Welcome to SCA's third quarter report press conference here at our headquarters at the Waterfront building in Stockholm. My name is Joséphine Edwall, and I'm head of communication for SCA. Today, our President and CEO, Jan Johansson, will go through the report. In the end, we will have a Q&A session where also our CFO, Lennart Persson, will join on stage. I'll hand over to you, Jan.
Thank you very much, and once again, welcome to the first meeting of this kind in our head office. If I start a little bit with the macro situation. In general, we still have a very weak economy in Europe. The unemployment rate is still on a very high level. The trade is still weak or even going down in many countries. Of course, the situation in the U.S. is not helping neither the global market or the U.S. market. In spite of that, if we look at our categories, we have had a reasonably strong quarter with growth both in emerging markets and even in the mature markets. We're still impacted by currency movement.
Of course, we have our strong Swedish currency, but also a weakening of some of the currency in emerging markets, which has an effect particularly in the translation, not necessarily on the transaction side. When it comes to the forest industry, I'm getting back to that, of course, later. We still see a difficult situation on publication paper. Newsprint is down by 6%, LWC is down by 8% year to date. The structural development is continuing in that part, and of course, the weak economy is also impacting that. Having said that, we have the second strongest result in SCA in Q3, we have been managing reasonably well, even though we have a difficult macro perspective around us. If we look at our efficiency program, I'm not going to dig into this.
The only thing I'm saying is that we are on plan, and everything is going as we have communicated, and there is no reason to believe that it should not continue in that way. Coming into summary between Q2 and Q3, we do have sale growth in the company, and of course, we are still impacted by acquisition and divestment. We always try to show the apple-to-apple situation. I come into some of the figures later on how that has impacted. We also have some growth in the forest industry, and everything except publication paper is doing quite well at the moment. We also are improving our EBIT compared to Q2. Higher volume has impacted the result by SEK 300 million. We also have higher prices, that has impacted the result by some SEK 140 million, and cost saving Q3 to Q2 is about SEK 550 million.
One negative aspect of this is, of course, if you look at the operating cash flow, that has decreased, but the main part of that is receivables. If we look at inventory, it actually has a positive impact on the cash flow. Receivables, of course, impacted also by increased sale, but also some prepayment or early payment to our suppliers. It's all in control. It's due to when the end of the month is coming. If it's coming on a Friday or a Saturday or a Monday, of course, you have a big swing on the working capital. The most important thing, inventories is still going down and have a positive impact on the cash flow. Looking at this one, if we look at the sales, we have a negative impact of divestment by SEK 1.4 billion on the Q3 result, on sales, sorry.
Acquisition, a positive impact of SEK 340 million. What we have to remember also going forward is that the remedy package that we were forced to sell when we acquired the GP will also have an impact on Q4 and Q1, because we divested most of it in Q1 but still have some of it left in Q2 this year. The total remedy package Q3 has an impact of SEK 450 million in sales and some SEK 28 million in the result. All in all, SEK 2 billion in sales and around SEK 300 million in EBIT when you look on a yearly basis for the remedy package. We continue to strengthen our balance sheet. The gearing is down now to 0.52. You know that we have a target of 0.7, so we're still below the target when it comes to debt equity ratio.
Sequentially, we have flat sales in the group. Summer months are normally a little bit weaker than the spring and autumn months. In spite of that, we have increased some of our profitabilities, in particular in tissue. Cost saving is continuing to come in. We have some SEK 72 million in tissue compared to Q2, also in forest, cost saving is coming in by some SEK 50 million. We had some lower sales in baby, I'll get back to that when I get into personal care. On the nine-month year-to-date, we have negative currency impact of SEK 450 million. Also have seen energy costs coming up with some SEK 210 million. We have a positive impact of raw material of SEK 153, but of that, SEK 183 is in forest, which means that we have a higher raw material price in our hygiene business.
Savings is up to SEK 1.2 billion, compared to last year. If we look at the divestments, it's negatively impacting us with some SEK 2.5 billion, but acquisition positively SEK 5.8 billion. It's a mixture all the time with divestment and acquisitions. Coming into personal care. We do have still a good growth in incontinence product, both in mature markets and in emerging markets. We are still growing in Europe. Even though the market is not growing very much, we are gaining market share. We are driving penetration, we drive penetration, it's always difficult also to look at the market share because those market shares were not there until you actually penetrate them and got them into the market. Baby, we had some strange development in the market. The market in Europe in many countries is down in baby during the summer.
I think mainly all countries except Germany is down. One reason, which may sound a little bit strange, is that it's been a very warm summer in many parts of Europe. When it's a very warm summer, you tend not to put diapers on your children. In Germany, at least in the western part of Germany, it was a cold summer. The baby sale was actually up in the western part of Germany. It was even down in Sweden because we had such a warm summer. At least that is what we believe, because we don't really understand why it's down. Of course, the weak economy, Greece is down by 12%. It's not only the sun, it's also because of the weak economy. Overall, we believe it is due to that.
We have to see now in Q4 if it was actually that and the sales is picking up. This is the market that is down, so it's not only our sales, it's the market sales. Feminine is doing great, very strong. We are growing in all parts. We are growing profitability. This is the smallest of our categories, but one of the most profitable we have. We also have an ambition to continue to grow the feminine market. Growth in emerging markets is continuing. Of course, we see some slowdown due to the general weak economy in the Western world, but less in our categories than maybe in other categories in the emerging markets. A slightly lower EBIT, even though we had a positive impact on volume of SEK 125 million.
We also had a positive price mix of SEK 32 million and cost saving of SEK 90 million. We have currency, negative raw material, and also we are investing more in the markets where we invested some SEK 82 million more in the market during the quarter compared to Q3. That is sort of consuming the improvement. The important thing is volume positive, price mix positive, cost save positive. Market activities we can always drive or not drive, so that's within our control. Of course, currency we can't do anything about. It is what it is. Coming to tissue, a very positive development. We are now in Q3 on a Return on Capital Employed of above 14% in tissue overall. You know that we have a target of 15%. We have a growth in all our areas, in consumer tissue and away-from-home.
Emerging market is continuing to grow quite well. We are in the middle of the process to have an offer on Vinda, as you know. The dividend day is today in Vinda. We have seen some movement in shares, but our estimate was that everyone will keep the shares so they get their dividend, and then they will sell it. We are still very positive that we will reach the target to get above 50 or 50.1% in Vinda. It will be open until the 28th of October, if I remember correctly now. Now from today and going on then, we will see the movement of share and if we are on track. The one sort of indicating that we are on track is the share price had never been above our bid. It's always been below our bids.
That's, for me, at least an indication that it will be accepted. Also quite a substantial improvement of profitability. Higher volumes has a positive impact of SEK 160 million. Prices SEK 70, cost saving SEK 300. We also have higher energy raw material costs negatively impacting by SEK 80 million and currency around SEK 40 million in negative impact. Coming into forest product, as I said, our sawmills operations are doing better. Our kraftliner is doing better, our pulp business is doing better, we do have a challenging situation on the publication paper. If we look at the decreased sales, the lower prices has impacted the publication paper by 5% compared to Q3 last year. Of course, the others are then having a positive impact. We continue to drive the cost saving very strongly. We have a positive impact of SEK 160 million on cost saving.
We have higher prices of some SEK 40 million. We also have lower material cost here, in particular the wood raw material, which has impacted by SEK 45 million. Energy cost is going up, we have SEK 80 million higher energy costs. Everything is moving in the right direction, except publication paper. Going forward, because I know I will get that question, the price increases in publication paper, it's probably an opportunity for next year to increase the newsprint. We believe it will be more difficult in other qualities, at least that's the assumption we have. To summarize, we have higher sales and profit in Tissue and Forest. Higher sales, slightly lower profitability in Personal Care, and you know the reasons behind that now, market activities, among others. Efficiency program, on track. Vinda, of course, we are now also walking into India, that's very exciting.
We are starting to invest and will be starting at least some import sales quite soon in India to test the market. We also have several new product launches during the quarter. You, of course, all understand the importance of innovation, that we do get new product, new launches into the market, that is accelerating. Of course, in doing that will also impact the short-term and the margin slightly negative. Of course, with new feature on the market, there's an argument to discuss with the consumers, with the customers on the different price levels. All in all, it's very positive to get new products on the market.
We have also inaugurated the first wind park with Statkraft, in the first phase, it will produce some 200 gigawatt hours, it will go up to some 350 during the startup phase of the wind park. This is, as you know, just the beginning of a major investment in wind power in Sweden, where we are not really investing, we have the land for the investment. We also are continuing to get credits for our sustainability work, which we think is very important. As you know, even though we have a difficult situation in the market, it's still something that consumers are looking very much at, and customers even more. Today, as you know also, the shareholder base is growing very much when it comes to sustainability funds.
I think we have almost 80%, 85% of all the sustainability funds in Europe as shareholders in SCA today. With that, ladies and gentlemen, I would like to open the floor for questions. Lennart, Joséphine?
Let's start here, yes.
Thank you very much. It's Linus Larsson with SEB. First of all, congratulations on a fantastically strong tissue result in the third quarter. Regarding tissue, where you had price mix improvement of some SEK 80 million sequentially, cost savings improvement sequential of around SEK 70 million. Looking into the fourth quarter, you have been talking about the price increase coming through late in the third quarter. You have continuous cost savings coming through. Are these sequential improvements that we see in Q3 and Q2 also indicative for the sequential improvement going into the fourth quarter? Is it even better? Anything deviating from this trend?
We will see some of the price increases were late in Q3. You will see some price increases in Q4. Of course, the cost saving will continue. It will not be a straight line, the cost saving. It will be depending on where we are on the projects. From that perspective, yes. In Q4, we have some two days less invoicing days or something like that. You have to look at the totality, but you are right in the assumption that price increases will come in a little bit more in Q4, cost saving, absolutely. We have Q4 with Christmas and some fewer invoicing days.
tissue volumes, Q4 and Q3?
I'm not going to give you the volumes.
also partly relating to tissue on the energy cost side, you said that you have seen.
Yeah
Energy cost increases, and if you could shed some light on where and what, and what to expect as we go into the fourth quarter, where you have some potential seasonal effects as well.
Well, I guess that looking at the situation, at least in Sweden, you will see higher energy prices going forward. Nuclear is not doing very well. There's very little water in the system. My assumption is that energy prices will come up. In the rest of the world, I would guess more or less flat-ish, depending on the U.S. situation also, if that will have an impact, but at least we are saved until the next year now, I guess, so.
Thank you.
Next question?
Oskar Lindström from Danske Bank. I'd like to ask some questions about the Personal Care division. First of all, regarding the Still declining EBIT in absolute terms sequentially. You cited the weaker than expected baby diaper market in Europe, also some higher A&P costs. Is that the entire picture? We've seen this trend now, well, this is the fourth quarter in a row. Is there anything else that you see increasing competition in this segment or reasons for this negative trend?
As I said, we had a positive volume impact and a positive price mix impact in personal care. From that perspective, no. Of course, there's always tough competitions, and in a weak economy, the competition even increases because you want to attract consumers. You have to remember that you're talking about a business area with a Return on Capital Employed of above 28%, and some of the categories far above that. From my point of view, you have to balance the profitability with the growth and the margin. The margin is one indicator, but of course, if you can run a business with 50% Return on Capital Employed and maybe go down to 49 and grow it by 10%, you probably would prefer that. It's always a balance between profitability and margin.
You talked a little bit about the product launches, which should come in towards the end of the year or next year, and being one of the reasons for the higher A&P spend that we've seen in this past quarter. Should we expect the product launches to have a positive impact on earnings next year?
Absolutely.
Okay, very good. A little bit about the cost savings as well, and this goes for the group as a whole. They came in at a very nice click this quarter. Could you specify some of the specific actions? Because we haven't really seen any mill closures on the tissue side, for example, or large cost saving activities. I presume there's a lot of smaller actions going on a little bit under the radar screen.
You have different, of course, for Forest and in hygiene, you have Georgia-Pacific, and you have the saving program. The low-hanging fruits are already picked out, of course, and that's when you reduce administration and sales force and marketing force. Now we're into the heavy stuff in the production sides. It's very simple. We have a perfect plant managed by perfect manager and perfect people, and then we copy that all over the world. Of course, it takes time before you have changed the perfect managers and et cetera. It's actually going quite well. The potential that we have mentioned here, I don't have any doubts whatsoever that we're going to reach that. Of course, it takes a longer time to change a plant than to ask 50 people in administration to leave the company.
That's why we have 2015 and 2016 as the target when it will be 100% done. Forest is also absolutely according with plan with the SEK 1.3 billion. We are delivering what we have promised to deliver so far, and I'm sure we will continue with that when it comes to cost.
All right. Thank you.
Then on the fourth.
Lars Kjellberg, Credit Suisse. Just a couple of follow-ups on the cost savings. Looking at the two major programs in hygiene, one seems to be running a bit of short of schedule. You've got SEK 130 in the productivity and efficiency program, whereas you targeted SEK 200 with not a great deal of incremental, I suppose, in Q3. Should we still expect a SEK 200 number? That would in then imply, of course, a significant step up in cost savings in Q4, while the other program is running actually ahead of the full-year target already now. Any thoughts on that target actually moving up?
When you talk about the full-year target, are you referring to the annualized saving?
Right.
It's not necessarily on a yearly basis. It's annualized, it can go over the full year also. I don't know if you want to answer that, Lennart.
As you said, we have announced that, and when it comes during the quarter, it's also depending on that. The P&L impact this fourth quarter or if it is coming after the year, and it's an open question, of course. As we have said, it is going according to plan, and we will deliver it.
The answer is you can't take the annualized figure and put all of that in Q4.
No.
No, I appreciate that.
Yeah.
It was sort of a incrementally was not that much in Q3, but to reach the run rate target for the full year.
You need to step up the run rate meaningfully, actually, in Q4. That was really my question, if that's in the cards.
I'm not sure we have communicated.
The SEK 200 million we said roughly as an annualized at the year-end.
Oh, yeah. That's true.
On the Forest Products side, it was a big step up on a sequential basis. Can you just try to run through again what sort of moving parts, and if we go into Q4, if we should expect any disturbing sort of maintenance works that would actually bring down the margins a bit?
You're talking overall or the cost-saving program?
No.
Overall
the pieces.
Yeah.
Especially, I suppose, someone else in the Stora, in fact, talked about very strong forestry results. Is that one part of the positives in Q3?
Lennart, do you want to comment on that? I can comment Q4 then.
We can see, if you compare the third quarter with the second quarter, we had more maintenance stops in the second quarter, even if we had in the kraftliner also in the third quarter, costing us SEK 60 million. We have some remaining costs also for the quarter four, coming from the stops. Of course, we have seen profit improvements not in publication paper, but in the other. When it comes to the forest operation, it depends also on how much are you harvesting on your own, or how much are you harvesting on purchased trees.
Right. Final question. When you're looking on your growth initiatives, been very tissue heavy, if you like, and less so on the personal care, where you're actually, as you highlighted, your margins and returns are much higher. There's one former, I suppose, partner or employee in Domtar running a show that is trying to buy a lot of personal care assets. There's more supply now in Europe. Why are you not in the running for these sort of assets? Are they not attractive, or do you not focus on personal care growth?
It's a big question, but if you look at the portfolio today, we have some 38% of the sales in personal care in emerging markets, and some 18, 19 in tissue. We are, from that perspective, more into personal care in emerging markets. You're referring to Domtar or-
Correct
What they have been acquiring has not been of any interest for us.
Would you like to grow in personal care from an M&A perspective?
We are growing. We acquired Everbeauty in China, as an example. Yes, what we need, especially in emerging market or any market, you need either baby or tissue as a driver into the market. You need the volume to carry the other products. Normally, there is less competition in tissue than in baby if you go into an emerging market, for many reasons. It's more capital and it's a different business than the personal care business. Overall in the portfolio, I would like to have a better balance between personal care and tissue. From that perspective, you're right. If there would be any good assets for sales that fits our portfolio, we will certainly look at that. We are not prepared to pay sky-high prices and never get a return on it.
Thank you.
Okay, let's open up. I think we have some questions also from the webcast, in the telephone conference. Let's take one question there first, and then we'll go back to the audience. Operator, can we have one question from the telephone?
You can indeed, ma'am. That comes from Bank of America Merrill Lynch, from Karthik Swamy. Your line is now open.
Hi, everyone. Thank you for taking my question. Karthik Swamy, Nathan calling from Bank of America Merrill Lynch. My first question was getting a little bit of color on what's happening in emerging markets. Looking through your prior presentation over the past couple of quarters, it seems there was quite a dramatic slowdown in EM growth in personal care. I was wondering whether there are any particular geographies where you've been impacted more than others. I recall during the management presentation just now, you mentioned certain segments of the market were worse than others. Also whether there are any kind of specific factors over the quarter, such as weather, that might have impacted you.
The main reason for the lower growth compared to previous quarter is actually that we are running out of acquisition. It's more comparable now quarter to quarter. Previously we had acquisition impacting the emerging market quite substantially. Having said that, as you normally see in China, we told you a little bit about the summer in Europe that we were surprised. In China, it's a fact that during summer, babies doesn't carry diapers. That's also one reason why you see a little bit lower growth in Q3. Otherwise, in general terms, it has not happened anything on the market when it comes to our categories that should make you worried about the growth so far.
Currency, yes. The currency is getting weaker in a lot of emerging countries, and that is, of course, impacting when we translate it into Swedish currency, but otherwise not. Acquisition, summer, currency.
Okay. Thank you. My second question was on kraftliner. If you could give us a little bit of color as to whether you're still seeing weakness in pricing post this summer and what demand's been like.
The demand has been kept up. We have had some stops during Q3 in our kraftliner mills. The inventories are slightly higher in Q3 than they were in Q2, and we don't see at the moment, anyway, a possibility to increase the kraftliner, even though testliner prices are going up. Of course, if testliner continue to go up, that's a good indication to increase kraftliner. At the moment, we feel it's not the right time to do it.
Do you think it'll take until the end of the year to destock that extra inventory, or could it be faster than that?
No, I guess you will, since December is very slow in the packaging business overall, I guess you will have to see until quarter one before it's turning.
Okay. My final question was just on the sequential movement on prices for personal care. If you just remind us whether you'd already scheduled some increases or whether it's been some contracts rolling over with increases into Q4 versus Q3 to pass the raw materials and other cost inflation.
In personal care?
Yes.
Normally, when it comes to branded business, you need to have some new feature in the market to increase prices, which we are introducing, but the impact of that will come first in Q1. I guess no major price changes in Q4.
Excellent. Thank you very much.
Thank you.
Let's go back to the floor, and we have a question there.
Hi, this is Stellan Hellström with Nordea. I had a question on A&P spending, I think you said before that you expected A&P spending in the second half for hygiene to be on par with the first half, I'm just wondering if you're sticking to that or if there's something that has changed in the overall picture that makes you want to change that?
Well, if you compare Q2 to Q3, I think we said it would be flattish and I think it was SEK 17 million higher. For me that is flattish, and I don't expect it to grow in Q4.
The pacing is that it's a little bit more in UK.
Yeah.
Yeah. Given that you have a lot of new products coming up, do you see more A&P spending next year? Is that too early to talk about?
No, I don't really see any reason for that in the way we see the business today. A&P, most of the sales today are on P, on promotion, and the consumer behaviors are changing day to day. I think over time you will see less A and more P. Today, almost all sales in the retail chain is on promotion. If I follow the sales week by week, it can be like this depending on your promotion or not. No, not really. Not any higher. It's different. It's shifting to promotion from A. Overall, I don't see any reason for any substantial increase in it.
Thank you.
We have more questions from the telephone, I hear. Operator, we can take another question from the telephone, please.
Thank you, ma'am. From J.P. Morgan, you have a question from Celine Pannuti. Your line is now open, ma'am.
Yes, good morning. In fact, I have a few questions. The first one is on the baby market. You explained what you thought was a decline over the summer. Can you say whether I don't know if you can track market share given that a lot of your market business is in private label, but do you have a sense of whether your contracts are still running or have you seen some maybe contract loss? How do you fare in terms of market share? The second part of that question is there any news that you can share with us on what's happening relating to Kimberly-Clark leaving this market? My second question is as well on baby, sorry, personal care. You mentioned just now that you have increased A&P. I was wondering whether there was as well other investment.
For instance, in India, do you have as well more salespeople or headquarter costs? To which extent you can quantify that, if that has been already taken in the third quarter? Finally, in tissue, you grew quite well at 4% growth in volume. Can you break down what has been the growth in Western Europe, please? Thank you.
Yeah, if I take the first question, as you know, we are very big in private label in Europe. It's about 50/50 of our sales, and we have not lost any contracts in private label, and private label is gaining market share in Europe, and Procter is losing. If you look at the markets where we do have branded, which is mainly the Nordic market and Russia, if you compare Q2 to Q3, we are a couple of points down in the Nordic market. It's too short period to tell if we're losing market share because it depends very much on promotion and not promotion. The major impact, as far as I can see anyway, is that the market is down and not that we are down. Emerging markets, we are still gaining market shares. That's not a problem. The market's a market. It's not SCA.
The second question was Kimberly-Clark.
Kimberly-Clark.
In India. Sorry. India, of course, we are investing in India now, and that will have an impact on the margin. Still, it's very small figures. It's not really something you can highlight. Kimberly-Clark is closing down. They are still selling on the market in some categories. We are, of course, targeting some of their customers, not all. We will continue to gain on this. We're probably more going in our thoughts for not building a newer brand in a country where we don't have a brand today, because the risks and the costs are too high. We probably go for the private label part of it rather than the branded part. It's not 100% decided, but at least that's the way we see it today.
Okay. My other question was on the growth in tissue. What has been the driver for that?
Q3 to Q3, you're correct, Lennart. I think acquisition is positively 3% and divestment negatively 4% on sales. The driver is the emerging market is growing quite well. We are growing in U.S. in away from home. We also have a growth in Europe, both in away from home and in consumer tissue, even though if it's slower in consumer tissue. We do gain market shares in Europe at the same time. We have a target to actually continue to gain market share from the position we have today. We are not allowed to acquire anything more in Europe in tissue, but we are going to get a higher market share by organic growth.
May I just come back to one question that was asked, I would like some clarification. In terms of raw material bill, as we look into the fourth quarter, what kind of inflation are you looking at? Is there any specific differences, for instance, in personal care versus tissue?
We still see part of the pulp coming up, we also see some other parts coming down. Overall, I would call it flattish, Lennart, if you take the total portfolio. Of course, from an individual category, it can be up, for another one it could be down. Overall, it's flattish.
In personal care, are we seeing continued raw material inflation in oil-based raw materials.
No, we don't see that.
All right. Thank you.
As you know, we also have a delay of three to six months for any price changes in oil-based materials.
All right. Thank you.
Operator, next question from the telephone, please.
Thank you, ma'am. From Barclays Bank, you now have a question from the line of Iain Simpson. Your line is now open, sir.
Thank you very much, good morning, gentlemen. Just a couple of quick questions from me. Firstly, looking within personal care, you mentioned that feminine care had done very well in emerging markets. It would be great if you could just remind us what proportion of that feminine care business is emerging markets, and perhaps talk a little bit about the drivers within that as to what did cause that growth. Secondly, you talked, if I heard you correctly, about how there are two fewer invoicing days in the fourth quarter. It would be great just to sort of hear a little bit more about that and whether that's going to affect your whole business.
Then just lastly, it would be great if you could talk a little bit about incontinence and specifically, how you sort of feel the branded part of your incontinence business has been performing and whether you're happy with the level of A&P that you're currently putting behind that with a view to next year. Thanks very much.
Okay. If I start with the last one, we only have branded business in incontinence all over the world. Of course, we would like to grow that faster, since it's such a good category for us, and the penetration is still, as you know, very low. We have to balance that with the margin impact of actually driving penetration. We try to have a decent growth without destroying the margin. As you know also, we have an extremely strong position globally and in all markets we are. We are spending the A&P we think is the level to drive penetration without destroying margins. When it comes to feminine, I actually said that we have been doing very well all over the place. Even in Europe, we have improved feminine and growing market share and growing profitability.
It's not only in emerging market part of it, and feminine in the group is 19% of sales, around that. 14% of the sales. It's a small category, but actually with the highest gross margin. What was the third one? I forgot it. What's the third one?
The third question was just for some color on the two fewer invoicing days in the fourth quarter.
I see.
Sorry, just on feminine, what proportion of your feminine business is emerging market? Thank you very much.
65.
Lennart?
65%. Thank you.
We have some extremely strong position in the emerging markets when it comes to feminine, and very high market share. It's also when we talk about this, our small acquisition in Brazil are gaining market share, so we will soon be number 1 on the market, if we are not already number 1 on the market. All our personal care products are actually doing great in emerging markets. Invoicing days, you're an expert on that.
What was the question about that?
Two less days. What is the impact?
If you have EUR 1,200 a ton, you can take a pulp price lag of 60 to 90 days in the hygiene part as well, at least.
60?
For a quarter, it is 60 days, invoicing days, roughly. If it is two less.
The sales is 100% determined of the invoicing days. If it's less invoicing days, we get less sales. If it's more, we get more sales in a quarter.
That's affecting all three business units, so there are no changes in terms of how invoicing works in each one. All three business units have had two fewer days in the fourth quarter.
Maybe not in forest, but in hygiene.
Not in forest
In hygiene, we often see that happen.
Okay. Thank you very much.
Over a year, we normally should have the same number of invoicing days.
Thank you.
Okay, next question from the telephone. Operator, please.
Thank you, ma'am. Now from Redburn, you have a question from William Houston. Your line is now open, sir.
Hello there. You mentioned maintenance shutdowns coming in some effect in Q4. Could you just talk about what scale those will be, and how those compare to Q4 last year, please? Secondly, on the wind power, given the opening of your wind farm, can you just talk about when you expect to be seeing some profit impact from those projects, please?
Should I start with wind, and then you take the first one? Was it the first? If you look at the wind power, it depends what kind of deals we have, because we have a number of setups in the market. The simplest one is that you lease the land, and then we get the revenue immediately. You have one that we build the windmills, and as soon as the windmill starts to work, we get part of the revenue of the windmills. We have a third one where when the park is finished, we get an ownership of that park, as we have with Statkraft. In that deal, we'll get 40% of the ownership. We have another, well, the fourth is that we have a combination of getting ownership and getting a competitive supply of energy from their existing production today.
There's a huge bunch of different setups. Overall, before you see a real good or a real big impact of this, I would guess it's another three, four, five years ahead, because it takes such a long time to get the permits, and then you need to build it, et cetera. It's a long-term project, but without any cash out or investment for us. That's, of course, the beauty of it.
Could you repeat the first question again? Lennart, you can answer that.
Yes. Sorry. On the maintenance shutdown side.
Yeah, okay.
You mentioned that you're expecting still some maintenance shutdown impact in Q4.
Yes.
Could you just quantify the impact you're expecting, and how that compares to Q4 last year, please?
For this year, it is SEK 25 million-SEK 30 million. I don't remember what we had in the fourth quarter last year.
Compared to SEK 60 million in the third quarter.
Yeah.
Okay. Sorry, can I just lastly on the invoicing days? I'm sorry, is that a year-over-year you expect two less invoicing days in Q4, or is that a quarter-over-quarter comment, please?
It was compared to quarter three this year. Quarter four this year compared to quarter three.
Okay. Year-over-year, your invoicing days will be the same in Q4 of this year than last year?
I have not looked at that.
Okay. Thank you very much.
I think the Christmas holiday, we'll have almost the same number of red days as last year.
Okay. Thank you.
In part of the world.
Yeah. Europe is the main part of all.
operator, let's continue with the next question from the telephone.
Thank you very much, ma'am. from ABG, you have a question from Martin Melbye. Your line is now open, sir.
Maybe this has been answered, but those tissue price increase announcements you had there, and you realized in September, how large were those? 3%, 5%, or what is it?
That's unfortunately nothing we communicate since we have a lot of customers and a lot of negotiations, so we keep that to ourself.
Say something that could be speculated upon, maybe saying that you had 1%? Was that wrong to say that?
Too low. No, just joking.
Okay.
No, we can't really get into that, because then we will have problems.
All right. Thank you.
The only thing I can say when it comes to tissue, even though that we do have an improvement over the years now, it is still not enough. We need to improve profitability more in tissue because of the capital we have invested there. This is not enough. We need to be able to offset raw material cost increases by price increases, and we need to deal with normal inflation also. In doing that, we need to improve the profitability. We are at 14% in Q3. It is not good enough. We need to get up. Okay, I think we have a final question from the telephone. Operator, let's open up for that one.
Thank you very much, ma'am, and that's from Société Générale, from Charlie Muir-Sands. Your line is now open.
Yes, thank you. I have a number of questions. Could we kick off with Q4? In Q3, I think your group organic growth was around 5%, but the comp looks considerably harder in the next quarter by something like 500 basis points. Is that something that we should take into account, or do you believe that you can offset that?
We are not giving the forecast for the fourth quarter.
No. Okay. Is that comp a real comp that we should be looking at?
Real. Could you repeat that, please?
Well, sometimes when we look at the historical comps, they actually reflect things of even the year before that, and so they're not real comps. I'm just seeing that the Q4 comp is 500 basis points harder than it was in this Q3. I'm just wondering whether that is something that we should consider a real hurdle for you or not.
Sorry, we do not really understand your question.
Okay. Well maybe we take that one offline.
Yes.
Okay. Yeah, sure. Okay. Then going on, there was some talk about new launches, I think mostly in the future, next year. Were there any new launches in this quarter that you can talk about, or any entries into new markets this quarter that you can talk about?
Yes, we had some new launches, both in tissue and in feminine.
Especially in tissue during the brand Tempo, where we have another development on an even softer paper in that one. We also had in TENA, a new product for light incontinence in TENA that's been launched during the quarter. We had a new kind of soap released in Colombia that we have a great belief on. We start in Colombia, if it's working there. It's a sort of an intimate soap. We have a lot of new things on the market, and not necessarily on all markets at the same time, because we can test it in one market. If it's working, then we can duplicate it in other markets.
Great, thank you. In terms of group organic growth, could you just give us simply what the organic growth was in your emerging markets versus your mature markets?
We look it up. I don't have it in my memory.
We're having a growth in personal care of 6% in emerging markets, we have 30% in tissue in emerging markets.
Right.
Overall growth in tissue are 8% and 5% in personal care.
Okay. On the baby diaper side, Kimberly announced its exits some time ago. We still haven't really seen anything come through. How long do you think it will take until the industry settles, the contracts are reallocated, and so it comes through?
We are in the middle of these discussions in different markets today. The problem is, of course, also that there is not really an overcapacity on baby in Europe. Which of course is positive. They are closing down, so no one is buying their assets. There will be a deficit of baby diapers. The question is, how fast can we cope with that?
I guess it will take probably a year before we have sorted everything out, and see where we can get the capacity or anyone else can get the capacity.
From that perspective, for us, a positive situation. For consumer and customer, a little bit difficult situation.
Mm-hmm. Okay. On the pulp situation, so the industry-wide pulp situation. My understanding was that there was some kind of major new pulp capacity due to come on stream sometime in the second half that would alleviate your input costs. Could you sort of update us on that situation, whether that's happened or not?
Well, you can clearly see on the development of eucalyptus that the prices are going down. Of course, that's because there is a lot of capacity coming out on the market. On the other hand, you see the other part of the fiber is actually increasing because there is no new capacity coming in on the softwood. We buy 50/50, hard and soft. For us, of course, it sort of even out the price increases and the price decreases.
Okay. Sorry, the final one from me. Assuming that the Vinda operation goes through as you hope, just over 50%, what kind of debt capacity do you think you'll be left with?
To reach the 50%, we will spend some 3 billion SEK. As you know, we are at the debt level of 52. With an equity of 60, you have some 9 billion-10 billion SEK before you reach that.
9, 10 billion SEK debt capacity, yeah?
It is not the target for us to go up to the 0.70. The Vinda acquisition to reach the 50 will take SEK 3 billion.
We will still have a very strong balance sheet.
Lovely. Thank you.
Okay.
Yeah. Okay. I think we conclude the Q&A session with that. Any final remarks from you, Jan, before we end?
I think we said everything in the summary that despite a very tough market, we are still performing reasonably good. We're still growing. We're improving profitability. We have a hiccup in baby during the third quarter. I'm not particularly nervous about that. Otherwise, we are doing quite well. With that, thank you very much.