Earnings Call: Q2 2014

Jul 18, 2014

Hello, and welcome to SCA's Quarter Report for the Second Quarter 2014. My name is Josephine Edbo, and I'm Head of Communications for SCA. Today, we have our President and CEO, Jan Johansson, who will walk through the report. And we will have a question and answer session where also our new CFO, Frederic Kerstet will join. So with this, I hand over to you Jan. Thank you very much. And as usual, I will start with a general market update and I think you recognize this now. It hasn't been changed I think for a couple of years. It's still quite a weak market in the mature market with some exceptions. I will get back to that a little bit later. And we still have a good momentum in emerging markets overall in the hygiene business. If we look at the forest business, we still see as also expected that publication paper demand is coming down. I will get back to that answer a little bit better, but also an improved market for solid woods. Going into our own business, we did have quite a good organic growth during the quarter, strong EBIT development. Efficiency program is working according to plan. We also have several launches in all our major brands during the quarter. We have now finalized the floating of our joint venture in Australia. And we also as you may have seen announced this morning that we have transferred our operation in China into Vinda. Coming back to that deal that we have done. As we have communicated previously also, one of the major reasons for actually going up to the major shareholder in Vinda was to be able to capitalize on their extremely strong position in China with more than 300,000 points of sales. And in doing that now, we will transfer all the Chinese operation. And as you remember from our acquisition from Evbuuti, we also acquired some part of Taiwan. Taiwan will not at this stage be included in Vinda. But of course, the ambition is that going forward that will also be a part of Vinda. But we want to start with China to make sure that we have a smooth transition that we can get all the competence into Vinda in the right way. And the transaction does not have any impact on our P and L. This is also subject then to the approval by the Cheron of Savindas. There will be an AGM in the coming months. The summary of the group. We have an increase of sale of some 12% if we exclude Vinda. Vinda impact that with 7% of the sales. The organic growth is 3.3%. It's at 3% here. If we include the organic growth of Vinda after the acquisition, the growth would have been organically 4%. 6% and gross margin sorry, 6% and gross margin sorry, operating margin up with 150 basis points. Earnings of shares up 56 percent. Operating cash flow 28%. I will comment on some of these figures of course a little bit later, but this is also a good summer of the quarter. What is also very good is that we continue to launch new innovations under our major brands. And this quarter, we have had new features, new product coming into the market both in TENA, Librez, Libre and also in Away From Home. These launches have of course as we also mentioned in Q1 had an impact on the cost situation because we have rebuilt machines. We have start up costs when we introduced new products in the market. But now we have the first one introduced to the market. And so far it's working as well as we hoped it should do in the plans. In Away From Home, we have an innovation that we call Blue and this is really changing the sort of management of bathrooms in terms of toilets. It's a system that helps to clean the toilet. It's a system that kills odors from the toilet. But also maybe most important, it can actually reduce water consumption with more than 30%. And in some countries, of course, water is a scarce resource. And it's already implemented in Holland and now we'll start the launch in other parts of the world. At the same time also directed to facilitators of commercial bathroom is EasyCube, which will help the facilitators to really be at the right place at the right time where you need to clean the bathroom when you see that the traffic is very high, because they can't see that today. So they have to send out people without actually knowing if it's necessary or not. So this will really help our customers to save time and to save money. We also have a very interesting new wet wipe. And this wet wipe is not only cleaning, it's also killing bacterials. So it's a cleaning of a bacteria killer at the same time. We introduced this in U. S. Now, but then of course it will also be launched in other countries. So from an innovation perspective, I think we've been talking about that quite a lot now that the bottleneck is not now in innovation. The bottleneck is in the market where it should be and we will gladly see new innovations coming out to the market. And this is a few good example of what we've been doing during this quarter. Coming back to the group. As I said, organic growth of 3% or 3.3% and 4% with Vinda and we have growth in all our business areas. And in the emerging market, we have some exceptional growth in some markets. I will also touch upon that a little bit later. But we also see forest picking up when it comes to increase of sales. Operating profits, up by 29%. The organic profit grew up 11%. So we try to help to divide from the organic profit growth and including acquisition etcetera. And we have better price mix. We have higher volumes. Of course, cost saving is kicking in. Acquisition of China, which is not included in the organic growth. It's included in the 29%. Gain from Force Swap this quarter also. But we also have some substantial higher costs in raw materials in particular in Personal Care and I will get back to that when I talk about Personal Care. Sorry. And operating cash flow also increased by 28%. Another way of looking at the net sales growth is you can see on this chart where we have pricemix volume acquisition and currency. And pricemixvolume is then 3% of the organic growth in the company. But then of course we add acquisition and then we also have a positive currency impact on the growth. But here you can see all the component that is actually creating the growth in the company. If we look at geography and I started to say that the mature market is stable, which means that there's virtually no growth. And you can see here that we only have 1% growth in mature market, but in emerging markets we have 9% growth. And in some countries and I give a few example here in Feminine Care Latin America 90% growth. We have incontinence Latin America 23% growth incontinence Russia 29% growth. And you remember that we did have a problem in Russia when they took away 30% of the reimbursement overnight and now we're actually picking that back without any change in the reimbursement. That shows maybe a little bit the strength of the brand Tianna. And also tissue in Russia is growing by 22%. But also positively in the mature market, we are growing away from home in Western Europe with 5%, which I think is also strength to the brand Torque. And with the new innovations coming in, which of course will take some time, especially the one on the bathroom, but that will certainly help us to get a stronger position in the markets. Some comments on this one and maybe one on operating cash flow and we do have quite a good increase in that. But overall, if we look at the cash flow year to date, we are not really satisfied with that. It should be stronger. And the main reason for that is actually all in receivables and which is of course possible because that will come into the company during Q3. But normally you should have seen a stronger cash flow. And the good thing is that we don't see any increase in inventory except some in forest because of the storm. And we have to take care of the tree that has been falling of course and that has a slight impact on the forest inventories. Debt to equity ratio 54% to 56% impacted by VINZ acquisition, but also the increase in the pension debt due to the long interest rates going down and that immediately have an impact on the pension, but still on a very low level compared to our target on 0.75. So coming into Personal Care. We had a cost increase in raw materials and currency impact of SEK196 1,000,000. And if we just take the currency impact out of that and add it to the operating profit, operating profit would actually go up by 9% instead of going down as you see in the result today. And we did also communicate in Q1 that we saw high raw material prices in fluff price for personal care. And we will continue to see some uplift in pulp price in Q3, but then it will come down. Since we have a delay in the market price into our operations, we can see fab pulp sorry actually is going down now. But since we have the previous quarter last month or the 2nd month of the previous quarter impacting Q3 there will be a slight increase even in Q3 not as much as you've seen from Q1 to Q2. And the currency changes is not continuing. We see that the currency is also being stabilized in these terms. Also here, mature markets is no growth. The good thing is that the emerging markets today is 43% of our sales in Personal Care. So we are growing that quarter by quarter. And as you know, we also have a target to be at least at 50% and hopefully above that emerging market sales from the Personal Care. The good thing though is that Q1 to Q2, we have a growth even in mature market of 5% in Personal Care. Some examples here when it comes to growth. And of course from a small base still in a very competitive environment. We have grown TENA in China with 35%, Q2 to Q2. We have grown TENA in Latin America with 23%. We have grown TENA in Brazil with over 30%. Libra China growth 89% Q222 to Q222. So we have some very good growth momentum in some of our growth markets, which we of course will continue to capitalize on. But the main downside in Q2 in Personal Care is actually on the raw material and currency impact. Otherwise, we have a positive price mix, we have a positive volume growth in Q1 to Q2 even in mature market a growth of 5%. Coming back to tissue, sales growth of 18%. Of that Vinda stands for 13%. We have an organic sales growth of 2% excluding Vinda, but also positive pricemix and positive volume and also very strong growth in the volume market as I comment. I can mention maybe a few more figures. So Away From Home China is up 29% Tempo China up 44% and Away From Home Latin America up 10% compared to Q2 last year. Also comment a little bit on North America since we did have the severe impact of the winter in Q1, we actually have seen the U. S. Market coming up with as high as 21% Q1 to Q2. So it was a winter effect and now we actually see the market coming back. When it comes to mature markets, which we also explained in Q1 was that we did leave some private label contracts that had an impact on the volume on sales and that is taking down mature markets with 1 percentage point in sales. But we have grown the branded market in Europe with 2%. So we have shifted the private label to branded. But of course, the volume private label is bigger than the volume branded. But in a transition way, it's a positive thing if we can actually switch from very low profitability private label to higher profitability branded sales. We also have Q1 to Q2 an increase in sales in mature markets with 4%. So it has been picking up since Q2 to Q2. Forest Operations, we did have another forest swap this quarter €175,000,000 We had 1 in Q1 also. I think it was €152,000,000 €2,000,000 if I remember rightly. But Q2 last year, we didn't have a swap. So that's of course the comparison you can see here. But even if you remove the impact of the forest swap, we have increased the margin to 10.6%. So it is really a good improvement in the forest operation. The difficult part is still publication paper and it is all qualities in publication paper. Consumption is down as I said with some 4%. And we estimate that we will in relation to this see actual price decrease in publication paper for the second half year. On the other hand, solid wood stronger and pulp is going strong. We did not get the price increase in kraftliner because the market didn't follow our announcement on price increases. But we now see companies in Europe announcing price increase in testliners. And if that is sticking on, then of course, there will be a price increase in kraftliner also. Because if the difference is too big between kraft and testliner, you can actually swap some of the kraftliner to testliner, not all of course. But the relation needs to be within certain boundaries. Otherwise, it's difficult only to increase the testliner prices, but overall a strong performance. Some comments on Procter and Gamble and once again entering the incontinence markets. And they have started in U. K. And launched their new incontinence under the same brand as the Feminine brand. And the result so far is actually that we have increased our sales in the U. K. Since their introduction. The good thing with Proctil once again is coming into incontinence is of course that it will help to drive penetration. And you know penetration is very low even in the mature market. It's below 40% in the European market. And if we are too driving penetration, it's of course better than if we are on the one driving penetration. They are mainly focusing on retail. And as you know, we are of course very strong in retail in Europe, but we're even stronger on what we define in health care. It's on a global level, it's more than 70 30, 70 home care and then 30 retail. We have of course known about this for some time that they were going to introduce incontinence. We have been given time to prepare ourselves and we will defend our positions. We have looked into the products. You should never of course underestimate Procter and Gamble. It's a great company and great innovation skills. But what we have seen so far, the product is not very different from what you can find on the market. And it's too early to see if we need to do something more or not. We don't anticipate that we will increase our A and P this year from where what we've been communicated, but we will reallocate A and P from other areas to incontinence to defend our position. And we do have an extremely strong position with the TENA brand. And as you know, we are more twice the number 2 on the global market and we are dominating the European market. And the U. S. Market, which is probably the weakest position we have, the total ink market in the U. S. And Canada is about 10% of the Inco sale. If you took a look at the retail U. S, it's about 5% of our sales and adding quite a little to the profitability. But of course, we have the ambition to continue to be number 1. We have done it before and we will try to do it again to defend our positions in the market. So summarizing market you know good organic growth in the company improved profitability efficiency program is working several new launches and of course important to launch new features and new products on under the brand TENA in a situation like that. This will help us to defend our position. And we have finalized Australia and we also finalized what we have communicated to integrate our Chinese business into Vinda. So with that, I will open up the floor for questions. Will ask Frederic to join me. Yes, Linus, start with the first question. Thank you. Thank you very much. It's Linus Slazo with SCD. You displayed a lot of big positive figures in terms of organic growth across your various categories. Could you maybe also highlight which the laggards are where? Because I understand you have some negative growth in certain categories or geographies within the group. Would you care to highlight those as well? Well, we are still not we're still struggling with sealer in China, which is a tiny, tiny part of our business. And as I said in Q1 also, it will take time before we're back to where we were 1 year ago since we lost so much in Q3, Q4. So that is still lagging behind. But that's probably the only one where you really see that we are not catching up as we were a year ago. Is there anything else, Fredrik? No. I think as you saw previously, you had very significant growth of all of these emerging markets and that those examples came from that. So I think the main issue is that growth on the mature markets are this quarter at least is slow. And also that overall in any market baby diapers is highly competitive product. So we don't really see any major growth in the baby business. Of course, in the mature market, there is no growth. It's not an organic growth. If you want to grow, you have to really gain market share. We have not been investing in getting market share in our branded business, but we have increased our sales in private label in Europe as I talked about also the Q1. May I also ask regarding today's announcement the Vinda transaction? How will the transaction itself affect cash flow? The value of the deal is SEK 1,000,000,000 Could you say something about how that would enter into SCA's consolidated cash flow? Actually it doesn't because we already consolidate Linda. So it doesn't have an impact. It only has an impact on the result of course in terms of the minority as we go forward. So very small impact if any. Great. Thank you. And also regarding Forest Products the remark that you made about publication paper price declines would you mind quantifying or estimating how much of a price decline there might be in the Q3? I mean it's more based on the fact that consumption is continuing down and we don't see closures of production facilities in the same level as consumption. And that will of course increase competition and that will drive prices down. Everyone want to have 100% utilization rate. So it will be very surprising if you don't see a price decrease in the second half. And how far are you at this stage? Are you halfway through negotiations? Or could you say something about that just to get a feeling for how You want to have a figure? No, no, no. I mean What's my guesstimate, my guesstimate 2% to 3%. Okay. That's excellent. Thank you very much. And just final question if I may. The forest land gain this quarter again should we expect more of that to come in the coming quarters? I don't think in near time, I don't see that we should have anything like that. Of course, we would love to have because we add value to the company. But I don't see it in the second half of the year. Okay. Thank you very much. Nikka Ljos, Kepler Cheuvreux. I'd like to continue a little bit on this Vinda. You say that they have more than 300,000 points of sale. Could you try to describe for us what will the benefit be for SCA? It will be a cost benefit. There are of course cost synergies in combining 2 businesses in the same region. And they have an extremely efficient distribution network. They have a very solid sales organization. So if we can when we have educated them in the personal care products, of course, we get much more power out to the market than we have today. And that should, of course, have a very positive impact on sales on baby, on Inco. But even more maybe on Tempo, which we of course will introduce to China now, more than 70% market share in Hong Kong. And we'll of course also try to boost away from home sales. But the categories we are in now with the combined distribution skills and the muscles of both companies is quite unique in China. And then second question. Recently we've seen the Swedish kronor depreciate. How and when will this potentially affect SGA? It is already today. And as you saw from my chart when I broke down the sales growth in sales, you had a currency impact on that. So but in particular, of course, in forest, because we have an opposite emerging market currencies have gone down, which is affecting mainly Personal Care sales since we're bigger in Personal Care than tissue. But the Swedish crown from translation already now, transaction forest already now, but not the rest of the business. Perfect. Thank you. Well, just to add that we had a positive impact currency translation about €100,000,000 in this quarter. So it has impacted already CRZ. Any more questions from the floor? Otherwise, we open up for the telephone. So operator, could we have the first question from the telephone please? Yes. Your first question today comes from the line of Kartik Swamy from Laden. Your line is open. Hi, there. Thank you very much for taking my questions. Kartik Swamy Nathan from Bank of America Merrill Lynch. My first question, apologies if I missed this, but could you please let us know the split of Inco sales by channel in Europe with respect to retail versus Healthcare? And if you could please remind us as to your ambitions on new product launches in H2? We have about 73% of our sales in Europe is what we define as health care and 27% is retail. North America 59% is health care and 49% is retail. Globally 62% health care 38% retail. Thank you. And on product launches in H2? Since we now just have introduced new products on the market, we will concentrate to get them up on the shelves and impacting the sales in a positive way. So we don't have any major new one. These ones are actually just now introduced to the market and not really in all countries yet. We just started with them. Okay. Thank you. My second question is on EverVT. Why did only the Mainland China operations that were sold into Avinda? If I recall correctly, you also have some operations in Taiwan, which are a big part of the sales that you originally acquired? That's true. We have a strong position in particular in continents in Taiwan, but also in Beijing. They also have quite a big export business to Philippines. And then we decided together with Vinda that we leave that outside until they have integrated the Chinese business. So we don't because this is a big step for Vinda to take over the Personal Care business of SCA. So not to destroy the process or asking too much of the people. We better take it in 2 steps than in 1 step. So that's the only reason to be cautious with the integration process. Okay. And my final question was on what kind of investment you think would be needed in order to support your international brands. Clearly, did I expect them to attract a premium on price relative to what's currently being sold by Epi Beauty on the ground there in China. But should we be expecting them to require a significant amount of support given the competition keeps increasing daily? That we need to look into that when we have started the integration process. I mean, we still are waiting for shareholders' approval for the acquisition. So I think it's a little bit too early for me to comment on that. So can we get back when we have all decided and finalized? Okay. Thank you very much. Thank you. So second question from the telephone please operator. Your next question comes from the line of Peter Testa from Lugano. Hi. Peter Testa from 1 Investments. Two questions please. One is just to make sure I understood this point on Personal Care FX and raw amount effect. And I'm a little bit confused because on the release itself talks about the change in operating profit from raw mab being a significant negative and currency being a small positive in personal care. And I was wondering where you described it the other way around in your comments. Can you just maybe help understand how I look at that table and what the impact is on raw mat and FX on the Personal Care profitability please in the quarter? Yes. Sorry, I should have been more specific on that. In the report, we are only talking about transaction impact. And what I was talking about was sorry translation. What I was talking about was transaction impact. So translation positive, transaction negative. I should have made that clear. Sorry for that. And the raw math minus 20 2% seems quite a big number compared to pricemix 11%. Can you help us understand in terms of maybe that impact of raw math, the price increases which are being put through which will help further mitigate that looking at the second half? It should have a positive impact mainly as we can see it now without any further price increases or further cost cuts in Q4 since we still see fluff power coming up slightly a little bit more in Q3 since we have the delay in pricing. But then of course, we can also see that it's coming down now which means that we will have that benefit in Q4 together with the price increases. I don't know, was that clear? You understood? Yes. No, I understand. Okay. So it should head towards flatter because of the prices continuing to come through the raw mat and working with less of an increase in the swing in Q4. Yes. Yes. And then the other question I had was over the last 2 or 3 quarters there's been a certain disruption in your business due to market changeover decisions taken, Yitsi and China and so on. And I have 2 parts of the question there. One is, without looking to be specific, do you think these significant decisions are largely behind us now with the Vinda transaction? Or do you think are there other markets where you see some of these decisions made in significant size over the balance of the year? No. I think I don't think you will see anything like that. I mean, it was 2 things in last year. 1 was China, which was a little bit surprise to us also. And the second was Russia, which of course was planned, but not communicated. And I don't see anything of that coming when we go forward. Okay. And then the other part was when you look at the bounce back that you've seen in Q2 from those Q4 and Q1 decisions, can you give some sort of understanding as to what benefit you think you've seen in terms of restocking and rebuilding of brand positions in China and Russia for example? Well, Russia is growing extremely strong both in baby ink or in tissue. China is going very strong on our sort of global SA brands, but we are still struggling a little bit with sealer even though we have repositioned it and we have seen some positive impact during the first half year, but we are far from where we were a year ago. So it still needs some work to get that position back. And with Vinda, we believe that will be a much faster solution than if we would do it ourselves. But overall, do you think you've recovered at least the sales rates that you had before in both of those? Not with sealer, no. On the sealer, okay. But in all other more than that. Yes. More than that. Okay. That's great. Thank you. And sealer is once again a tiny, tiny portion of our business. Question comes from the line of Stellan Hellstrom from Stockholm. Your line is open. Thank you. First a few questions on tissue. You have you specify in your earnings breakdown that sort of the other items add some 4% to your EBIT. Now that includes I assume Vinda which contributes 10%. Can you give us any idea why the cost savings are not coming through more than one could expect here? Yes. We can do that. There are several other things there. And of course, things like inflation is negative of course in this line. But we also have some other cost increases and particularly around packaging and some other materials. So those are the main reasons. And how do you see that, I mean, going forward? Will this continue to be a negative factor in the coming quarters or? I think inflation, of course, will be there. We also had another issue in Q2, which had to do with a slightly lower production volume in tissue. And that of course will be roughly in the same area. So you shouldn't expect any major differences, but of course we try to keep as much as possible of the savings we do. Very good. And then also a question on the U. S. Business. I think that you were planning to hike prices in the U. S. And if you can give us any idea on how that's progressing? Yes. We are estimating that we will have some net price increases of 1% to 2%. Good, good. Thanks. And then also finally a question on A and P spending in Personal Care. I think you said earlier that you expect that to be sort of flat year on year now for the year. And then now you are up clearly in the first half. Is there still a valid expectation? I think we comment that in relation to sales that we've seen at the same level as in relation to sales and that still stands. Okay. And with the transaction with Vinda that could perhaps change a bit or? I mean the Vinda process will take a couple of months. I don't think it will have a major impact during this year. Okay. But maybe next year do you think that's going to be a significant impact? I mean since we are consolidating within the 100 percent, I don't think it will have any impact next year either. I'm thinking that if you're planning sort of a more of a major launch into new shelf space so to say more doors in China that you would have to support that with an increased A and P spending. I think the major problem in China is probably not A and P. It's actually sales to get sales running in a good way to be in to have people on the floor, people in the stores, bigger distribution, etcetera, etcetera. And we will get that within that without actually investing anymore. So I don't think the A and P is the problem. It's the sales. Okay. Very good. Thanks. Thank you. And your next question comes from the line of Celine Mann from Laden. Your line is open. Yes. Good afternoon. I have a few questions. The first one if we look at Personal Care, I'm trying to understand the moving parts here in your performance, some of which you have already commented. So am I right in understanding that despite the savings And you had had some higher A and P. FX hit on transaction in Q1 and Q2 was quite material. And you had this higher fluff and packaging costs in Personal Care. Now if you can comment on that. My understanding is that this FX transaction should not be as dramatic in the second half of the year. Can you please comment on this and whether effectively what would be the you had commented on fluff, actually, but if you could comment on the other raw mats and packaging in Personal Care. Secondly, in Personal Care, I would keep to understand if you look now your margin is better in tissue than in Personal Care, where the gross margin clearly and the return on equity capital, I'm going to try your in Personal Care. What do you think mid term should be the trajectory for Personal Care? Obviously, you are putting a lot of investment upfront, but how should we be looking at on a maybe a mid term basis? Then if you would also comment on Personal Care, why incontinence growth was what I would call rather low 3% and what happened in Feminine Care? Thank you. Yes. Many questions. I'll see if I remember them. It's I repeat it. Yes. If I take the first one, it's you're absolutely right. It was quite substantial SEK196 1,000,000 Q2 to Q2 in raw material and FX transaction. When it comes to FX, we don't see any further sort of impact on that as long as it stays as we are today. And fluff which is the most important part of these raw material increases is as we talked coming down, but it was going up during the Q2. And with Our price is set by average price of the 2nd month of the quarter before we buy the fluff sorry, which means that we still have we still will have some price increases during Q3. Then it will come down after that. What was the second one? On the margin in Personal Care, it's Ann. The margin. Okay. The margin in Personal Care is not on a level that we want to have it today. It should increase. And as you know, we have a target on return on capital employed on 30%. And I think we're at 28. Something at 70.7% this quarter, which means that we need to bring up the profitability. We need to improve the margin. We have, as you said, really invested quite a lot in Personal Care during this first half year by upgrading all the production facilities in Continence and Baber with start up costs etcetera. So of course, we really are going to see a payback of that Q4 and going forward. And the other question was incontinence growth in the quarter versus it was very strong growth in Feminine Care. Feminine Care was growing quite well. And if you look at Europe, we had quite a slow growth where we have our biggest incontinence markets during Q2. And also we were impacted by a very, very slow growth in U. S. But the 2 big markets we're seeing incontinence. So that's why you see a slower growth in the quarter. I guess you asked the quarter or the half year. And the market is not growing very much and we have not really been too aggressive in gaining market share during the quarter. We have actually been preparing very much to welcome Procter and Gamble when they arrive to the market, which we're doing in U. K. Now. So we actually U. K. We're actually growing quite well at the moment. So it's more a tactical move than actually factual change on the market. Okay. If you allow me, I would like to clarify a point that you made in tissue. So you did say in tissue that you had an increase in raw mats, which was I think packaging costs and I would presume as well as pulp prices. You think that packaging costs will still be higher going forward, but what about pulp prices? My estimate on pulp prices for the second half year is that it's coming down both in soft and hardwood. And in particularly in hardwood, we have 2,300,000 new tonnes coming out of the market and that will have an impact on the softwood also since we can actually switch a little bit. I mean we have also internally normally we are fifty-fifty now. We have forty five-fifty five hardwood, softwood. So that will impact even if the softwood market is quite tight today. So it will come down. Packaging, I can't see the packaging costs will go up for the second half. Okay. Good. And just a point on Vinda. The Vinda joint venture sale rather in China, does it mean that all the launches that will happen in Personal Care under the Vinta distribution are going to be booked in Vinta And therefore, any top line acceleration will be seen in Vinda and will not be part of your like for my computation at least in the second half of this year? Well, since we consolidate 100 percent of India, we'll still see it in SCA. So it's from that perspective, it will not be different from today. And just to add, we already separate there as you may see in Consumer Tissue and Away From Home and we will do that of course also for this business. Good. Thank you so much. Thank you. Your next question comes from the line of William Houston from Lejuez. Your line is open. Hello there. Three questions for me please. Firstly just on the incontinence launch you've seen in the U. K. I think the speculated number of SKUs was up to about 24 different SKUs for the Always brand. It doesn't feel like they've launched anywhere near that in the U. K. At present. Could you just comment on that on the scale of the launch and how you think that compares to the eventual rollout that you will have from Propsa? Point 2 would be on improving the margin mix. It's going to use it in Q1 by exiting some low margin contracts. It's something that Azaleo Care did as well to with good success. Do you think that's something you can do a lot more of over the coming quarters? And then point 3, just in terms of the cost cutting programs that you've got ongoing, could you talk about kind of the specific tangible things that you've done in this quarter to take cost out of the business such as kind of headcount reduction? Is there any production capacity that you've exited on the converting tissue side or anything like that that you can give us on a kind of tangible cost cutting you've done please? Well, if I start with Procter, we did assume that they would have a full range of incontinence products. And I guess that they in the end they will have that. Otherwise, it's very difficult for them to enter the market. And they were delayed as you know in U. K. Also the shelves were empty for a while. But our assumption is that there will be full scale SQs on the market and that's what we are preparing ourselves to deal with. And of course, it may take some time in different countries depending on the supply situation. But we are prepared for a full scale. What was the second? Sorry it was on the margin. Sorry. No I don't really see that. We have actually quite silent exchange quite a lot of tonnage during the past 2 or 3 years from lower margin to higher margin, but then gradually over the year. Now it was sort of a one shot 1 quarter. On the other hand, we grew the branded business by 2%. I can't see that we have the situation like that going forward, no. And then lastly on just kind of tangible cost cutting measures that you've taken please? We are continuing to drive the productivity in the supply chain and that's mainly where you see the cost cuts coming from now. It's not heads anymore. It's more pure productivity improvements excluding France, because we are still dealing with France and the negotiations in France. So I exclude that from that comment. But otherwise, it's more in supply chain than we have already done the sales. We have done the marketing. We have done the IT, but now it's pure production. Yes. And just in terms of the French negotiations, could you update us on how they're going and when you would expect to hear a bit more from them? Because I mean, I understand it takes a while, but if you had any more color on that that would be helpful. Well, there is nothing in the process that is going to change the plan that we will have all the synergies by the end of 20 16. So from that perspective, it's going according to plan. Okay. And just lastly on the just on your sourcing. I mean that was expected to be about DKK 1,000,000,000 of saving and you had 700 initiatives that you were going to put into the put into your sourcing organization. Is there any update you can give on how far you think you are through the sourcing savings specifically please? I'm not sure I can comment that in particular. But of course, there is a good opportunity now being the biggest pulp buyer in the world as we are together with Avinda. And as you know in pulp you have the same system as everyone else now that you have one market price and then you have a different price for big customers. But the only thing I can say is that we still have some good potential in sourcing. We haven't really consolidated global sourcing in all our products and transportation. So my expectation is that it will continue to deliver. Okay. That's helpful. Thank you very much. Thank you. The next question comes from the line of Oskar Lindstrom from Stockholm. Your line is open. Yes. Hi. I have three questions. The first one Take them 1 by 1. Yes. All right. The first one concerns the competitive environment in the European tissue market. Is that something you could say a little bit more about given the size of that business for you? And is there any change in the competitive environment there with new capacity coming in or imports affecting it? No, not really. It's not changed from what we have communicated previously. It's always competition of course, but we are if you look at the result that we are delivering that we have been delivering the past 4 or 5 years, it's of course a lot of internal saving that is improving margin, but also the way we are taking the lead in the market as the market leader in Europe. So it is no different from a quarter ago or a year ago. All right. The second is more specific. It's regarding the split of your hygiene cost savings between tissue and personal care. I think you gave that early on in the program, but is that maybe something you could give more detail on now? I think we are only reporting the accumulated now. But I've also been very specific that the absolutely bollic is in tissue. So is that sort of 2 thirds or They're absolutely boric. Absolutely boric. I'll look that up Yes. And that's going to be also the case going forward? Yes. Yes. So there's no shift there. And the final question is given that we've talked today about a situation where one of your competitors enters a new segment in the Personal Care field. Is that something you yourselves are looking at? Are there any new product segments out there, which are which you're keen to enter? And I'm not talking about just sort of brand extensions into very adjacent segments, but really new product segments. Is that something that interests you or you see a need for? Well, first of all, it's not the first time Proctil is entering the incontinence market. They actually have a product in the European market today on the very light Inco sign. So it's not the first time. And of course, we have the highest respect for them, but we are going to defend our position. We don't have any major I show you some examples today, which you can call in your category when you go into to the really washroom facilities with the new products and away from home. That's of course a new category in a way even though if it's within the away from home market. But otherwise we don't have any spectacular new category that we're going to have to enter into. All right. And there's no it's not something that you think could be interesting for you going forward to add on a new product segment, I guess, especially on the Personal Care side? But we are of course looking at if we can add something to the structure we have today that would fit the structure and that would be accepted by our customers at Natural for S. A. To add to the category, but we don't have anything today. All right. Well, thank you very much. Thank you. Question comes from the line of Charles Branson from Laden. Your line is open. Yes. Thank you. Yes, I have a few questions. Could I start off with the away from home? You were saying at the beginning that I think it was from Q1 to Q2 your U. S. Away from home grew I think you said 21%. Could you just confirm that? Obviously, we're more interested in the year on year growth from Q2 to Q2 and how strong that has been. And if that's been quite strong, the implication therefore is that the Consumer Tissue side has been under more pressure. And could you just say whether that is the case or not? Yes. It's the reason I mentioned the sequential was of course that we did have some challenges during Q1 with the winter and some part of the market were afraid that it was sort of the market that went down. That's why I said 21% is right. And if I remember right at the top of my head, it's 4% Q2 to Q2 in growth. Okay. So I mean consumer tissue in mature markets is down? We are not in consumer tissue in U. S. We are only away from home. But of course, we can see that the consumer tissue market in U. S. Is changing because of the new capacity and private label is start to sort of get into the market in a completely new way than we had seen before. Okay. And on the P and G issue, could you just inform us when they actually did enter the U. K? I mean you're saying you're growing nicely on the back of that. Do you have a feel for the impact on market growth? And what the price gap is between equivalent SKUs between you and PNG? We that's of course a positive thing with Procter and Gamble compared to maybe a private label supplier is that they are not driving prices down. So they are on an equal price level as we are in the market. And it's too early to say if it's really penetration that has increased or if someone else is losing market shares. But we are not doing that. We're actually gaining market shares. They entered a monthly growth rate for them right now. Okay. And on the saving programs, if my numbers are right the incremental saving in Q2 was less than the incremental saving in Q1. And I was just wondering whether sort of trend wise we've kind of gone over the hump and now incremental savings from here on in will continue to slow down? Well, I mean the closer we if you take it quarter by quarter, of course, it the closer we get to the end of the program, the individual quarters. So you cannot necessarily draw the conclusion. We are on plan. And of course, the Performance to Growth program will be completed this year, but we still will continue with GP savings. So it will marginally decline, but of course, we have still some room to go. Great. And on a sort of housekeeping issue, if you could comment on associates and minorities, which are quite volatile so far this year. Are the Q2's minorities and associates kind of a cleaner base than the Q1 for us to try and extrapolate going forward? I think the only thing we have that Verano is Australia isn't it in Australia because we consolidate everything else. And of course in Australia, we have had the listing of the companies very successful by the way. And that has been drawn a lot of costs during the process. And that's why you see some impact on that. But otherwise it should not be as volatile as you've seen it this quarter going forward. And we are after the listing, we are holding 32% of the shares. And previously we had 50% of the company. So that will still be sort of reported as associates. Right. And the minority line this quarter is twice that of last quarter. There were some exceptionals in last quarter I believe. Is this quarter minorities sort of a clean number? No. It's not a clean number. As Jan just alluded to, we have had some share of cost of course for that listing in Australia. So I think as we go forward Australia will pick up a little bit. Right. Okay. Thank you. And finally, last quarter you mentioned sort of which categories and geographies you were sort of gaining share or where shares were flat. Could you perhaps go through that again for Q2? Yes. I think we are the only place where we are losing have been losing market share in Q2 is on sealer in China. Otherwise we are we have been gaining or on the same level. Okay. I mean in Q1, shares market shares were pretty flat in European Consumer Tissue, Baby Diapers and retailing contents. You mentioned that you're now gaining share in European Retail Inco. But are they still flat in Consumer Tissue and Baby diapers? Well, we have been gaining shares in baby diapers due to this new contract as I informed of in Q1. If you look at the market in totality, of course, that's a private label not branded. But it's not I mean it can shift depending on your promotion strategy and whether or not you have a promotion. But if you look at the trend, I think the only trend where we have lost is in senior China. Great. Lovely. Thank you. Otherwise, as I mentioned during the presentation on the growth figures in emerging market, of course, in all these markets where you see the double digits even 30% growth, of course, we are gaining a lot of market share in those markets, because they are not growing in that in the same speed. And we've also grown I guess INCO overall in Europe. Absolutely. Not only in retail overall. Thank you. We'll have one more question from the line of Peter Tester. Please ask your question. Yes. So just on the comment you made a minute ago about the U. S. Market changing as private label arrives in a way it's not done before. Can you give a sense as to whether that creates any opportunity for you in the U. S. Market or changes any views you might have about M and A in the U. S. Market? Well, I guess with the valuation you would see on any consumer tissue in U. S. With what we see on the market development it would be very difficult to justify an acquisition. And any opportunity to enter private label by purchasing in the U. S. Market? We looked into that and one of our major customers have asked us. But we believe it's the wrong timing to actually enter that market now. I mean, if it goes the same way as Europe did for 10, 15, 20 years then probably you should wait a little bit before you enter it. It could be different of course, but we need to see where it's sort of ending before we do something. Okay. So it's not clearly state wise to establish enough to understand what the production capacity would need for example. The only thing we see is that it is actually coming in too much capacity in U. S. Today and main part of that is directed to the consumer tissue. Of course, when they can't sell it on consumer tissue some may spillover even on their way from home. But we are using that now. So we're actually buying mother reels in U. S. Instead of tidying capital ourselves on the market. Okay. Okay. Great. Thank you. Thank you. So I understand that was the final question. So any closing remarks? I think we have covered everything. So I just for those of you who are in this part of the world that soon we'll have some holiday. I hope you get a good holiday and then we'll have an interesting autumn to tackle together. So thank you very much.