sound like good savings if you have a minus there, but it's actually a lot of different components. So basically three things that are negative: inflation, normally salary inflation and all other inflation. We have a fairly large increase, as you have seen also in previous quarter of A and P. And this has to do to large degrees degree with personal care and the INCO efforts that we put in place, also FEMPRO to some degree. And then finally, we also have much higher SG and A, primarily actually in Vinda, but more generally more sales efforts in the group. So all those three components, SG and A, A and P and inflation is more or less fully compensated by the efficiency gains that we have in our business. So once again, a strong performance in efficiency. Look at the cash flow. Magnus alluded to it, we have a on the operating cash flow level, we have improved by 7%. If you look at this slide, you can see we're actually slightly lower than we were last year. And the difference between what Magnus showed in this is that here we include also strategic investments. So it's all investments that we have in the group. And this may not appear to be a good performance, but in fact, it is actually a good performance because last year, we had a strong really exceptionally strong performance in working capital, but it also had very, very low investment. So if you look at the capital expenditure here, the 1,700,000,000 including strategic investments, it's pretty much in line with our full year forecast of between 6,000,000,000 to 6,500,000,000. So this is very much as expected. As before, cash surplus increased a little quicker than EBIT. And of course, that has to do with higher depreciation of approximately €130,000,000 or in that ballpark. Finally, we have in this quarter a very high number on items affecting comparability as Magnus already alluded to. Of course, Ottervinken and the publication paper, the closure is a very significant part of that, as you can see. But we've also done 2 other impairments. If you look at the first one, the Mexican baby diaper business, this is a nonprofitable business that we have in Mexico. We are not shutting it down. On the contrary, we've taken actions to improve that profitability from the loss making situation it is at this point. But it is our estimate that we will never be able to achieve a profitability level that supports the value we have of these brands that we use in the Mexican business. And there's a similar story relating to predominantly Sealy and Doctor. P for the Ebb Beauty acquisition. So these are pure impairment. They have no profit impact going forward, but we don't amortize on those items. Georgia Pacific, this is predominantly Olean that we have already announced. And we've also closed that facility and the rest divestment of Brahma Business Jet, we have announced. And this is the cost for that divestment. And then the last portion, the €111,000,000 that you see on this slide is predominantly advisory fees relating to the 2 transactions, Vinda and Wassa. Just a final comment here. This is 2 point close to €2,500,000,000 out of this €460,000,000 approximately is cash related and the rest is more balance sheet adjustments. So with those words, Magnus. Thank you, Frederik. And quickly a closer look then at each of our three business lines. And for Personal Care, we see good growth both in sales, operating profit and operating margin. And when looking at the operating margin, which improves with 90 basis points, actually that is including headwinds from raw materials of 2 40 basis points. So the actual improvement, taking that into account, is over 300 basis points. So very, very good work with increasing prices everywhere where we have had these raw material headwinds. Return on capital employed, this is now before items affecting comparability. It's actually above our target rate of 30%. So I think this is a good step. Moving on then to more of the market conditions and how this growth has secured, we have a good development both in mature markets and in emerging markets. And what's keeping down incontinence products again in this quarter compared to last year is the development in Inco North America Retail, where compared to a year ago, we lost approximately 2.2% market share. In all other markets, the incontinence care business is doing really, really well. And of course, we are working hard to address the issue in Inco North America now with the new organization we have in place with the transatlantic Inco business. Other than that, very, very strong volume development. And both baby diapers and Feminine Care have exceptionally strong volume growth. And Frederic mentioned the fact that we are investing more in advertising and promotion A and P and actually this is a very profitable investment when it comes to these categories and especially Feminine Care because we really see the growth, the profitable growth with high gross margins the high EBIT margin. So it seems as the more we spend here in Feminine, the more actually profit and margin we get out of it. So A and P is not only a cost, of course, it's an investment also in growth and profits. And to mention then some of our innovations, I'd like to bring up LibroTouch, which 8 out of 10 parents in Sweden say is softer than the competitive diaper. And we looks like this. It's the best diaper we ever made and it's the softest diaper we've ever made. And not only that, this is our 1st global launch of a new platform. So we launched this now in Sweden and in Finland. We are launching it in Malaysia, which is the dry purse product. You see it looks exactly the same. And we are now rolling it out also in Russia and looking at other markets. It's aligning on one brand platform, one technical platform. This takes time, but we're moving in that direction. So please feel that some of you are young enough to still have maybe some babies at home and then go out and buy it. So moving on then to Tissue. Similarly, improving net sales and operating profit. The margin is down by 40 basis points. But in this case, the raw material headwind quarter of last year's quarter is 350 basis points. So again, very, very good compensation through better price mix, better volume and saving initiatives. And return on capital employed before items affecting comparability, up 0.4% compared to last year to 13.5 percent. And our target is 15%. And then digging into the different markets and products, we have reasonably good growth in Consumer Tissue everywhere and in Away From Home in North America with 0 growth in away from home in Europe during the 1st 3 quarters of this year, partly due to the price increases that we have prioritized before volume. And as you can see also in the split, Consumer Tissue and Away From Home, that also is reflected there. But overall, good growth in the tissue business. And some innovations, I will not get into them. But again this shows the importance of being relevant with both the retailers and the distributors when it comes to Torque and always having new news to show and present. And of course, this contributes to our improved price mix and our improved volumes that we are continuously talking about new attractive innovative products with our customers and consumers. So that's why I keep bringing this up. It really underpins the development we see financially. And finally, Forest Products that has 0 growth and underlying volume growth is slightly negative. So the growth comes from pricemix and currency. Operating profit increased substantially 14% percent or 13%. And this is very much based on higher prices, including exchange rate effects. So the weaker krona and the stronger dollar really helps our forest products business. But we continue to see very good cost efficiency savings in Forest Products and in the other business units underlying. Also remember that in quarter 3, we have seasonally low energy cost, for instance. We were also helped by some seasonally low costs here. And to summarize then, good organic growth in sales and operating profits, both in Personal Care and in Tissue. And we have seen a very good price realization. And we have earlier communicated that we'll see a gradual improvement of price realization during the second half of the year. And then now with a good improvement we had in the Q3, I think we've seen most of it. So most of the initiatives that we've taken and then we, of course, always adjust to changing currency, taking the opportunity to increase prices. In Personal Care, the very good margin we also saw was partly supported by a lower promotional pressure than the same quarter last year. And this varies depending on promotion schedules a little bit between quarters. Forest, very good result. In the material, you can see that we will have some stops for planned maintenance in the Q4. We continue to have very strong efficiency gains. And I mentioned the seasonally low energy prices that we had in Q3 and normally then in the next two quarters, we see the effects of winter. And when it comes to the strategic initiatives, we are working very hard both to accelerate our profitable growth through different initiatives, but also to really address low performing parts of the business. And that's what makes up the initiatives that we have presented over the last quarter. Thank you for listening. Good. Thank you, Magnus. So let's start the question and answer session. And we have the first question there. Oscar Lindstrom from Danske Bank. I have more of a general question here with regard to the strategic initiatives that you presented today, but also earlier, now after the summer. The ones presented so far this year have tilted very much towards Forest Products with the investment in the pulp mill in Ostrand and towards tissue with the acquisition of Wassa or the proposed acquisition of Wassa. And I've also looked at sort of historically, let's say, over the past 5 years, the Personal Care division, which is your most profitable division, has only received some 20% of strategic CapEx. Are you happy with that distribution of strategic CapEx? Do you see that changing going forward? Or should we expect sort of roughly sort of distribution similar to what we've seen in the past? We want to invest in the profitable opportunities that really enhance margin for the group as a whole. And if you look at the Ostrand project, for instance, this has been prepared for the last 2 years. So it's not that it happens to happen now because of a change in strategic direction or anything like that. And ideally, we want to invest, of course, more in the high margin, high growth parts of the business. And what we have seen is, for instance, the initiative in Brazil, the initiative in India at the beginning of the year. And we are also investing quite substantially in modernizing our machine park and also our product assortment, both in incontinence care and feminine care. And the good thing is that these investments are relatively very low. So of course, that's why we want to do more of that. But still, it doesn't show compared to some of these other bigger investment. But I agree that, of course, we would want to do even more in Personal Care, which has higher margins and higher return on capital employed. Can I just add maybe one thing? Just generally, we also have a lower capital intensity in Personal Care. So it doesn't actually take that much strategic investment to grow significantly. So just generally speaking, of course, acquisition wise, it takes a lot of money. But if you just grow the business, it has a much higher capital turnover. So that's one issue. And the other thing is there are more ways of investing. And of course, one is A and P and sales. And there we have invested a significant amount both in INCO and FEMPRO. So from that dimension, we have we continue to invest a lot in Personal Care. If I may, just a follow-up on organic growth within the Personal Care business area. In this quarter, and if I remember correctly also in the previous quarters now, we've seen the highest organic growth in Feminine Care and Baby and at least in this quarter, the lowest organic growth within the incontinence business. Now I mean, you mentioned that this was due to some of the sort of challenges from competitors in North America within the incontinence business and that you hope that the new transatlantic organization would help to remedy the low organic growth within INCO. But don't you feel that there's do you feel that there's more you need to do structurally to drive that organic growth from relatively sort of low levels of around 3%? We're in good shape in Europe, and we're taking more and more initiatives in emerging markets where this category is tiny typically. And but we need to really establish ourselves early like we're doing in Brazil, for instance. So yes, we want to grow faster in Continence Care. There's also a certain price increase effect in here also that Baby and Feminine is very strong in some of the markets like Latin America and Russia where we have increased prices substantially. So that accounts for some of the growth that you see in those categories. I don't want I don't know if you want to fill me in. Yes. All right. Thank you. Yes. So next question? It's Linus Slauson with SEB. If you could talk a bit more about organic growth, which accelerated in the Q3, if you compare with the Q2 and I mean year on year. And maybe we could drill down a bit on that. Where do you see organic growth going forward? You had, for instance, 8 product launches in the Q3. Is that a pace that we should expect going forward? And secondly, if we try to break down organic growth into volume versus pricemix and then maybe divide price and mix, Could you say something about that? To what extent have we seen the price impact already from inflationary environments, etcetera? And could you say something about what the mix component has been and might be going forward? And also with regards to launches on the volume side, please? Okay. So if I start and then hand over to you about the seismic issues and so on. It's very difficult to give an estimate on launches per quarter, but I think if you sum up what we're doing year over this year, I think that's a good pace. What we're also looking at with this global with its global platform is that every launch should have a bigger impact that we launch on a bigger market, of course, so that we use the same investment in technology, but also in developing the advertising, the branding and so on globally instead of in one specific small market, which we've done and still do to some extent still. So it's not only the number of launches, but also the scale of each launch that we want to make them bigger. That was the easy question. Yes. The price and mix, Lino, that varies, of course, over quarter. So we have a positive mix also in this quarter, a positive mix contribution to profit, if that's your question. And we have that predominantly of $688,000,000 that I showed in this quarter is actually price. And it's 2 parts, as Magnus alluded to. The first one is actual price increases in Latin and Russia and all the consumer tissue, etcetera, that we talked about. And the other is a relatively low sales promotion level in comparison to what we had a year ago. So price is a higher part of the development in the quarter than mix. And sometimes it goes the other way around. So it depends on, of course, the launch pattern of new products, etcetera. But mix is clearly positive, and it will probably remain that as we go forward or will remain positive. But do you have initiatives out there which haven't yet filtered through in terms of price increases in Russia, LatAm, Asia, what have you? If we look at the big initiatives in markets that are more stable like Consumer Tissue Europe and most of those that price realization we see coming through now in 43. So don't expect significant continued improvement going forward. Then in these more volatile markets, we will always adjust with price increases as necessary as the currencies fluctuate. And what you just said, the fact for the European Tissue business as well, have you already realized the price hike gains that you're expecting to compensate for raw material cost increases? A large part of it for this time, of course, then we have new negotiations coming up next year. In Away From Home, we are still in negotiating and pushing price increases to that would then take effect beginning next year in Europe and in North America. So next question over here in the front row. Nick Kalljovsky from Kepler Cheuvreux. I'd like to continue a little bit on this price discussion as you talked about raising prices in emerging markets. Is there somewhere sort of threshold where the consumer in those parts of the world builds have difficulty in sort of continuing to pay up? I can say that we are positively surprised by how that our categories seem to continue to grow at the pace that not some other categories do. So that is our case are quite resilient because, of course, in countries like Russia, in Malaysia now the purchasing power of the average consumer is down 20%, 30%, 40%. And at some point that should impact growth, one could assume. But so far, we continue to see a fairly good growth because, of course, the penetration is still so low in these markets and you still have a growing middle class. And this is also the categories that consumers still want to buy and invest in even when their overall purchasing power comes down. So I mean, it's a very important essential. And then just a housekeeping question. On the sale of your Asian business to Vinda, did you state anyway what sort of the benefits or cost savings from that would be? No, not other than the fact that we are closing our Asian Pacific business unit office in Shanghai and that we will have costs, dollars 90,000,000 of costs relating to that. So that's kind of a short term synergy, but then we foresee big synergies going forward. But those we haven't stated, no. So any other questions? Okay. Oscar Lindstrom from Danske Bank again. Coming back to your changes in emerging markets where you've now sold most, I would assume, of your East Asian Hygiene business to Vinda. You have previously reduced your stake in or sold off your Australian and New Zealand business? And today, I mean, what percentage of your exposure to emerging markets within Hygiene is in joint ventures? Do you have a sort of It's Vinda, which is not a joint venture, which is the majority owner, but and Familia, which are the big ones. And what could that be in 1,000,000,000? It will be over 10% of sales, but maybe more exact number of our overall sales. So if you have 32% in total sales, it would be then a little over a third of our emerging market sales that is in either Familia or in Vinda. Does that sort of do you have a sort of a strategic view of that you prefer joint ventures or you like to be a full owner? Or is it more sort of whatever works in each specific market, which is the preferred strategy? With a choice, full control and full ownership, definitely. But then what you can actually achieve varies from market to market. But if you look at the trend over the last couple of years, we've been rather pulling out of joint ventures. We pulled out of the joint venture in South Africa, for instance, one that we had in the Middle East that we did last year with the majority stake in Vinda. It's still of course we have an important partner and it's listed, but we're still the majority shareholder there. So that's our preference and that's the direction we're moving in. So don't expect to see any more joint ventures going forward. All right. Thank you. Next question? Okay. So then let's open up for the telephone conference. Operator, please bring us the first question. Yes. Your first question today comes from the line of Kartik Sveinathan from Merrill Lynch. Your line is open. Kartik Svananthin from Bank of America Merrill Lynch. Thank you for taking my questions. The first was on your EM footprint. So with regards to the Vinda transaction, I only just started to get through the material that Vinda has been distributing. And I appreciate that given their listed co, certain comments will have to be relegated to their own management team. But I wanted to clarify, where does the transaction leave your balance sheet if it's going to be financed partly with their own equity and also through what I'm guessing to describe as an intercompany loan? And second part of that was given that you've made very substantial progress on your EM footprint, where does that lead you towards your target of bringing up your EM margins towards that of your developed market businesses? And how does that translate into your group target of hitting, if I recall correctly, 30 percent return on capital. So after these initiatives, should we assume that the company should be hitting that run rate either Q1 or Q2 2016? The second question I had was on raw materials. So just some clarification on what could be happening with pulp into Q4 and the remainder of the year and of course, plastics and polymers, given there seems to be a clear dislocate between what we're seeing on the screen on Bloomberg relative to what the company is experiencing? And the final question is on adult incontinence. So if you could perhaps qualify or give us a qualitative opinion as to how much the North American retail business is a drag on this year's 3% growth run rate? And Lexo, PNG and some of your other competitors, given that you're talking about a very positive return coming out of the A and P investment that you're currently putting into the market? Okay. Starting with Vinda. Initially, the gearing of Vinda will increase. We will support Vinda with an intercompany loan, as you mentioned. But over time, we have a plan that gearing will come down so that Vinda can continue on their very ambitious growth trajectory and while still keeping the balanced ownership stakes that we have today, which is very important that free float stays above 25% and that both Swan and SGA keeps our current stakes. Can I just add maybe to that your question, I guess, on balance sheet? First of all, we consolidate Binda already today. So it's already part of the group. And the actual transactions specific questions regarding Vinda, you will have to ask the management of Vinda. When it comes to the emerging market footprint, this is an ongoing process. So we don't give any forecast regarding margin improvements going forward. But of course, we hope and expect that the work we're doing will have a positive effect eventually. So but I can't be more specific than that. And the North American Inco drag, maybe before I leave that to you to think about, Frederic, but when it comes to the PNG launch that we saw now over a year ago in Europe and in North America, and they're still rolling out in some markets, They are still hovering below 10% market share in almost all markets where they launched also in the U. S. Actually. And we feel that mark we have lost some market share to P and G and also in that initial phase to private label, but we feel that market shares are now stabilizing. And more positively, the underlying market growth has really, really increased in Europe and in North America. So it's double digit and remains double digit in many markets because of the increased, again, advertising and promotion pressure from us, from Procter and from others. And of course, that's helping us in Europe where we are the incumbent and have a very strong market share, less in North America where we are reviewing our strategy. Again, remember that if you look at our overall Inco portfolio, it's a mix of healthcare and retail where retail is the smaller partner and where Inco North America is a quite small part of our overall Inco portfolio. Yes. I think your question was whether Inco U. S. Was a drag on profitability. We don't actually give numbers for individual categories or geographies for competitive reasons. And so I don't comment on that. But needless to say, of course, there's been a significant launch in the U. S. So profitability has been impacted, needless to say, from promotional things and more competitive pressure. But we don't give away numbers for individual geographies. And finally, on raw materials, if I may. What was your question on raw material? Sorry, yes. It was on understanding where pulp is heading, given we've seen quite a lot of negative pushback from apparently Chinese purchases. And secondly, on plastics and polymers moving into the 4th quarter? Yes. Again, we don't really forecast. It has been a sort of a fairly stable now level on pulp. And over time, of course, in dollar terms, it should be stable or perhaps even slightly increasing. But it's always difficult to predict. Our main issue as you have seen is, of course, the exchange rates. That's the impact for us, not the actual pulp level if you take the hygiene business. If you look at the oil based material, it's been fairly, you can say, of the trend. So if you look at the plastic indices, they were coming down quite significantly in the first part of this year, so the Q1. And then we saw an increase a considerable increase back again, back up to higher levels than at the starting point during summer. And now we've seen plastics indexes trading down. And again, this is at the same time as oil prices have been very low or stable or very low. So of course, this if this stays this way the way it is now with a lag, we should have a slightly positive impact towards 1st or second or maybe more Q2 next year, but it's really difficult to predict at this point of time. It should be slightly positive. Right now, plastics indices are coming down, and that means should mean over time that oil based materials should come down. That's great. Thank you very much. So operator, you can take the next question, please. Julie, your next question comes from the line of Celine Pannuti from JPMorgan. Your line is open. Yes. Good morning. I would like to follow-up on that last point on raw material. So I think in previous quarters, you kind of help us understanding the moving parts for the next quarter. So could we do the same here? Because I understand your point on the absolute U. S. Dollar based raw mats, but then FX, as you guys pointed, has had a big impact, and we should anniversary that given that the dollar trends really started in Q4 last year. So could you please maybe, if we look at Personal Care and if we look at Tissue, give us a bit of an estimate of how we should model those raw material impact in the next quarter? That's my first question. Yes, I can try and do that. It's always difficult without having a real good crystal ball, Celine, but I'll try to do that. First of all, we don't expect any major changes in comparison. If I start in that end in comparison to Q4 versus Q4 of last year. If you look at Q4 versus Q3, if you take Personal Care, we expect slightly higher raw material costs and this is more negative transaction effects and predominantly actually coming from emerging market currencies. So they have continued to become weaker. And therefore, we expect a slightly higher raw material level. If you take tissue, also there, slightly higher prices, and this has to do with hardwood pulp in U. S. Dollars. So that's an underlying price increase in hardwood pulp. And for forest products, basically stable. So this is pretty much the outlook. But again, of course, currency has such a big impact. So depending on what the dollar will do and not do and emerging market currency will do, that, of course, will impact more, I think. So just to recap, so if I look at tissue, slightly higher in U. S. Dollar, but the dollar, I think, you mentioned was kind of 90% of the comparison Q4 versus Q4, so the dollar rate was I think $1.25 in average during Q4, and it's clearly lower now. But if you look at Q3, it was roughly about 135. So if you just compare it last year so if you actually compare it with the change Q4, Q4, then that is, of course, a lower number simply for the dollar reason. But if you look at the absolute level that we are now buying at, of course, that's the same. Okay. But if you look at the €700,000,000 hit from raw mats that you had in the quarter, maybe let's be a bit clearer there. What should be kind of a broad base number for Q4, percent today? We don't give that forecast Celine, of course, for obvious reasons. It's really difficult to do that. But of course, as I just said, generally, if you compare it to Q3, the absolute level that we're trading at, we expect for tissue higher cost, and this has to do with higher hardwood cost or pulp hardwood pulp and of course for personal care for Latin American currencies predominantly. So and then if you compare it to Q4 of last year, it should be slightly lower simply because we have an easier comparable in the U. S. Dollar rate. Right. Okay. My second question would be on the category growth. If we look at Personal Care, of course, you had a big pricing benefit that you mentioned in emerging market, but volume growth was as well quite good. Can you talk about the category growth maybe on a global basis and in your key region and how your market share are trending against that and whether this kind of 3%, 4% volume run rate is sustainable in that category. Then I will have a last question on tissue. Okay. So overall, we have been gaining market shares in most categories except incontinence care because of the negative development in North America and also the shares we lost when PNG launched last year in Europe, but that loss has stabilized. So we have stable shares in incontinence care, stable to slightly growing shares in away from home and then improving market shares in consumer tissue, baby, feminine care in general actually. Then we have, of course, exceptions in baby where we decided to ramp down or to leave the market. And then, of course, we gradually lose market share. So but in generally, that's how we are performing. Otherwise, when it comes to the overall market development, it's still the same as we have stated all through the year actually, which means that in general, continuing good growth in emerging markets and very slow growth in mature markets, maybe with the exception of INCO in Europe, which is growing faster than before because of the reasons I already mentioned. Did you say double digit growth for INCO? Was it globally or was that Europe included? No, that was Europe. That was retail Europe, not Retail Europe, yes, not overall INCO. Okay. And then on tissue, so a few things there. You said that you put all the pricing you wanted in Q3. Does that mean that you had the full benefit already of pricing in European tissue already in Q3 or the full benefit will be there in Q4. And then in tissue as well, volume were quite good. In fact, they have been good all year, so around 3% to 4% run rate. Is that as well a run rate we should be looking at as sustainable? First one comes to the price increases, yes, I think we have seen most of the expected price realization already now during quarter 3. So actually faster than previously predicted when we said that this would come gradually under quarter 3 and quarter 4. So kind of maybe make an indication then for the next quarter. But of course, we always continue to work with our price mix, I mean, in the long term. And when it comes to volumes, yeah, I think we have good products and good sales force, and we want to keep on growing. But right now, we don't see any reason why growth should be either up or down. All right. And lastly, what about your market share in Consumer Tissue in Europe branded versus private label or in both branded and private label? We are growing most of our branded positions with exception if we have decided to really go for price again before volume. In our overall mix, it's unchanged this year, and that's because of the price increases that we are doing. And on the private label side, that's I mean, that's yes, it's a temporary mix issue. Our long term ambition is always to grow the branded part of the sales, but this year it's more or less unchanged. All right. Thank you very much. Thank you. So we continue, operator, with the rest of the questions, please. Your next question comes from the line of Rosie Edwards from Goldman Sachs. Just a couple of quick questions for me. So just firstly on the Vinda transaction. I know when the same was done in Mainland China, you talked about wanting to capitalize from Vinda's extensive distribution network. And I think you said their point of sale is over sort of 300,000. Can you give us any sort of similar data points to understand the rationale behind the further transaction today? So first, talking about that transaction. We see actually very good growth in Feminine Care and in incontinence care now through Vinda. But that you can also see from their own numbers. I want to dwell more on that going forward. What we have in the Malaysia and in some other markets is a very, very strong competence very strong market positions in personal care. And we believe now taking some of those key persons into the management team of Vinda will really support Vinda's efforts to continue to grow in personal care. And this is also one of the reasons why the new CEO of Vinda is Christoph Mikalski, who is an expert in branding and innovation in personal care that used to head up the global hygiene category for SCA before. So that's one synergy to the benefit of Vinda. On the other hand, Vinda has almost no sales of tissue outside of China. And we have a very strong distribution network in some Asian countries like Malaysia, Korea, Taiwan, Philippines, Thailand to some extent, where of course, over time, we will start to market where Vinda can be expected to start marketing tissue products. Okay. And then could you just remind us, in your Personal Care business, how much Russia is or roughly? How much Russia? I'm sort of having looked when I last looked at it, it was about sort of 8%. Does that sound? Yes. It's close. If you take the whole group, Russia accounts for approximately 3%. So yes, you're that's a good question actually. It's you're probably roughly about right in Personal Care, yes. Slightly lower for that. It's actually slightly less than 8%. Okay. Perfect. And then I mean, you've obviously been very clear that in Personal Care and in diapers, pricing has been a significant part of your growth. Are you saying of that 12%, are we looking at sort of 70% to 80 percent of that being price or is that too much? Of the 688, yes, we don't disclose it, but it's a big portion of the number is the course price. Yes. And sorry, of the 12% organic growth that you did in diapers in the quarter? I mean Yes, how much is price and how much is volume? Yes, actually, we have a good volume growth in diapers. We have a really good volume growth pretty much in Europe. We have it in many places. So we don't the exact proportion. It's actually good volume and good price. It's both. It's both. And what's driving that volume growth in Europe? It's predominantly new customers. I mentioned that previously, but it's new customers in the European market. In private label, but we're also growing market shares in the Nordic region and in Russia since the beginning of this year. So let's have the final question, I think, before we end this meeting. So the final question, operator, please. Sure. Your next question comes from the line of Robert Walslett from Liberum. Your line is open. I just wanted to come on to your reorganizations of the business and how you expect to attack things on cash flow, supply chain, logistics, etcetera. So I believe that's been a point trusted out before for a key focus. We've seen some improvements in cash flow to date, but I think there's quite a lot of scope to further improve. How should we think about that going forward? And sort of what plans do you have in place and on what time frames? We don't have any specific savings programs running that we announced externally. We have very clear targets internally and with the new hygiene organization with 2 persons specifically responsible for the supply chain, which accounts for 75% of costs in relation to sales. So it's the big cost part, cost of goods sold. With a new focus that these two persons have, 1 for personal care, Enrique Korssrud and 1 for consumer tissue, Donato Georgiou. We are now reviewing completely our entire footprint and logistics setup and operations. So but this is something they are just starting now. So but of course other than that we continuously have are working with improvements in all markets. But I guess it's fair to say that improvement in both working capital and cash conversion would be a very critical focus going forward? Absolutely. It has been and it will continue to be. Okay. Magnus, any final conclusion before we end this conference? No, I think we made those conclusions. So good growth and profit and many strategic initiatives to accelerate growth and to also address low performing parts of the business. Okay. Thank you very much for joining today. Goodbye.