My name is Joséphine Edwall-Björklund, Head of Communication. Today on stage I have Jan Johansson, our CEO, who will go through the highlights of the report. Afterwards we'll have a Q&A session where our CFO, Fredrik Rystedt, will join on stage. With this, I hand over to you, Jan.
Thank you very much and once again, welcome. I will, as I normally do, start with some macro discussions. Maybe it's needless to talk about this because everyone know that we are in a quite weak economy almost all over the world, but sometimes we need to remind ourselves anyway how that may impact business. As you know, we do have a very weak development in the global economy, where GDP forecast has been downgraded almost all the time, maybe with the exception of U.S. The political conflicts, of course, are impacting us with Ukraine, but also Middle East. If we take SCA as an example, we have been the market leader in countries like Libya, Syria, and of course, you understand it's very difficult now to have any business environment in the situation we have.
We still have a very low growth in the mature market, but in hygiene business, we do have a good growth in emerging market, as you may have seen from the report. When growth is becoming slower, then of course competition is also increasing because it's less to compete on, and we see that also in some of our markets. This quarter, we are also hit very much by, in particular, the stronger U.S. dollar. We buy all, almost the bulk of our raw materials all over the world in USD. Then, of course, if you're in Colombia is buying pulp in USD, you will have a hit. But also EUR-USD has changed quite substantially. That short-term is difficult to offset. Of course, over time, we need to take care of that. I'll get back to that a little bit later.
We do see an increased demand in Europe of kraftliner and solid wood products, which of course is very positive. In this difficult environment, we have anyway, a very strong increase operating profits and cash flow in the company. We also have good organic growth, even compared to some of our major competitors globally. We continue to work with cost efficiency. I'm going to use two slides today just to show what we're doing and some impact of that. We have several new launches. I will touch upon that also. That's one of the most important measurements we have actually to offset cost increases, but also to increase growth. We have now successfully transferred our Chinese business to Vinda, as from 1st of October. We continue to receive recognition for our sustainability work in the company, that is also giving positive business impact, in particular in the emerging markets.
Summarizing, we have a growth in sales of 16%, that of course also include the acquisition of Vinda, but Vinda had an impact of 7% on that. Still excluding Vinda, we have quite a good growth. Organic sales growth of 4%. We do not include Vinda in that since it's still regarded as an acquisition. If we do that, it would have been 5% organic growth. Operating profit is increasing by 16% if Vinda's impact of that is about 4%, underlying business is still generating quite a good profit increase. Operating margin flat, it is slightly negatively impacted by the consolidation of Vinda, because Vinda do have a lower margin in their business than we have. Excluding Vinda, we would have a slightly higher margin. Substantially increase in earnings per share, 30%.
Also, as we talked about in Q2, we are regaining some of the working capital that we tied up in Q2, in Q3 now. It's a substantial improvement of cash flow, almost 60%. Coming back to the efficiency program, because we do get questions on that, what we are doing. One major measurement or action that we have is that we have a blueprint implementation in all our plants. It sounds very simple. We have a blueprint of a perfect paper plant, and we have a blueprint of a perfect converting plant, then we implement that in all our operations over the world. That is almost finalized in the Perform to Grow program, but still we have some things to do in Georgia-Pacific, and particularly in France.
That will also during this year be more action oriented and more impact of that going forward. We also, of course, work with sourcing. We work with our warehouses, et cetera. The same in forest. If we look at some of the results, you can see that Personal Care machine efficiency in converting is going up, same in Tissue, same in Papermaking. If you take Papermaking, 3% looks like a rather small figure, but if you look in a Papermaking environment, that's actually a substantial improvement of efficiency. We also see costs coming down when it comes to sourcing, logistic, and energy consumption. The cost-saving programs are working and also working as we communicated and planned in the beginning. If we look at innovation, last quarter, we had some innovation on the incontinence side.
This quarter, we have been focusing on the feminine side, we have three new innovations that we present here. If you look at the report also, you see that we have quite a strong growth in feminine almost all over the world. That is also a category that we want to grow in. We want to be big here in the feminine category. It's mainly a branded category. It's also a category where innovation actually makes a difference to gain market share and to have satisfied customers. That's why we are focusing quite a lot in that area. Also some new innovation in Tissue, in Tempo, in Lotus, and also in our Xpressnap, where we also got a very prestigious award in the U.S. on one of our new innovations. Innovation is working.
As I have been talking about, I think for maybe a year or two now, we are in a situation where the bottleneck is on the market and not in the innovation, and that should be the bottleneck, which means that we do have new products, we have plans, new products for the coming two, three years. That is very important because that is also something we can communicate with our retailer customers. They want to know what is happening, not only next week, but also next year and two years ahead and three years ahead. That is a very positive change that we are seeing in our innovation funnel and the work we are doing now. This is also probably the best and maybe even the only way you can really offset quick cost increases in the raw material side, new innovations, new communication, new way of pricing your products.
If we look at the group, how the net sales has been growing, we have a price mix of 1% and volume of 3%. Of course, also acquisition is impacting. We also from a group level on the translation impact, a positive currency impact. That is mainly offset by transaction impact when it comes to the hit of the raw material when we go down to the P&L. It is positive in translation, negative on transaction. If we look at the different markets, in total, 4%. Mature markets, of course, still very slow, but 2%, emerging market, 9%. If we add Vinda into that, we would have had a growth of 11% in emerging markets. As I said, 5% in total. We also show here some very strong development in different countries.
Of course, we talk a lot about Russia and the problems in Russia. We are actually growing very strongly in Russia. People still need our products. Of course, we are hit by the depreciation of ruble. As long as we can produce in Russia and sell in Russia, it is more a translation impact than a transaction impact. We actually also had a decent growth in Europe during the quarter. We grew the baby with 8% in Europe in a non-growth environment, and we grew the Fempro with 9%, which also is very good. It is exactly in accordance with our strategy. We also had an Inco growth of some 2% in a market that is normally not growing. On top of that, a very good growth in some of the markets in the emerging markets.
I think we at least are proving that we are able to grow in a more and more difficult macro environment, even in a market that does not have any growth at all, like the European market. If we look at the different parts of the growth, the organic operating profit growth was 6%. We have a better product mix. We have higher volume, and of course, cost saving is coming in more and more. Consolidation on Vinda is helping us in this aspect. The very fast increase of raw material, both in price but very much in FX, is short-term difficult to offset. Operating profit flat, as I said, excluding Vinda, it would have been a slight increase in the operating profit.
Still a very strong improvement in earnings per share with 30%, as I comment on, and also a very good return of cash flow with almost 60%. Coming into Personal Care, the major impact, if I start with operating margin, is, of course, the raw material. We had increased cost of SEK 159 million in the quarter for raw material, and that would have meant everything alike, we would have over 30% margin if we wouldn't have had the short-term hit on raw material. Of course, we need to deal with this. When we deal with this in different ways, we continue to look at cost. How can we reduce our cost? Innovations will help us to offset that. We also need to look at price increases in particular categories and in particular countries. That's something we are working very hard with just now.
When we talk about Personal Care, it's obvious that I need to get into Procter & Gamble's entrance on the incontinence market. They started in U.K., they are now coming into France, Belgium, Germany. One positive thing is that the entrance of Procter has really had a positive impact on the growth of the market. The market has grown by 18% after they introduced themselves to U.K. You have to be careful with that figure. It's one month, and 80% of the sales in U.K. has been on promotion, which means that probably people are overspending now, and we will know the second, the third return to buy the products, whether or not it's sustainable. I guess it's not, because the penetration has increased slightly, but it has not increased to impact the market by 18%. They have gained some market shares.
They had some 2% market share even before they started. I think volume-wise, they've gained some 5%, 6% during this period. We have increased our sale by 5% in U.K. since they entered, and it's far too easy to say if this is going to be a success for Procter or if it's going to be difficult for us. We have to wait until the third, fourth, fifth time people are coming back to buy their product. So far, from our perspective, our tactic is working. As I said last quarter also, you can never underestimate such a big and good player as Procter. We do have an extremely strong brand. We do have the trust of the consumers. We do have the trust of the customers. We also have to remember that they are entering a piece of the market.
They are not entering the total market. The retail market in Europe is about 18% of the total incontinence market. Then we also believe that they will be into the pharmacy market, which is very different because you do sell different products in pharmacy than you do in retail, a little bit more heavy products that they are not into. They are more into the light products. If you also include the whole pharmacy market and the whole retail market in Europe, it's about 34% of the incontinence market. We continue to follow this, and we continue to, of course, to invest in TENA to keep our position. We are not substantially increasing our costs. We are redirecting some of the A&P that we were planning. This is, of course, something we need to follow every quarter and see how it's developing.
So far it's going according what we would have guessed before they enter the market. Going into Tissue we had absolutely beautiful growth in Vinda with over 20%, but with a lower margin than we have in our rest of our business. The Vinda margin is actually taking down the Tissue margin. Without that, we would have been flattish in the margin. The negative impact here is that we have less price increases in raw material than in Personal C are, but we also have quite substantial transportation costs because of two new legislation. France increased the road tax and U.S. new legislation, drivers are not allowed to drive as long as previous, they need to sleep, and that has sort of short term impacted the cost side. Good growth in away from home, gaining market share almost all over the world.
Some problems in U.S., of course, for the year, the winter problems we had is impacting. We do have an overcapacity in Tissue in U.S. now that was primarily directed to the consumer tissue. When the consumer tissue cannot absorb it's spilling over to the away from home side, that has increased the competition in U.S. Q3 to Q3, we do have a reduction in price, but we actually managed to increase the price Q2 to Q3 in U.S. Even though there is an increased competition, we have been managed to, in new contracts, actually to have an increase, small, but still an increase. Same here. If we would have included Vinda in the growth in emerging market, the growth would have been 30%, the organic growth. Of course, next year, they will be part of the organic growth.
Forest is probably the most positive surprise in the report, it's been a strong quarter. We have been able to get some price increases into kraftliner. It's about EUR 15 in Q3, and we expect another EUR 20 in Q4. We have increased sales of publication paper, even though the market is still going down. Newsprint is down with as much as 9%, and also magazine paper is down by some 2%, 3%, but we have increased our production. We have had some higher costs in our forest operations due to, you remember that we had more than five million cubic meter that was storm fell. Of course, it's much more expensive to go in to take care of that forest than it is when you can do it in an organized way.
The storm also made us buy somewhat more external forest than using our own forest, and that had an impact on the cost side. Solid woods, good demand. Unfortunately, the supply is increasing, we may anticipate some price pressure in Q4 on solid wood. Still good volumes. Of course, you have the Christmas et cetera that will impact it. Pulp is going strong, the pure forest operation is also going quite strong. We are obviously helped here also by the weaker Swedish crown.
Summarizing, in a very difficult environment where we are downgrading country after country almost every month, you look at this small country now with zero interest rates indicating that we are not as strong as maybe we believed a couple of months ago, with one exception, U.S., even though the consumer side in U.S. is not as strong as maybe the industrial side. We have to keep an eye on that because in the end, that will actually dictate the growth of the U.S., how the consumer is behaving. In spite of all this, we have substantially improved our profit, substantially improved our cash flow and earnings per share. With that, thank you, and we open the floor for questions, I guess.
Yes. We start here with Linus.
Absolutely.
Thank you. It is Linus Larsson with SEB. Just coming back to your raw material cost comments, in Q3 and Q2, there was cost inflation of SEK 158 million in the P ersonal Care and Tissue combined. Could you say how much of that was currency related? Is it possible to make a breakdown of that? Second to that, in Q4, do you have a view or guidance on this kind of potential cost inflation continuing Q4 on Q3, please?
Well, in Personal Care, it was about 50-50. In tissue, Tissue was much less than Personal Care. Personal Care, I thought it was SEK 159. It is SEK 159. Yeah. It is roughly half and half. Yeah. Currency.
In both subdivisions?
Less in Tissue. It's roughly half and half in Personal Care, a little less in Tissue.
Okay.
Great. Q4 on Q3, do you have a view at this stage what kind of raw material cost inflation we should expect sequentially?
First of all, it's very difficult to forecast the currency, because the currency more will have a bigger impact than maybe the price. The general economy doesn't really support a price increase in raw material. Normally, you would see a negative reaction on pulp price when the U.S. dollar is getting stronger, which you haven't seen in this case. Historically, it's always been like the negative correlation, you haven't really seen that. You see hardwood soften up a little bit, softwood's still very strong. We don't expect from a price point of view any substantial increase. You have the currency play, which is difficult.
Okay. Elsewhere on your variable cost side, the oil price under pressure, at what stage will you be seeing some tailwind in plastic superabsorbents, et cetera?
Well, on average, three to six months after you see oil price coming down or coming up, we will get it in the P&L.
You wouldn't expect that?
No
given your contract structure, et cetera, it's not in the Q4?
No, not Q4. More in Q1 now.
Something different, just finally, on Vinda, you say that Vinda is at this stage margin diluted. Is that what we should expect for the foreseeable future? Or at what stage will margins be on par? I understand the balance between growth and margins, but what's your thinking around that? How will you play that, do you think?
I think Vinda is a growth case, they should grow. They are, as you maybe saw from the report this morning, they are growing substantially higher than the market today. They are gaining market share. They have, in many cases, superior products to a lot of competitors since they are using the modest technology, lot of virgin fibers, the consumers are actually trading up a little bit in China now to the better products. We will continue to ride on that if we can, because there will be a huge consolidation in China. Companies will be forced to close down with oil production, we want to be the one who is going to gain that. For me, China is not a margin game, it's a growth game.
Great. Thank you.
Margareta, I think that was on the front row.
Thank you. Mikael Alfs from Kepler Cheuvreux. Couple of questions. Historically, when you have faced higher raw materials, you have been able to offset this within one and a half, perhaps two quarters. Should we think otherwise now?
I think in Tissue, absolutely. In Personal Care, as we have said many times also, you don't have the same sort of discussion with the retailers as you have in Tissue because you have a discussion with the consumers, and they need to see a benefit before they actually accept a price increase. The benefits would be the innovations we introduce, those will give a higher margin. Of course, in certain categories, we will increase the price anyway, but you can't just say generally we will increase by X% in Personal Care. We are not going to accept this. We have to do something to offset, of course, the higher cost. That's on top of the agenda for everyone now.
A second question. You have a very strong cash flow now in Q2. Could you give us some color and flavor what to do with this cash flow going forward?
Yeah, it's a difficult one. We had some weak cash flow in the first quarters and in the end of the day, of course, it's the shareholders deciding what we are going to do with the cash flow, if they believe that we are over-financed and that's something we have to get back to.
Thank you.
Oskar Lindström from Danske Bank. The European tissue business is a big part of your overall business and could you say something a little bit about the competitive environment in the European tissue business, any new capacity or price pressure and so on?
It has always been an overcapacity if we talk about mother reels now in Europe. Today we are sitting on a majority of that ourself, in terms of mother reels, which means that we try to use that overcapacity in a smart way in the markets. So far it's been working quite well. The only new investments that we know of is the WEPA, they are planning to add, I think it was 60,000 tons in Germany. Otherwise, we don't see any new capacity coming in. It's also very local, so you can't really look at Europe as Europe. You have to look more of a countries or region than actually Europe, because you can't really transport the products. It's a more difficult puzzle than just Europe.
I'd like to follow up with another question on the European hygiene market, where private label is quite prevalent. Have you seen or are you seeing any change in the share of the market that private label has in Europe, both on the baby diaper and on the Tissue side, and perhaps also on the other Personal Care products?
Tissue, it's quite stable. Actually, brands that are growing a little bit. Baby, they are gaining market shares, if you look at European, not very much, but still gaining market shares. Feminine, almost nothing. Incontinence, the bulk is still very branded, but of course you have private label coming in the more value segments than in the premium segments.
Right.
It's nothing new compared to the past five years, you could say.
Final question, if I may. The Östrand pulp mill, there was a piece of news that you'd sought to extend the environmental production permit there. Could you talk a little bit about the logic for increasing capacity at the Östrand pulp mill?
It's absolutely too early to do that. We'll come back to that. We are just looking into to see, in the end, the most important thing for that part of the business is how do we create a value on the trees, on the forest? We look at different ways of doing that, and this could be one way, we are far from any decision.
Right. Thank you.
Any more questions from the floor? If not, operator, do we have any questions on the telephone conference?
Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Thank you. First line comes from the line of Karthik Swaminathan. Please ask your question.
Hi. Thank you for taking my questions. Karthik Swaminathan from Bank of America, Merrill Lynch. My first question was on if you could please give some color and similar commentary on what happened in Personal Care in the U.S. One of your competitors on that conference call believed that it's possible private label and your TENA brand had been losing some share, due to competition in the adult incontinence space. My second question was, when thinking about raw material price progression over the next couple of quarters, I understand that soft wood is probably the closest proxy to understanding what's happening in fluff pulp, but if there's any further considerations that we need to take in supply or demand to understand how that translates into cost inflation in Personal Care, that would be very useful.
Okay. Thank you. If we start with U.S., and of course in U.S. we are much smaller in incontinence and we only have one category in the retailers, and that's the incontinence. And if we look at the development so far we are, if I remember right, Fredrik, we are flattish Q2 to Q3.
Yep
in incontinence. We have not been delisted anywhere. And we have the same strategy as we have in Europe, that we are going to defend our position. Procter has entered the market and gained some market share. Of course, KC is fighting them, Furious also in U.S. As far as we can see in this early stage, it seems like it's more cannibalizing on the feminine side in U.S. than it's in Europe, even though in Europe it's also cannibalizing on the feminine side. So far we are on track and we have not suffered as much as you would have guessed, maybe with a small position rather when you have 70% market share that we have in some countries in Europe. So we are holding up, there is of course a tough situation.
We are executing the same plan as we do in Europe to defend our position. When it comes to the pulp situation, the reason that we have had different direction with hardwood and softwood pulp is, of course, that the balance in soft has been much stronger than in hard. New hardwood is coming in as we speak. There has been a couple of new projects announced in softwood in this part of the world that, of course, will have an impact on the balance on softwood, at least as soon as they are in operation. I guess the best answer is if you follow that will give the best indication on the fluff price development.
Thank you. Just a very quick follow-up on the first answer. I was wondering, when you talk about flattish volume trends, is that with respect to your growth or your market share Q3 on Q2?
It's growth.
Growth.
Okay, thank you.
Any more questions from the telephone conference operator?
There are. Thank you. Your next question comes from the line of Rosie Edwards. Please ask your question.
Yes, good morning. Two questions from me. Firstly, just back on P&G. I think in the release you talked about P&G's intention to enter healthcare channels. I just wanted to clarify that, if so, do we know which markets they're planning to do that? Second question, is sort of a bigger picture on sort of operating margins. Two, three years ago, sort of group operating margin of 14% was speculated and talked about. What is your latest position on this, given margins are still only around the 11%?
If we start with Procter, we divide the market in sort of retail, home care, and institutional. Retail is about 18% of the market in Europe, if you add pharmacies, it's about 34% of the market. The product range in pharmacy is slightly different from the retail, because you're coming in more to heavy incontinence also, not only the very light incontinence. Procter is more targeting the light mid incontinence and not the heavy incontinence. I think also when they reported on their sales in Europe, they were sort of reporting on that segment which they are targeting, maybe not the whole market. If they would enter all the pharmacies in Europe and all the retail, they would work on 34% of the market. I don't know if that is the answer to your question.
If you look at the margin and speculation, of course, I have not speculated in the margin myself, so I'm not really sure of that. What we have is a clear target on 15% return on capital employed on Tissue and 30% on Personal Care. We feel still very confident that we will reach that figure, and maybe that is then translating to 14. I'm not sure on that.
Okay. Yeah, that's fine. Thank you.
Next question, operator.
Thank you. The next question comes from the line of Celine Panici. Please ask your question.
Yes, good morning. It's Celine Panici from JPMorgan. I have a few follow-up. My first one is on pricing. We've seen that pricing has vanished, I include that you had mix as well, benefit. It has vanished. Q2, you had some positive impact, and both Personal Care and Tissue, we've seen that there was no pricing. Can you walk us through what has happened and then what we should be looking at in the coming quarters? Could we expect pricing to come back? Second question is on China. Could you comment on how your diapers business is going? Last question on FX transaction in Personal Care and raw material. I think at the Q2 stage you were hinting that we would face a much better environment in the Q4. Is that still the case? Thank you.
If we start with the pricing, I think we communicated in Q2 also that we didn't really see any price increases, further price increases in Q3 than we already had from the beginning of the year. As I said, when it comes to Tissue, we will certainly start to implement. We have already announced in Away from Home from the 1st of January. We will start with that in consumer tissue also to offset the raw material price increases. As I also said, in Personal Care, it will be more targeting pricing and new products than the general pricing. It's of course not an accepted situation for us that we do see margins coming down, particularly in Personal C are, because in Tissue it's actually flattish from that point, even though we had all these higher costs.
SEK 159 million in one quarter is impossible to deal in that quarter. Of course, we will deal with it in one of the three ways that I mentioned. Looking at baby in China, Libero is actually doing very well. We are growing quite strong with Libero. Sealer is still losing market share. We have different development on Libero and Sealer. In the end, that's of course a quality question, because the quality of Libero is much higher than the quality of Sealer. This is something now we discuss very hard with Vinda, how to change that process. With the muscles they have and also actually with the baby production facility they have, they will be in a much better position than we were actually to change this to something positive. Third one, what was that? I think that was the FX impact on Q4.
I think this is, as you can see, largely depending on the dollar movement. It's, of course, your speculation is as good as ours in terms of how the dollar will go, but of course, in comparison to Q3, it hasn't really gone in the right way. It's largely $1 issue.
Thank you. Just to come back on my first question. If I look at Q2, you had some positive impact from pricing. Why is Q3 not as good as Q2? I understand one is some pricing pressure in U.S. away from home, but can you give us a bit more flesh on the bone on what has happened?
U.S. is of course impacting the pricing in Q3. Even if we had a price increase on new contract, we had a price decrease on old contracts. All in all, it's a reduction in price. I don't know if you have any comments on that, Fredrik.
Not really. We had some benefits in comparison and sequentially Q1, Q2, and now we've also had, for instance, in U.S., as Jan already mentioned, a slight positive increase in the U.S. There are no major price movements. I think that's the short answer. We've had some selective compensation for smaller parts of the Personal Care, but not, of course, enough to cover the raw material increase.
Thank you.
Thank you.
Yes, operator, you can take the next question.
Thank you. Sorry. The next question comes to the line of Sophie Cheung. Please ask your question.
Hi. Good morning. This is Sophie from Credit Suisse Hong Kong. My question is regarding the transaction about Vinda. Basically, we sell the China business to Vinda at the EV to sales at about 1.7 times. We think that the valuation is a little bit too high considering that some of the business are probably still at a loss. Because you just mentioned it's a growth story in China, we want to know what's your view on the growth that you expect in Vinda in China, and also, what is the potential synergy that perhaps we can see from the manufacturing or the procurement? Thank you.
I think when it comes to Vinda's strategy and Vinda's growth, I have to ask them to answer that. It's a listed company, and I really can't comment on that. Synergy side, of course, there will be a lot of synergies, both on cost side, but mainly on the distribution and sales side. We are substantially reducing the sales force and administration in China because we are sort of listing over the business to Vinda where they have all this already, which means that there will be quite a huge reduction of people overall in China if we combine SCA and Vinda. The growth case, you need to discuss with Vinda.
I see. Because last year you have quite a strong growth from your China business. Just want to know, would you still be expecting something similar or?
You probably saw the Vinda report this morning with extremely good growth in Tissue, and I talked about their products, but of course, a very important part of that is also their very, very strong distribution and sales force. Once we have properly introduced our products in Vinda, of course, I expect that that will have a positive impact on the Personal Care. Not this quarter, not next quarter, but certainly next year.
Can we expect some synergy in terms of the material procurement or the manufacturing?
You can expect synergies in many fields, including that, yes.
Okay. Thank you.
Thank you.
Thank you. Next question comes from the line of William Houston. Please ask your question.
Yes, good morning. Three questions, please. Firstly, could you update us on the pricing side of things for incontinence in the U.K., how that developed over since the P&G entry, please? Secondly, could you update us on your plans in the Spanish diaper market? Thirdly, could you just talk a bit more about the cost-cutting programs in Europe, particularly Georgia-Pacific, and how you expect capacity to change for your business over the coming quarters, please? Thank you.
If you start with the U.K. and Procter & Gamble, they have not reduced the price. The price is on par with our price, maybe even in some categories slightly higher. Of course, heavy promotion. More than 80% of the sales overall in U.K. last month has been sold on promotion. You don't see it on price, but you see it on promotion. When it comes to Spain, we are, as you know, investing in baby production in Spain, and that's mainly to supply Mercadona because we have been transporting from Poland so far, and of course, with the local production, it will substantially improve our profitability. France, there will obviously be a change of the supply situation in France, and there will probably be some closure of some businesses also as we planned when we acquired Georgia-Pacific.
We are just now in the middle of the discussions and negotiation with the unions around this. I have to come back when we have finalized that, and then you will get the exact answer what we are doing.
Sorry, just on both Spain and on France, have you got any update on timing for when the new lines will be open in Spain and when the France changes, roughly when we can expect those to come through, please?
Spain, the first line has started, and the second is starting next year. The first up and running and the second next year. France-
Running.
Sorry?
The first will be up and running or is up and running?
It's up and running.
Is up and running. Perfect. Thanks.
France, we'll come back to that maybe later this year or in the beginning of next year, depending on how the discussions are going.
Okay. Thanks very much.
Thank you.
Thank you. Next question comes from the line of Stellan Hellström. Please ask your question.
Hi. I had a question on Personal Care and pricing again. I think in Q2 you had a positive effect from pricing, I guess, related to emerging market pricing. There was no support in the third quarter from price mix. I wonder if this is reflecting higher promotional spend or if there's any other reason.
You have an answer to that?
Not really. It is a lot of promotional spend, as Jan has alluded to. It's not really that. It's been slow pricing movements this quarter.
Okay. You also mentioned pricing and costs needs to offset higher raw material costs in Personal Care. Is there anything more you can do on costs, given that you now have been largely through your hygiene efficiency program?
There's always a lot more to do on costs. Always. We started that work already some time ago, but we are not going to have any new programs, you don't have to be afraid of that, but of course, we need to do the day-to-day productivity improvement. There's always a lot to do. If you make a big program like this, you take what you see, which is obvious. When you start to dig, you'll find more than you can do, of course, we will do that also.
The cost focus will not be less just because this program ends.
No.
It's still going to be exactly the same kind of pressure.
Okay, thanks.
Operator, I understand you have two more questions. Is that correct?
That is indeed correct, yes. Would you like me to open up for the next one?
Yes, please.
No problem. Your next question comes from the line of Cham Manzo. Please ask your question.
Yes, good morning. I think I have three questions. Firstly, on baby diapers, you said that it was 8% growth in Europe and 2% overall. Perhaps on the European 8%, you could discuss where the growth is really coming from, whether the Spanish line was a big contributor to that. If the overall is 2%, it sounds as if there are declines elsewhere. Could you take us through the major declines elsewhere and why they're declines? That's the first question. The second question is on the U.S. overcapacity in tissue spilling over to away from home. Can you give us an idea of the percentage level of overcapacity impacting away from home? Is it getting worse? How quickly can it be absorbed? The third question would be on consumer tissue. Q3 is another quarter of zero organic sales growth.
Is this zero the ongoing rate we should expect? Could you just explain to us the dynamics here and what is required really to get some positive organic growth into consumer tissue?
If we start with baby, the growth was mainly in private label, Europe and in Russia. The Spanish operation has not yet impacted the growth. We had a decline in growth mainly in China, Sealers, but also some in Latin America due to some tough competition. We also sort of protected the margin a little bit more than the volume. Those two were the major negative and the major positive. What was the second?
Away from home in the U.S.
Yeah. It's an interesting development or not, I don't know how you should define it in the U.S., because there has been a lot of investment to upgrade the quality of the paper by TAD and ATMOS. Obviously, the market doesn't really want to have that. That means that they produce conventional paper with very expensive upgraded machines. Those conventional papers were mainly made to actually penetrate the private label market much more in the U.S., and that is growing quite quickly, as you know now, because all the big retailers want to have private label. The volume is so big, so it can't be consumed as fast as was anticipated. That's why you see a spillover to away from home. The spillover then is on the real commodity side on away from home. It's not on the premium side.
Today, our value added sale is more than 40% in U.S., but still almost 60% is more on the commodity side. That's where you see the pressure. It's very difficult to see when it would sort of be consumed by the market, because that depends very much how fast the private label market can grow in consumer tissue in U.S. We also looked, a couple of years ago, to really upgrade the paper quality into TAD or ATMOS in the U.S., but we saw this coming, so we actually didn't do it, because now we can buy mother reels on the market and still convert it to good products. It's positive on one side, we save capital. It's negative on the other side. The commodity side, it's more competition, not really on the upgraded side. Third?
Consumer tissue. I think your third question was on?
On consumer tissue, zero growth. Is this the new normal?
In mature markets, it's a combination of leaving some contracts that we didn't like the margin on, and also growth in other areas. The only way you can grow in a market that is not growing is, of course, by growing market share or introducing products at a higher value, and that we are doing and working on. We are not very keen on starting a price war by being extremely aggressive in gaining market shares in a market where we have 30% market share. We'd rather protect the margin, if that is an answer to your question. Of course, with new innovations, we anticipate a growth that is higher than the GDP growth. This year, we have rebalanced the portfolio a little bit more to branded and less private label, and overall, the year, it has a negative impact on the volume.
Western Europe is heavy for us still. Of course, that impacts, with the private label contracts, has a large impact, but we have significant growth in Russia. We have it in Mexico, of course, you've seen the Vinda numbers. There is a lot of different areas where consumer tissue continues to grow at very strong numbers.
Emerging market is being a bigger part of our portfolio now. It's a little bit more than 30% today, it's becoming more important for the growth case.
Okay. Until you anniversary the exit of those low margin contracts, until that anniversary happens, is the zero growth the most reasonable assumption?
Yeah. A very small growth, I would say.
Okay. Thank you.
With this, let's have the final question, operator.
Thank you. The next question comes to the line of Celine Panici. Please ask your question.
She left.
Sorry. Hello, can you hear me now?
Yeah.
Yeah, just had a follow-up. In Tissue, others, there was an almost flat, if I look at the deviation number, while you should have the benefit from the savings. Can you say what was the hit there? I am rebounding on the commentary you made about this overcapacity in Europe, at which point you will have to tackle that, because I presume that probably is a drain as well on your EBIT and maybe a restructure. Thank you.
You mean overcapacity in Tissue in Europe?
Yes.
We have had overcapacity in Europe for the past 50 years. It's less now, actually, than we've seen in the past, also, we are sitting on the bulk of it, which means that it's easier to manage where the overcapacity should come out. Of course, if we can sell mother reels to a competitor and avoid an investment in new capacity at that competitor, that is of course better for the market and us, than not doing that. We do sell quite a lot of our overcapacity mother reels to competitors today, which in my view is quite a good thing.
You had the question, Celine, on Tissue other. That's largely distribution. It's what Jan alluded to. We have new road tax in France, we have new legislation in the U.S. as to how many hours a truck driver can drive before taking a rest. That's had a fairly significant impact. That's basically that impact.
Thank you.
Okay, any final remarks, Jan?
Thank you. I think we have touched upon the most important subject. We have, of course, a couple of major things. We have the global economy. We have the good growth that we have in spite of the global economy. We have the hit of the raw material. Overall, we still have been able to improve the profit and the cash flow and the profit per share. I think we have actually proven that we do have a strong brand portfolio, and we do have a strong market presence, and we can actually grow even in a very difficult environment. With that, thank you very much.