Good morning and welcome to the SCA Interim Report. To start with, just a few comments on the important raw material market for SCA. We have seen our major raw materials coming down during the last quarter. If we look at pulp, oil-based, and recovered paper. At the same time, we have seen the dollar strengthen. In euro terms, we actually haven't seen pulp as an example coming down in the major part of our operations. The interesting situation on pulp is that the spot prices today are about $100 below what you can see on the contractual prices. It seems like there is still downward pressure on the pulp side. The important part in our Personal Care business, the oil-based raw materials, is also coming down.
As you know, we have a time lag of between three to six months before we get the lower prices into our P&L in the Personal Care business. A general comment on the market situation, in particular the financial crisis that we are in the middle of in Europe, we haven't still seen any impact on our businesses due to that. We still have reasonably good volumes, and as you can see and will see later, quite a good growth in part of our businesses. Coming into Q3 compared to Q3 last year, in local currency, we have an overall growth of 6%. Still, good growth in emerging markets, both in Personal Care and in Tissue. Packaging volumes are up, and we also have a substantial price increase in our corrugated business compared to last year.
Publication paper, also some volume increases, and solid wood still on this comparison a good growth of 7%. We do have slightly lower EBIT, and that is mainly due to the increased prices of raw materials. We have some SEK 900 million in high raw material costs compared to Q3 last year, but also a currency impact of SEK 180 million. If we look at nine months to nine months, we have a similar growth in local currency of some 6%. Also, in this period, a good growth in emerging markets, both in Personal Care and in Tissue. Packaging volume is up, corrugated prices are up, publication volume flat-ish, still a little bit up, and solid wood also up nine months to nine months.
Same situation on raw material, but we have as much as SEK 3.1 billion higher raw material prices, and also a currency impact of SEK 700 million. We have been able to offset almost all of that by increased prices, increased volume, and improved mix in our business. A cash flow of a little bit more than SEK 4 billion. Looking at the result from this perspective, you can see that the impact on sales just in currency is a little bit above SEK 1 billion Q3 to Q3. You can also see that we have a substantial improvement between Q2 and Q3, and I will get back to that a little bit later. If we go to the first nine months, the sales impact of currency is as much as SEK 5 billion. That is, as you know, the translation impact, and it's not the transaction impact.
In local currency, as I said, 6% overall growth. We continue to reduce the debt-equity ratio, even though it has been heavily impacted by the remeasurement of the pension liabilities in Q3 due to the low interest rate mainly, but also, of course, to the stock exchange development. Coming into Q3 compared to Q2, overall, still a growth in the company. We have a substantial EBIT increase of 13%, and that's higher prices, but we still see also raw material continuing up in Q3. That's mainly because of the lag in the oil-based, but also there is a lag in the pulp contract. As I said, in euro terms, pulp is still on the same level or even slightly higher compared to the previous period. Looking at the business area, Personal Care, it's an EBIT increase of 18%.
We also forecasted some improvement in the hygiene business when we reported the Q2 report. It's higher prices and volumes, but still higher raw material prices. Tissue, 21% improved in EBIT, higher volume and better mix, and of course, also prices coming in as we announced in Q2. I will get back to that a little bit more when we are going into the different business areas. Packaging also an EBIT increase of 14%. It's higher prices, but slightly lower volumes compared to Q2, and that is mainly due to seasonality. Forest, we say flat, it's actually SEK 1 million better, so it's also slightly better, but of course, it's flat-ish. Increased prices, but also increased raw material costs. We have also announced the restructuring program.
As you remember from the Q2 and the Capital Market Day, we announced that we are investigating further efficiency improvement, in particular within our hygiene business. This program has a cost of SEK 1.4 billion, of which write-down is SEK 500 million. It will impact some 2,000 employees in the company. Savings will be SEK 700 million when it's finalized. This is mainly in hygiene, it's partly in packaging and a very small part in forest operations. It's in Europe, but it's also outside Europe in Mexico, where we actually have closed the plant now when we have started up the new Tissue Plant in Mexico. We will see this gradually coming in as an impact during a two-year period. The savings and the cost will mainly be taken in Q4 and the first half next year. Coming into the different business areas, starting with Personal Care.
First of all, it's of course very positive that we have been able to improve the margins from Q2, where we had a margin of 9.5%, and now we're up to 10.9% in Q3. We have continuing growth in our main categories. We are gaining market share in incontinence, which is very important. As you know, that is our most important category within Personal Care, but also growth in feminine care and baby diapers. Sorry, baby diapers is still on decrease, and that's because we are ramping up the new production in Poland. We are getting the new contracts, as I announced in Q2, of some 500 million, 550 million pieces of baby diapers, and that will be fully incorporated during the beginning of next year. We will be 100% utilized in our production facilities in baby.
We have been dragging on, of course, a fixed cost while we have been working up, ramping up the volumes, but also reducing cost. Part of the restructuring program is actually a substantial efficiency improvement in our baby production, which means that with fewer machines, we can produce more. Of course, then we need fewer people and fewer machines going forward. Good growth in emerging markets, and also incontinence care is growing quite well in emerging markets. From a profitability point of view, the higher raw material costs which we see compared to this period is SEK 176 million. We have not been able to offset that fully by price and volume increases.
As I said, the lower raw material in Personal Care will gradually get into the business in Q4 and Q1 next year, since we have a lag of three to six months in our contractual positions with our suppliers. Coming into Tissue, we also have an increase of 5% Away-from-Home, and emerging markets are good growth. In Tissue, we have implemented a price increase in Away-from-Home of 5%. That has not impacted Q3 fully, and it will gradually get in Q4 and Q1 due to the contractual situation we have with our Away-from-Home customers. We have also implemented a price increase of 2.5% in Consumer Tissue, and the same situation there. It will gradually get in Q4 and Q1 next year. Now, of course, we will see what happened with the raw material prices.
We don't have any plans of further price increases during Q4. Now we have to focus to get all of this through into the system, so we can actually see it in the P&L in the coming quarters. Same thing here, improvement of margins Q2, Q3 from 7 - 8.1, and mainly due to price increases, volume, but also negatively impacted by higher raw material costs, even though those are less than we have seen in the previous quarter. We also have a negative currency impact of some SEK 40 million in Q3. Moving into Tissue. In Tissue, we, as you know, have been trying to increase the kraft liner prices. At the current situation, we have not been able to do that. We don't see for the rest of the year any possibility to increase the kraft liner prices.
There is a slight downward pressure on the testliner prices on the market today, mainly driven by an expectation that the prices will come down. The OCC prices are coming down, and that creates an expectation on the paper prices. That also, of course, moves inventories in the system. No one would like to be on inventories when they actually believe that testliner prices will come down. The underlying corrugated volumes are still good, and up until today, we see none or very, very little impact of any financial crisis. The price increases we've been able to implement in corrugated in Q3 is around 2.2%. Still having a very big raw material price increase of SEK 450 million for Q3. Forest operations, in general, we see pressure on prices in our sawmills, and that is mainly driven by increased production in the system, mainly from Finland.
The underlying consumption is still on a good level. I would say that probably the sawmills are the earliest in any change in the consumption. They're even before packaging if you see any change in behavior from the market. The pressure on price now is overproduction. We will reduce our production during Q2, and I believe that what I've seen from some of our competitors, they are doing the same to keep the inventory levels on a decent level. We also have an improvement of margins here between Q2, Q3 from 11.7- 12.3. Increased raw material costs of SEK 250 million, and here also we have a transaction and a translation impact from currency that is SEK 105 million. We don't anticipate any further price increases for the rest of the year in publication paper, but we do anticipate price increases for next year, both in magazine paper and newsprint.
The level of those price increases is still difficult to forecast, but there will certainly be price increases. Going forward, there is of course still an uncertainty in the global economy, even though we see some positive signs from the U.S. in the last days. We still need to solve the Greece problem, of course. Everyone is aware of that. Hopefully, we will have some solution from our political friends in Europe in the coming week. We see still prices on raw materials coming down, and we expect it will continue to come down for the next quarter. We will have further price increases coming into our hygiene business, mainly in Tissue, but also in parts of our Personal Care business, but not in totality. With that, I will stop, and we will open the floor for questions. I will ask Lennart Persson to join me in answering those questions.
Please.
Thank you. It's Linus Larsson with SEB Enskilda. You said that you haven't seen any impact on demand as of yet. One of your potentially cyclical exposures is in packaging, and I just wonder if you could elaborate a bit on your near-term outlook in terms of corrugated pricing in the fourth quarter and also what you expect in terms of volumes in Q4 versus Q3.
Normally, as you know, Q4 is for seasonality reasons one of a weaker quarter since you have Christmas and all the holidays. We assume that we will have the same pattern this year, which means that you will have lower volumes in Q4 compared to Q3. We don't anticipate any further price increases in Q4 due to the fact that there is a pressure on testliner and there is a weaker quarter.
Is it too early to anticipate a slight decline even in corrugated pricing?
We don't have any indication of that as yet, but it depends of course how all our competitors are acting. Also, if someone gets nervous or wants to increase their market share, etc. There are no market fundamentals that are sort of indicating that that should happen because we still have very high OCC prices, and those should actually be governing the testliner prices, even though we see a slight pressure on testliner prices now.
On your cost savings program, the SEK 700 million of savings, could you break that down into the various business areas? How much is Personal Care, Tissue, packaging?
We haven't communicated that yet, so I don't know, Lennart, if we want to do that at this stage.
No, I mean the main saving is in Tissue and Personal Care.
How much incremental savings in 2012 versus 2011 could give any reference as to the timing of this two-year implementation?
What we can say today is that it will gradually get in 2012 and 2013. We can't exactly say when they... We will try to do it as fast as possible, of course.
That's great. Thank you.
Hello, Oskar Lindström with Erik Penser Bank. I'd like to follow up on the questions regarding the restructuring program. You mentioned that Mexico was included. Does it include the closure of the plant in Mexico City? Following on that, will it include plant closures in Europe or any plant closures or changes in structure in Australia?
It's including the closure of Ecatepec in Mexico. There is no closure of any plant in Europe, but of course it's closure of production on operations in a plant. We are reducing the number of machines. Australia is not included.
All right. A follow-up question. In the Personal Care division, you managed to improve your EBIT margin sequentially. Could you divide that roughly between how much was the effect of improved prices, which you mentioned, and how much was the effect of the end of the Linselles/Oława restructuring program, which had burdened previous quarters, as I understand?
Lennart, will you try to make it?
Yeah. I mean, if we start with the closure of Linselles and move to Poland, that we have said should give us EUR 50 million in saving on an annual basis. Of course, that is done now, so some of that will come into the fourth quarter. How much will come from price increases or cost reduction of volumes, that is split between those three factors.
Okay, during the second quarter, you had still some costs related to the move of production, which burdened the result then. That was not included in the third quarter. There was no effect from production disturbances.
The saving is the EUR 15 million, including the moving costs, etc. You start now to see the EUR 15 million coming into the P&L in the fourth quarter.
Thank you very much.
Hello, Mikael Jåfs from Cheuvreux. A question regarding the impact from increased pension liabilities. Could you just please run us through what happened there, and should we expect more of that to come?
Yeah, and that of course only has an impact on the balance sheet on the net debt. If you have seen the report, we have reported with and without the pension when it comes to gearing. Lennart, maybe you want to...
Yeah, I mean, we have seen an increase from the SEK 2 billion deficit up to SEK 4.8 billion. Of course, if that will stay there, we might see some increased costs next year due to the deficit increase. On the other hand, it is what I say, a valuation issue each month, so it is very volatile for the time being, both the interest rates and the return on the assets.
If you look in a three-year period, you will see that it moves quite a lot.
What are the sort of threshold interest rates or stock exchange that we should be looking in the next?
It is the long-term interest rates that we are using for discounting, calculating the net present value of obligations. Of course, the obligations increase when the interest rates are declining. At the same time, we now have seen a lower return or shrinking planned assets as well. You have both today lower interest rates and negative return on the assets.
Thank you.
Claes Rasmuson Swedbank. Those price increases that you commented on, 5% for AFH and 2.5%, is that something that you have actually achieved for the fourth quarter? Are they fully implemented?
We have achieved it, but due to the contractual situation, it may not impact, or it will not impact fully in the fourth quarter.
Towards or in Q1, you will have achieved these amounts?
Yes.
When it comes to the cost decreases that you see continuing, would that be mainly pulp or is it RCP as well? As we see the trend today, it's probably that all of the raw materials will come down. Of course, it depends also on the dollar euro exchange, what we will have, because there is a negative correlation to dollar in pulp at the same time. The downward pressure is obvious since the spot prices are so much lower than actually the contractual prices are. If you go to China, it's even lower than that. There is more pressure on eucalyptus than on what we produce, but normally they follow each other after a while also. The trend is downward. All bale prices, I mean, we know that it will be lower because we have a delay of three to six months.
OCC very much depends on China, what they are doing. They've been in the U.S. now for a time because of the low dollar rates. If the dollar is increasing, you probably will see them come back to Europe again. On the other hand, it seems like the inventory levels in China are still very high in all raw materials.
Electricity, do you have a window for that one as well?
It is a difficult question. We do have hedges, of course, and in this part of the world, it depends very much on the water system. Now we have quite a good reserve level, but of course, the winter period is increasing electricity prices. As we see today, we don't see any dramatic change in electricity prices.
Thanks.
As long as the producers are not spilling the water and producing electricity instead.
Lars Kjellberg, Credit Suisse. In the present environment where we stand today, what sort of cost decreases would you anticipate Q4 and then going into Q1 when the full impact has been felt? Let's assume current exchange rate, current prices for the various raw materials. The second question is, are you positioning yourself in terms of pulp purchases in any way? Do you keep decent inventories? Do you have low inventories and the same thing on the recycled side?
If I start on the inventory side, we always aim for the lowest possible inventories. We have been quite good in achieving that. We have inventories in Personal Care Europe today of 1.7% of sales, and in Tissue, we're around four months, something like that. Quite good levels. When it comes to the cost position, if you look at the restructuring program that we're talking about now, you will probably not see very much of that in Q4. It may start to walk in a little bit in Q1, Lennart, but not in Q4.
In terms of the raw material side, that's really what I was asking.
Lower costs.
You can't quantify it directly?
No.
We've seen a number of companies in various industries talking about an element of destocking throughout the supply chain. Are you seeing any of that in your Hygiene business?
Not in the Hygiene business, but I suspect without actually having any proof yet of it, that we do see some of it in packaging since the expectation is that the paper prices will come down. Of course, you try to reduce your inventories. In the hygiene business, no. I mean, everyone is on the lowest level today. No one has sort of built up their inventories.
A final question. When you're looking at costs, we talked about pulp, we talked about recycled fiber, and another big element, of course, is wood. What sort of trends? We've seen a few cuts in Sweden, I guess. Are you seeing wood appreciate or coming down?
Our assumption is that you will see slightly lower wood prices going forward. It depends very much also where you are in the world, of course. In our part, it depends very much also how the sawmill operation is going and how much they will ask for it. We anticipate slightly lower prices.
I just recall one question that I had. When you're looking at this regional split of electricity cost in Sweden, I guess given your big presence up north, that should be a real net benefit for you. Will you be able to benefit from that?
It is a fact that you have different price areas in Sweden, and the prices in the north are lower than they are in the south. As a general answer, yes. Of course, it depends very much on our hedges and the long-term contracts that we have in the supply and our ability also to produce ourselves. I mean, we are a big producer of energy from renewables, but it's not a negative fact to be in the north of Sweden, if I answer it diplomatically.
Thank you.
Okay. Do we have any questions from the telephone audience, please?
Our telephone participants may ask a question by pressing star followed by one on their telephone keypad or cancel by pressing the hash or the pound key. The first telephone question comes from Myles Allsop also from UBS in London. Please go ahead with your question.
Hi there. Just a few quick questions. Could you clarify with the Away-f rom-H ome Tissue price increases of 5% and Consumer Tissue increases of 2.5%? In what regions are those price increases? Are they just in Europe or just in the U.S.?
The price increases that we talked about in Q2 were mainly in Europe, and it's the same with the one I commented today.
That's for Away-f rom-H ome as well. It's mainly in Europe?
It's mainly in Europe, yes.
Okay. With the corrugated increase 2%, is that sequential quarter-on-quarter increase?
Yes.
Okay. Just going back to the corrugated volumes, you're kind of expecting some seasonal weakness in Q4, but you're not seeing any signs of any real slowdown yet. How much visibility do you actually have there? How confident are you that things are actually holding up okay at this stage?
We have the visibility in our order books, but of course, a lot of this is also bought on sort of a day-to-day operation. It's not like in some businesses where you have a six-month order book. From that perspective, there is of course some uncertainty into it, but what we can see from the behaviors of our customers today, it's not any signs of any dramatic movements like we saw in the previous financial crisis.
Okay. Just lastly, on the Tissue margins, we talked a while ago about a 10% margin in the second half of this year, and obviously that was pushed back because of pulp cost increases. How confident are you now that we're going to get to that 10% margin in even Q4 or Q1 next year?
I think we still have the absolute ambition to reach that level in Q1 next year. As you have seen from the raw material prices, they have continued to go up during the quarter, which means that we are sort of running after higher costs. We still believe that we have the momentum to reach that target.
Do you think the industry is disciplined enough to sustain it to that level throughout next year, or is this going to be a kind of one, two-quarter peak margins before Tissue prices fall back down again?
I think it depends very much on where you see the raw materials heading also, because if there is a downward pressure on raw material, the incentive or the probability to increase prices is reduced. The discipline is better, and of course, at the 10% level, that's where you at least have to be to cover a decent return on the capital. We feel reasonably confident that we can achieve that.
Okay. Maybe one very last question is, do you think we're going to see either on both on the Tissue side in Europe and corrugated side? Do you think we're going to see any material consolidation or industry restructuring next year?
I mean, that's of course always a very difficult question. Looking at the fragmented market in both packaging and Tissue, there is certainly a need for it, but it's an impossible question to answer for me.
Okay, thank you.
The next telephone question comes from Johan Sjöberg from Carnegie in Stockholm. Please go ahead with your question.
Hi there. Could you say something about, could you quantify the price increases that you will see now in Q4 as an average for Personal Care, as just a broad picture, both for the Tissue segment and also Personal Care, just to get a feeling for the magnitude there in terms of % quarter- over- quarter?
In Personal Care, the main impact in Q4 will be the reduced raw material prices. There will be some price increases in the incontinence business, but I can't say exactly how much that will be. I don't think we're prepared to give you a firm figure on each quarter on this one, only that it will be fully implemented during Q1 next year.
Now you're referring to Tissue?
Yes.
Okay.
I jumped.
Sorry?
I jumped to that.
Good. Just coming back to the price pressure also on testliner, we've seen prices coming down by 10% if you look at the FOEX price statistics. Typically, how big of a price decrease would you have to give in to your corrugated buyers? 10% price change in testliner?
I think if I remember rightly, there's a 2% drop in test liner prices. Of course, it's more the expectation than the actual drop in test liner prices that the market is acting on. With an expectation on lower paper prices, the possibility to increase prices in corrugated is of course limited. As you know, we also have indexed clauses that automatically price to the liner prices with a delay of five to six months. Those will be impacted in steps if testliner prices are going down. The positive side is that even though inventories have come up slightly, they are still far below where they were in 2008. It's not as if we are building huge inventories yet at least.
Okay.
Any questions from the floor?
Market share increases in Personal Care. Could you just elaborate a little bit on the size and what segments and where?
We are actually growing both in Personal Care and in Tissue, in particular Away-fr om-Ho me, where we now are above 20% market share in Europe. We are still growing market share in the U.S., which of course is very important. The main category that we are still growing market share in is incontinence. It's both in retail and institutional in Europe, and also in emerging markets. We were falling below 40% in Europe about one and a half years ago. Now we are above 40% market share again, also because we are entering into the value segment, which is the fast-growing segment in incontinence, and also innovation. We actually have a much higher speed of new innovations coming out on the market in incontinence. That's the best way and the most profitable way of growing market share and growing profits in incontinence.
In baby, since we lost 500 million-600 million pieces of baby diapers about two years ago, now we're gaining it back. That also means that we are gaining market share, but we are gaining back the market share we lost in the private label business. Feminine is reasonably stable in Europe. Still growing in emerging markets, both in volume and in market share.
Oskar Lindström from Erik Penser Bank here again with two follow-up questions. The first refers to the price increases in Tissue of 5% and 2.5%. Are those for part of your Tissue business within Away-f rom-H ome and Consumer Tissue respectively, or are they average for the entire business? You mentioned a little bit earlier in response to a question that it was mainly in Europe and not in North America within Away-f rom-H ome. Is it a similar situation in Consumer Tissue that the 2.5% price increase pertains to part of your Consumer Tissue business?
I mentioned Europe since this is absolutely the bulk of our business. If you look at price increases in Mexico, Colombia, for example, it's much higher than 2.5%. Europe is 2.5%. Away-from-Home is also higher in the emerging markets, but in Europe it's 5%. In the U.S., we have assumed flattish prices during the rest of the year.
Okay, so the 5% and 2.5% are averages, roughly?
We have increases in Australia, New Zealand, also both in Consumer Tissue and Away- from-H ome. Since the bulk is in Europe, that's why I concentrated on that. Otherwise, it would be higher in some markets.
Okay. Second question is regarding acquisitions. Is it so that you've sort of a fair understanding that you've shifted your interest in acquisitions and growth a little bit away from China and perhaps East Asia and are now focusing more on the Middle East and Latin America where you've made the two most recent acquisitions while you've sold businesses in China?
Yeah, we sold packaging in China. I wouldn't say that. It's also a matter of finding the right partner or the right company. We are still looking and of course investigating China very carefully to find a partner to expand. The incontinence business in China is doing great, but of course it's a small business and it would be helped by adding other businesses into China. That is certainly absolutely our ambition. It's not that we sort of have left China or Southeast Asia. It's more that we have had better and faster opportunities in other parts of the world.
The final question, if I may, within the incontinence segment, are you seeing any effect, perhaps not sort of a well from sort of tighter healthcare budgets in Europe? I mean, there's been a lot of talk about in Spain with the regions cutting down on healthcare spending. Is that in any way affecting demand for your more premium incontinence care products?
It has been impacting us even since the first financial crisis. I mean, it's an ongoing process where, of course, countries are trying to save money. We are mitigating that by better and cheaper products and lower costs in production. That's something we do every day.
Thank you.
One more question from the floor. Hello, let's take some questions from the phone audience, please.
Mr. Sjöberg, please continue with your question.
Yeah, thank you. I think your security department cut me off there. Just coming back to Tissue operations on an earlier question here. Margins in 2009 peaked at 10.9%. Now things are moving your way right now. Prices are coming up, cost inflation is coming down. Last time around we saw prices coming down at the same time as raw material costs started to increase by the end of 2009. How will you prevent that situation from happening again now?
I think it's two things. What we have to remember also is that if you take Consumer Tissue, more than 20% of the sales is outside Europe. We have had huge problems in Mexico, for example, where we now are substantially going to increase margins as long as we ramp up the new production in Mexico. We are improving profitability in Australia. When it comes to the major part in Europe, I think we, on the contrary, proved that we were able to keep the margin substantially, all of the margin when raw material prices went down in 2009. Of course, if there is a substantial reduction in raw material prices, we want to and we have to give away part of that to our customers also. It should certainly improve the margins, not the contrary.
It seems like you have some type of disharmony between your own prices and raw material costs. I mean, you're always lagging raw material. You're chasing costs and the prices are following costs. How can you mitigate that? Is it possible to shorten your contract lengths here or something like that?
I mean, that's something we are looking into. At the same time, you would like to have the safety of a contract of some length with your customers. It's always a balance, a risk balance of actually selling the volume and transferring the cost side into your pricing system. We do have some fortified delays on pulp when it comes up and down at the same time. I don't think that we are ever going to match that, especially if you have an extremely volatile market as we have seen in the pulp business the past years. We have to deal with that internally. We can't pass on all the risks to our customers.
Okay, fine. Thanks.
The next telephone question comes from Al Cattermole from JP Morgan Asset Management in London. Please go ahead with your question.
Hi there. Two questions. First, on inventory, are you seeing any buildup of supplies in any specific areas? On funding, have you seen any change in your conditions in the CP market, and do you feel you have any need to come back to the bond markets to do another issue? Thank you.
Thank you. We don't see any inventory buildup in any part of our system. I mean, I think most of the customers and competitors learned their lesson during the last recession. Everyone's trying to keep lean inventories on a good level. We don't see that. Lennart, maybe you want to comment on the...
Yeah, we were in the bond market in May, as you remember. We still have SEK 6 billion, SEK 7 billion outstanding CP, and that is also at the normal good conditions.
Okay, thank you.
The next telephone question comes from Jussi Uskola from Deutsche Bank in Helsinki. Please go ahead with your question.
Okay, thanks. A few quick ones. The first related to the U.S. Tissue business. I was just wondering, how do you see your position in that market right now? I mean, valuations of the sector have been coming down massively, and your position there is not on the same level as it is elsewhere. Is that something that we should be considering going forwards? Secondly, I'm just wondering your thoughts about newsprint price increases. What makes you confident about price increases in the existing environment where waste paper prices are moving constantly down, and it seems that the pace is even accelerating as we speak? Thanks.
Okay, if I take the first question, we are the second biggest Tissue producer in the U.S. today in terms of volume. We have a substantial position in the market. We have more than 50% of the fast food market in the U.S. I'm talking about Away-from-Home now, not Consumer Tissue. We are growing our value-added sales in a very good way in the U.S., which means that we're introducing our dispensers with patterns and solutions. My expectation in the U.S. going forward is, on the contrary, very, very positive. We will continue to gain market share. We will continue to improve our profits. We still are only on the level of around 30% of value-added sales, but after the latest decision of improving the paper quality in the U.S. as we did last quarter, we will have a substantially better position to grow our value-added sales.
I feel very confident in that.
Do you feel that you are in the need of M&A activity on that market right now?
Not in the Tissue part, no. If we look at the publication paper side, it's of course one obvious reason for possibilities to increase prices is that there is a good consolidation ongoing or has happened. Hopefully, we'll see some more consolidation, and that will help to balance the markets. We are, as a business, if you look at SCA and all our competitors, in need of a price increase. A lot of our competitors are running their business with red figures, and you can't just continue to do that. That will at least hopefully put some good discipline into the market, and we will see price increases.
Okay, thanks.
We will certainly aim for that.
The next telephone question comes from Markus Almerud f rom Morgan Stanley in London. Please go ahead with your question.
Hi, Markus. I'm from Morgan Stanley. A couple of quick ones here. First, in Tissue, the 4% volume growth that you're seeing, first, is that in all regions? Second, it seems on my math that volumes in Away-from-Home is fairly flat. It's mainly prices driving, whereas Consumer Tissue is increasing a bit faster. Is this all emerging markets or do you see growth in Europe as well?
I lost your first question, but if I take the second one, we still see growth in Europe. Of course, in Western Europe, the growth is very much connected to the GDP growth. As you know, we have had quite a low GDP growth in Europe if you look at Away-from-Home. Eastern Europe is still growing quite well. I lost your first question.
No, it was just if the volume split between Away-from-Home and Consumer Tissue, are volumes in Away-from-Home fairly flat, or are both segments growing?
Both segments are growing, but Away-from-Home is growing faster than Consumer Tissue.
Okay. On Personal Care, could you please split incontinence products and diapers in terms of volumes and price? The 7% we see in incontinence, is it mainly volumes which are driving that or do we see some price increase of that as well? Also, the same thing in diapers, is it mainly volume there?
In incontinence, it's both price increases and volumes. We will continue to increase prices in part of the incontinence segment, mainly the healthcare segment during Q4. In baby, it's a combination of volume and price increases, mainly volume so far.
In incontinence, is it mainly volume or is it split fairly equal between price and volume?
Incontinence, it's mainly volume if you look at the Q3 results.
Okay. You talked a little bit about inventories on containerboard in the market. You say that they are a bit higher than they were before, but they are far below 2008. It broke down just about there. Can you elaborate a little bit on what you are seeing in containerboard inventories in the market, please?
From maybe this longer perspective, what we can say is that we do need a growth of 2% to 3%, 2% to 4% in Europe in total to offset the increased production coming into the market. I'm including Eastern Europe, also not only Western Europe. If that doesn't happen, you will gradually get an oversupply on testliner. You will probably see some more closures as we have seen in the past two years when production capacity has been above what is the demand on the market. I talk about testliner. Kraft liner is, from a European perspective, much more balanced, but of course we do get some exports from the U.S. depending on the dollar level. That market is more impacted by export-import than the testliner market.
In terms of containerboard inventories at the moment, would you characterize them as being average or below?
No, I would probably say that they are average. If there is an average, I would say that.
Okay, perfect. Thank you.
The last telephone question comes from Nitin Dias from JP Morgan in London. Please go ahead with your question.
My question has been answered. Thank you very much.
Okay.
Okay. Do we have any other questions from the floor? If not, do you have any last comments?
Thank you. What I would like to point out from the Q3 report is that we did achieve what we actually said that we should achieve when we presented the Q2 report. The market development has been, as we also forecasted in the Q2 report. We feel quite confident that we will achieve what we have communicated in the Q3 report going forward, both for Q4 and in the beginning of next year. With that, thank you very much.