Earnings Call: Q3 2014

Oct 29, 2014

Name is Josephine Edwell, Head of Communication. And today on stage, I have Jan Johansson, our CEO, who will go through the highlights of the report. And afterwards, we'll have a Q and A session where our CFO, Fridrich Christe, will join on stage. So 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. And 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. And 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 S. The political conflicts of course are impacting us with Ukraine, but also Middle East. If we take SA 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 a 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. And 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 dollar. And then of course, if you're in Colombia is buying pulp in dollar, you will have a hit, but also euro dollar has changed quite substantially. And that short term is difficult to offset. But 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 efficiencies. I'm going to use 2 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 October. And 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% and that of course also include the acquisition of Vinda. But Vinda had an impact of 7% on that. So still excluding Vinda, we had quite a good growth. Organic sales growth of 4%. We do not include Vinda in that since it's still regarded as an acquisition. But we do that, it would have been 5% organic growth. Operating profit is increasing by 16%. Vinda's impact of that is about 4%. So underlying business is still generating quite a good profit increase. Operating margin flat, and it is slightly negatively impacted by the consolidation of Vinda, because Vinda do have a lower margin in their business than we have. So excluding Vinda, we would have a slightly higher margin. Substantial increase in earnings per share 30%. And also as we talked about in Q2, we are regaining some of the working capital that we tied up in Q2 in Q3 now. So it's a substantial improvement of cash flow of almost 60%. Coming back to the efficiency program because we do get questions on what we are doing. One major measurement or action that we have is that we have a blueprint implementation in our plants. And it sounds very simple. We have a blueprint of a perfect paper plant and we have a blueprint of a perfect converting plant and then we implement that in all our operations over the world. And that is almost finalized in the Perform2grow program, but still we have some things to do in Georgia Pacific and particularly in France. And 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, etcetera, etcetera. And the same 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 and same in papermaking. And if you take papermaking 3% looks like a rather small figure. But if you look in the papermaking environment, that's actually a substantial improvement of efficiency. And we also see costs coming down when it comes to sourcing, logistic and energy consumption. So 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 and we have 3 new innovations that we present here. And if you look at the report also you see that we have quite strong growth in Feminine almost all over the world. And 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 make a difference to gain market share and to have satisfied customers. So that's why we are focusing quite a lot in that area. But also some new innovation in tissue, in Tempo, in Lutus and also in our Express Snap, where we also got a very prestigious award in U. S. On one of our new innovations. So innovation is working. And as I've been talking about I think for maybe a year or 2 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 2, 3 years. And that's very important because that's 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 2 years ahead and 3 years ahead. So that's a very positive change that we're seeing in our innovation funnel and the work we are doing now. And 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. Then of course also acquisition is impacting. But we also from a group level on the translation impact of positive currency impact. Then that is mainly offset by transaction impact when it comes to the hit of the raw material when we go down to the P and L. So it's positive in translation, negative on transaction. And 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. And as I said 5% in total. And we also show some very strong development in different countries. And 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. Then of course we are hit by the depreciation of ruble. But as long as we can produce in Russia and sell in Russia, it's more a translation impact than a transaction impact. We actually also had a decent growth in Europe during the quarter. We grow the baby with 8% in Europe in a non growth environment and we grow the FemPro with 9%, which also is very good. It's exactly in accordance with our strategy. And we also had an income growth of some 2% in a market that is normally not growing. On top of that, very good growth in some of the markets in the emerging markets. So, I 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 doesn't have any growth at all like the European market. And then 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. But then 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, but 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 and the major impact if I start with operating margin is of course the raw material. We had increased cost of SEK159 1,000,000 in the quarter for raw material. And that would have meant everything in like we would have over 30% margin if we wouldn't have had the short term hit on raw material. And of course, we need to deal with this. And 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. But we also need to look at price increases in particular categories and in particular countries. So that's something we are working very hard with just now. When we talk about Personal Care, it's obvious that they need to get into Procter and Gamble's entrance on the incontinence market and they started in U. K. Then are coming into France, Belgium, Germany. One positive thing is that the entrance of Proxom has really had a positive impact on the growth of the market. The market has grown by 18% after they introduced the same to U. K. But you have to be careful with that figure. It's 1 month. And 80% of the sales in the 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 so it impacted the market by 18%. They have gained some market shares. They had some 2% market share even before they started. And I think volume wise, they've gained some 5%, 6% during this period. We have increased our sales by 5% in U. K. Since they enter. And it's far too easy to say if this is going to be for Procter or if it's going to be difficult for us, we have to wait until the 3rd, 4th, 5th time people are coming back to buy their product. But so far from our perspective, our tactic is working. But as I said last quarter also, you can never underestimate such a big and good player as Procter. But we do have an extremely strong brand. We do have the trust of the consumers. We do have the trust of the customers. And 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 income market. And 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're more in the light products. But if you also include the whole pharmacy market and the whole retail market in Europe, it's about 34% of the income market. But we continue to follow this and we continue to, of course, to invest in Tiena to keep our position. We are not substantially increasing our costs. We are redirecting some of the A and P that we were planning. And this is of course something we need to follow every quarter and see how it's developing. But so far, it's going according what we would have guessed before they enter the market. Going back to coming into tissue. And 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. So the Vinda margin is actually taking down the tissue margin. Without that we would have been flattish in the margin. And the negative impact here is that we have less price increases in raw material than in personal care, but we also have quite substantial transportation costs because of 2 new legislation. France increased the road tax and U. S. New legislation drivers are not allowed to drive as long as previously and 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, but we do have an overcapacity in tissue in U. S. Now that was permitted directed to the consumer tissue. When the consumer tissue cannot absorb it, it's spilling over to the away from home side. And that has increased the competition in U. S. And Q3 to Q3, we do have a reduction in price, but we actually managed to increase the price Q2 to Q3. In U. S. So 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. And the same here, if we would have included Vinda in the growth in emerging market, the growth would have been 30% the organic growth. And of course, next year, they will be part of the organic growth. Forest is probably the most positive surprise in the report and it's been a strong quarter. And we have been able to get some price increases into Kraftliner. It's about €15 in Q3 and we expect another €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 operation due to you remember that we had more than 5,000,000 cubic meter that was a storm felt. And of course, it's much more expensive to go in to take care of that forest than it is to when you can do it in an organized way. And 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. So we may anticipate some price pressure in Q4 on solid wood, still good volumes. So of course, you have the Christmas etcetera that will impact it. Pulp is going strong and the Pure Forest operation is also going quite strong. And we obviously have tear ons by the weaker Swedish crown. So summarizing in a very difficult environment where we are downgrading country after country almost every month. And you look at this small country now with the 0 interest rates indicating that we are not as strong as maybe we believed a couple of months ago. We may be one exception U. S. Even though the consumer side in U. S. Is not as strong as maybe the industrial side. So 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 profits, substantially improved our cash flow and earnings per share. So with that, thank you and we open the floor for questions I guess. So we start here with Linus. It's Linus Slauson with SEB. Just coming back to your raw material costs comments. And in Q3 and Q2, there was costs inflation of DKK 158,000,000 in the 2 in Personal Care and Tissue combined. Could you say how much of that was currency related? Is it possible to make a breakdown of that? And second to that in Q4, do you have a view or guidance on this kind of potential cost inflation continuing Q4 on Q3 please? In Personal Care, it was about fifty-fifty. In Tissue, it was Tissue was much less than Personal Care. Personal Care I thought it was €159,000,000 and Tissue was It is €159,000,000 So but roughly half and half, currency? In both subdivisions? Less in Tissue. So it's roughly half and half in Personal Care, a little less in tissue. Okay. Great. And Q4 and Q3, do you have a view at this stage what kind of raw material cost inflation we should expect sequentially? I mean, first of all, it's very difficult to forecast the current because the current move will have a bigger impact than maybe the price is sort of the general economy doesn't really support a price increase in raw material. And normally you would see a negative reaction on pulp price when dollar is getting stronger, which you haven't seen in this case. I mean, one would in history, historically it's always been like a negative correlation, but you haven't really seen that. I mean, you see hardwood softening up a little bit, but softwood is still very strong. But we don't expect from a sort of a price point of view any substantial increase. Then you have the currency play, which is difficult. And elsewhere on your variable cost side, I mean, the oil price under pressure, at what stage will you be seeing some tailwind in plastics, super absorbents, etcetera? Well, in average, 3 to 6 months. After you see oil price coming down or coming up, we will get it in the P and L. So not you wouldn't expect that given your contract structure, etcetera. It's not in the Q4. No, not Q4. More in Q1 then. And then something different just finally on Vinda. You say that Vinda is at this stage margin dilutive. 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 and they should grow. And they are as you maybe saw from the report this morning they're 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, lots of virgin fibers And the consumers are actually trading up a little bit in China now to the better products. And 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 and we want to be the one who is going to gain that. So for me China is not a margin game. It's a growth game. Great. Thank you. Margarita, I think that was on the front row. Thank you. Mikhail Jovs from Kepler Cheuvreux. A couple of questions. Historically, when you have faced higher raw materials, you have been able to offset this within 1.5, perhaps 2 quarters. Should we think otherwise now? I think in tissue, absolutely. In personal care, as we have said many times so and so, it's not you don't have the same sort of discussion with 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. And the benefits would be the innovations we're introducing. So those will give a higher margin. But of course, we in certain categories we will increase the price anyway. But you can't just say generally we will increase by X% in Personal Care. But it's absolutely we are not going to accept this. I mean we have to do something to offset of course the higher costs. So that's on top of the agenda for everyone. And then 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? Yes. It's a difficult one. I mean we need to I mean we had some weak cash flow in the 1st quarters. And in the end of the day, of course, if 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. Oscar Lindstrom 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 is has always been an overcapacity and if we talk about mother reels now in Europe. And today, we are sitting on, well, a majority of that ourselves in terms of mother reels, which means that we try to use that for the capacity in a smart way in the market. And so far, it's been working quite well. The only new investments that we know of is the WEP, they are planning to add, I think it was 60,000 tonne in German. 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 countries or region than actually Europe, because you can't really transport the product. So 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, branded 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, it's still the bulk is still very branded. But of course, you have private label coming in the more value segments than in the premium segments. So it's nothing new compared to the past 5 years, I could say. And a final question, if I may. The Ostrand pulp mill, there was a piece of news that the you'd start to extend the environmental production permit there. Could you talk a little bit about the logic for increasing capacity at the Ostrand pulp mill? It's absolutely too early to do that. So we'll come back to that. We are just looking into it to see. I mean, 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. And we look at different ways of doing that. And this could be one way, but we are far, far from any decision. Right. Thank you. So any more questions from the floor? If not, then operator do we have any questions on the telephone conference? Thank you. First line comes from the line of Kartik Swamy. Please ask your question. Hi. Thank you for taking my questions. Kartik Swamy Nathan from Bank of America Merrill Lynch. My first question was on if you could please give some color and some of the 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 TENNA brand had been losing some share due to competition in the adult income space? And then my second question was when thinking about raw material price progression over the next couple of quarters, I understand that softwood 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 U. S. In U. S. We are much smaller in continents and we only have one category in the retailers and that's incontinence. And if we look at the development so far, we are if I remember right, Frederic, we're flattish Q2 to Q3. In Continence, position. Protefill has entered the market and gained some market share. Of course, KC is fighting them, furious also in U. S. But 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. But 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, but there is of course a tough situation. But 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 hard 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. Now there has been a couple of new projects announced in soft wood in this part of the world that of course will have an impact on the balance of soft wood at least as soon as they are in operation. But I guess the best answer is if you follow that, that will give you the best indication on the flat price development. Thank you. And 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. Okay. Thank you. Any more questions from the telephone conference operator? 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 PNG. I think in the release, you talked about PNG's intention to enter health care channels. I just want to clarify that. And if so, do we know which markets they're planning to do that? And then second question, sort of bigger picture on sort of operating margins. I mean 2 or 3 years ago, sort of group operating margin of sort of 14% was speculated and talked about. What is your latest position on this given margins are still only around the 11 percent? If we start with Procter then, the I mean, we divide the market in sort of retail, home care and institutional. Retail is about 18% of the market in Europe. And then if you add pharmacies, it's about 34% of the market. The product range in pharmacy is slightly different from the retail because then you're coming in more to heavy Inco side also not only the very light Inco side. And Proctil is more targeting the light mid Inco side and not the heavy Inco side. And I think also when they reported on their sales in Europe, they were sort of reporting on that segment which they're targeting, maybe not the whole market. So 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 of your question. If you look at the margin and speculation, of course, I have not speculated in the margin myself. I'm not really sure of that. But what we have is a clear target on 15% return on capital employed on tissue and 30% on personal care. And we feel still very confident that we will reach that figure. And maybe that is then translating to €49,000,000 I'm not sure on that. Okay. Yes, that's fine. Thank you. And the next question operator? Thank you. The next question comes from the line of Celine Pennucci. Please ask your question. Yes. Good morning. It's Celine Panucci from JPMorgan. I have a few follow-up. My first one is on pricing. We've seen that pricing has vanished and include 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. So 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? And 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. And 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 January. And 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 in your products than the general pricing. But it's of course not an acceptable situation for us that we do see margins coming down in particularly in Personal Care because in T shirts actually flattish from that point of view even though we had all these higher costs. But €159,000,000 in 1 quarter is China, Libro is actually doing very well. We're growing quite strong with Libro. SealyR is still losing market share. So we have different development on Libre and sealer. And in the end, that's of course a quality question because the quality of Libre is much higher than the quality of sealer. And this is something now we discuss very hard with Vinda how to change that process. And 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. 3rd one was on that. Think that was the FX Celine that was the FX impact on Q4. I think this is as you can see largely depending on the dollar movement. So 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. So it's largely a dollar issue. Okay. Thank you. Just to come back on my first question. If I look at Q2, you had some positive impact from pricing. So why is Q3 not as good as Q2? So 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. Also even if we had a price increase on new contract, we had a price decrease on old contracts. So all in all, it's a reduction in price. I don't know if you have comments on other? Not really. I don't I mean, we haven't had we had some benefits in comparison and also 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. So 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 to cover enough to cover the raw material increase. Thank you. Thank you. Yes, operator, you can take the next question. Thank you. The next line sorry, the next question comes from the line of Sophie Chu. Please ask your question. Hi, good morning. This is Sophie from Credit Suisse Hong Kong. My question is regarding the transaction that you about Vinda. So basically we sell your the China business to Vinda at EV to sales at about 1.7 times. And do you we think that the valuation is a little bit too high considering that some of the business are probably still at loss. So we just we want to know that what is your because you just mentioned it's a growth story in China. So we want to know what's your view on the growth that you expect in Vinda in China? And also, what is the synergy potential synergies 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. I mean 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. And 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 SAE and Vinda. But the growth case you need to discuss with Vinda. I see. But because last year you have quite a strong growth from your China business. So just want to know would you still be expecting something similar or? It's I mean, you probably saw the Vindra 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. And 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 PNG entry, please? Secondly, could you update us on your plans in the Spanish diaper market? And 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 we start with the U. K. And Procter and Gamble, They have not reduced the price. So the price is in par with our price, maybe even in some categories slightly higher. But of course heavy promotion. More than 80% of the sales overall in U. K. Last month has been sold on promotion. So 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 the baby production in Spain, and that's mainly to supply Mercadona because we have been transported 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 the Georgia Pacific. And we are just now in the middle of the discussions and negotiation with the unions around this. So I have to come back when we finalize 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 lines will be the new lines will be open in Spain and when the France changes we can be roughly when we can expect those to come through please? Spain is first line has started and the second is starting next year. So the first up and running and the second next year. France sorry? The first will be up and running or is up and running? It's up and running. It's up and running. It's up and running. Okay. Thanks. And 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 Hellstrom. 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 Q3 from pricemix. And I wonder if this is reflecting higher promotional spend or if there's any other reason? You haven't answered that. I don't think it's a Not really. I don't think it's particularly it is a lot of promotional spend as Jan has alluded to, but it's not really that. It's been slow pricing movements this quarter. Okay. You also mentioned pricing and cost as a means 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. So we started that work already some time ago. We're 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 problem like this, you take what you see which is obvious. When you start to dig you find more than you can do and of course we will do that also. And the cost focus will not be less just because this program ends. It's still going to be exactly the same kind of pressure. Okay. Thanks. So operator, I understand you have 2 more questions. Is that correct? That is indeed correct, yes. Would you like me to open up for the next question? Yes, please. No problem. Your next question comes from the line of Charles Mando. 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. And if the overall is 2%, it sounds as if there are declines elsewhere. So could you take us through the major declines elsewhere and why there are 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? And the third question would be on consumer tissue. Q3 is another quarter of 0 organic sales growth, is this 0 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. And we had a decline in growth mainly in China sealers, but also some in Latin America due to some tough competition. And we also sort of protected the margin a little bit more than the volume. So those 2 were the major negative and the major positive. And what was the second? Away from home in the U. S? Yeah, yeah. It's an interesting development or not. I don't know how you should define it in U. S. Because there has been a lot of investment to market doesn't really want to have that. So that means that if you use conventional paper with very expensive upgraded machines. And those conventional papers were mainly made to actually penetrate the private label market much more in U. S. And that is growing quite quickly as you know now because all the big retailers want to have private label. But the volume is so big, so it can't be assumed or consumed as fast as was anticipated. So that's why you see spillover to away from home. And the spillover then is on the real commodity side on away from home. It's not on the premium side. Today we have our value added sale is more than 40% in U. S, but still almost 60% is more on the commodity side. So that's where you see the pressure. And 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. And I mean we also looked a couple of years ago to really upgrade the paper quality into Tier Atmos in U. S. But we saw this coming. So we actually didn't do it because now we can buy motherfills on the market and still convert it to good products. So it's positive on one side. We save capital. It's negative on one other side. The commodity side is more it's more competition, not real on the upgraded side. 3rd? Consumer tissue. I think your third question was on? On Consumer Tissue, 0 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. I mean 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. But 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. Then we'd rather protect the margin, if that is an answer to your question. But of course, with new innovations, we anticipate a growth that is higher than the GDP growth. But this time of the 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. And Western Europe is heavy for us still. And of course, that impact with the private label contract has a large impact, but we have significant growth in Russia. We got it in Mexico. And of course you've seen the Vinda numbers. So there's a lot of different areas where Consumer Tissue continues to grow at very strong numbers. And emerging market is being a bigger part of our portfolio. And I'd say it's a little bit more than 30% today. So it's becoming more important for the growth case. Okay. But until you anniversary the exit of those low margin contracts until that anniversary happens is the 0 growth the most reasonable assumption? Yes. Or a very, very small growth, I would say. So with this, let's have the final question, operator. Thank you. The next question comes from the line of Celine Bonnichi. Please ask your question. Sorry, hello. Can you hear me now? Yes. Yes. Just had a follow-up. In tissue orders was there was almost flat if I look at the deviation number, while you should have the benefit from the savings. So can you say what was the hit there? And 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. And it's less now actually than we've seen in the past. And also we are sitting on the bulk of it, which means that it's easier to manage where the overcapacity should come out. And of course, if we can sell mother reels to a competitor and avoid an investment in your capacity at that competitor, that is of course better for the market than us than not doing that. So we do sell quite a lot of our overcapacity model is 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. Then we have new legislation in the United States as to how many hours a driver truck driver can drive before taking a rest. So 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. And 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. But overall, we still have been able to improve the profit and the cash flow and the profit per share. So 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 a very difficult environment. So with that, thank you very much.