Good morning, ladies and gentlemen, and a warm welcome to the Mayr-Melnhof Karton AG conference call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Please note also that this conference will be recorded. Let me now turn the floor over to your host, Stephan Sweerts-Sporck.
Good morning and welcome on the part of It's a great pleasure to have you joining this Q&A conference call on our 2024 annual results, which we released just this morning. Besides the press release, a video statement of our Management Board, CEO, CFO, has been published on our website, mm.group. In this call, we want to provide you now with the possibility to direct questions on today's communication to our CEO, Peter Oswald, and our CFO, Franz Hiesinger. Since this call addresses an international audience, we would very much appreciate your questions to be asked in English in the following Q&A session. Before we go for that, Peter, may I ask you to start with a short summary of our key messages?
Yeah, thank you, Stephan, and welcome, everyone. I assume you've all read our announcement, and therefore I just want to summarize the key points before we then go to the formal Q&A session. 2024 was a challenging year for the whole industry, and I'm very pleased to say that we've made significant progress by focusing on self-help. In our Food & Premium Packaging division, we've again achieved market-leading returns, and we could show at least some volume growth. In Pharma & Healthcare Packaging, we are now halfway through the successful turnaround of the former Essentra Packaging business. We have picked the low-hanging fruits, and now we have to advance the division towards MM's market-leading operational standards. Here we are well underway, but equally, we have significant further potential. At Board & Paper, we have made good progress in terms of volumes, which were up by about 17%.
However, the results were flat compared to last year, with a positive tendency if you look at the quarterly development. Importantly, looking to the whole group, we have reduced our net debt and have now a strong cash cushion. We have made great progress in sustainability, reducing our CO2 emissions significantly. We have also, in tough times, and this, I think, sets us apart from some other participants in the industry, increased our training and development intensity, and we have strengthened our management teams with a particular focus on technological knowledge. I would want to use this opportunity to thank our employees for their great contribution. We will propose a dividend increase of 20% to EUR 1.80 per share, in line with the net profit increase.
We've launched a share buyback program at the beginning of this year, and as per yesterday, we've successfully repurchased more than 350,000 shares, which represents 1.7% of all outstanding shares. As we've announced in December, we signed an agreement to sell our TANN business, a tipping paper that had limited or no synergies with our packaging operations, and this will be closed in the second quarter. What is the outlook for 2025? Of course, always with the caveat that it's impossible to predict the future in any way. What we see at the beginning of the year is a flat order intake in both packaging divisions and a slightly increased order intake in board and paper. Prices show a very heterogeneous picture, with some prices increasing, some decreasing, but overall marginally increasing.
In recycled carton board, we have the positive news that a small mill will be closed down during this year, which will somehow improve the supply-demand balance. Unfortunately, in virgin carton board, we see the startup of a new mill, also a closure of a mill, but a much smaller mill. Here, we will see even more overcapacity going forward. Now, looking ahead, we will again concentrate on self-help, and we will do whatever it takes to improve our long-term profitability. CapEx in 2024 was at a surprisingly low level. We had indicated a higher number. Some of that was obviously a rollover to this year. We expect for this year a CapEx of around EUR 300 million. We will continue to invest in our business in order to increase our competitiveness.
Yeah, and with this brief summary, it's now your turn, and Franz Hiesinger and myself, we are looking forward to your questions. Thank you.
Dear ladies and gentlemen, we will now start with the question and answer session. If you would like to ask a question, please press 9 and the star key on your telephone keypad now to enter the queue. If you find that your question is answered before it is your turn to speak, you may press then 3 and the star key to cancel your question again. To state your question, please press 9, star now. One moment for the first question, please. The first question is from Richard Phelan of Deutsche Bank AG. One moment, please. Please now go ahead, Richard.
Good morning. Thank you for taking my question. Just a specific question on WLC markets. I know that a price increase was attempted on January 1st. Could you give us an update in terms of where the pricing environment stands, especially in light of a major competitor's closure announcement in Spain? Thank you.
Yeah, so we caught part of the announced price increase. We have gone for EUR 50. We've achieved all of that, but a significant part our competitors did not follow. We basically don't see an erosion of our market share because our products are better, and I think the market has expected some increase.
Great. Has the closure accelerated the ability to implement more of the price increases through the year? Is that sort of the direction of travel?
Yes, it should have a positive impact. What is a bit strange about this announcement is that it was announced for the end of this year. We see some customers changing to us, but one has to be very careful. This competitor has announced once already another closure, so you never know whether it's really executed. We will wait and see if the closure really happens. Again, it's a bit strange because it does not take normally 11 months to execute the closure.
Understood. Great. Thank you so much.
Thank you.
Thank you very much also from my side. The next question is from Mark Watts of Citi. Over to you.
Hi there. Thanks for taking the question, guys. Just one question on market consolidation. As we understand it, there's perhaps obviously quite a lot of pricing pressure. Do you envisage any kind of the smaller players potentially falling into trouble? Would you consider, or have you heard anything here, and would you consider potentially looking to acquire those competitors? I guess mainly more in Southern Europe. Is that something that you're looking at?
I think we have to differentiate between our board mills and our converting plants. As for board mills, there are some small competitors where it's very difficult to understand how they continue, but some of them might have very specific niches. In the board area, I think we would not touch the smaller mills. On the packaging side, we are open-minded. We also see some bankruptcies. Of course, we look if there is any value for us, customer relations, know-how, machinery, which would make sense to be taken over. I think as it looks in the European landscape, the typical owners seem to be very optimistic people who always wait for the big jump in sales the very next day. Probably the tough time of waiting for some people to make these decisions is still outstanding.
Got it. Can I ask on capacity utilizations on the board and paper side? What are you running at kind of now, maybe versus the end of the year, or where do you envisage you will be given the outcome?
Yeah, we are now at roughly 90%.
Roughly at 90%. Okay. The other one, I guess, is just on the board and paper side. I kind of see a little bit of a reduction in free cash flow year on year. It looks like kind of a bigger decline on the cash flow from operating activity. Is this mainly working capital driven, given that you did report a sizable increase in EBITDA, or how would you kind of explain the kind of the weaker year-on-year comparable for operating free cash flow?
Yes, you are right. It's, I would say, almost exclusively a working capital reduction, where we simply had a bigger scope in, let's call it, the first year of crisis than in the second year.
Okay. It's not sort of a sign of restocking. It's rebalancing? Or what was actually the driver of the inventory?
Yeah, I mean, one driver was factoring, and the other driver that we systematically reduced inventories for all sorts of industry inventories, from raw material to finished goods, intermediate materials. I think that was a big focus. Another focus was to cut some receivables, so the terms with our customers. The third leg was, as I said, was factoring.
Got it. Sorry, one last one, if I could, just regionally, how you're seeing kind of the Italian market versus maybe German? Any kind of discernible differences in demand or on the customer side?
Yeah, we see probably in Italy, so the Italian market is typically an even more competitive market in terms of somewhat lower prices, also more import pressure, for instance, from Turkey, if one refers now to the WLC market. There is a gradual difference, but equally not a big difference.
Thanks very much.
Welcome.
Thank you very much also from my side. The next question is from Michael Marschallinger of Erste Group. Please go ahead.
Yes, good morning. Thanks for taking my questions. First question, board and paper for quarter EBIT, back to positive. You said this is mostly due to higher CO2 compensation. Is one of could you give us a number around this payment, or would it be EBIT positive in the quarter without this effect?
Yeah, I mean, we see actually a very smooth development when this regards the spreads, however you want to take it, the annual shutdowns, which we had in the third quarter. We were more or less break-even, plus EUR 2 million in the second quarter. In the third quarter, it shows EUR 20 million. However, if your costs were, I think, around EUR 24-25 million for the shutdown. If you excluded that, it would be plus EUR 4 million, and now it was EUR 11 million. Yes, we got somewhat higher CO2 credits, or we booked them, so to say, in the fourth quarter, which also helped. There is a positive underlying trend. However, I would also not overstate it because the issue of prices is still pending.
Okay, understood. A follow-up to the question on the market consolidation. You talked about these overcapacities in the markets. What would be your best guess when this will resolve itself?
Sorry to ask. What is the extent of the overcapacity? Is that the question?
Yes. How long do you think the market will take to absorb this capacity?
Yeah. I think we have an overcapacity in FBB of around 1 million tonnes and in WLC of around, whatever, 300,000-400,000 tonnes. It is very difficult to judge when some of the weaker players will decide to leave. I mean, I always expect it sooner than it really happens because, as I said before, this industry, there are a lot of visionaries who see the big market increase around the corner and wait for this. The question then often becomes if they can afford to do it. I think during this year, I do expect some overcapacity reduction.
Okay, understood. Last one on pharma healthcare. In the video statement, you said you are halfway through restructuring Essentra. When do you assume this restructuring will be finished? Will this be already in H1? Can we assume already some margin improvement throughout the year? What's your timeline on these restructuring measures?
Overall, when we acquired it, we had a timeline of four years. Two years are gone, and two more years will be needed. If you ask the question, why so long? I mean, there were some low-hanging fruits, which we picked very quickly, and that went ahead of expectations in 2023. Now that we really have to improve the underlying business, it's about qualification of people. We had to install new, more modern machines, and just to order the machines took more than a year. You need to install them, you need to train the people, then there are start-up curves, etc. That is basically what we've seen in 2024. We expect steady progress both in 2025 and in 2026 towards a profitability level, which is at the level of our Food & Pr emium Packaging business.
Hopefully then, we will see once we are there, we can make it even more profitable.
Okay, thank you. That's all from my side.
Welcome.
Thank you very much. Ladies and gentlemen, just a little reminder. To state your question, please press 9 and the star key. To cancel your question again, please press 3 and the star key. Moving on, the next question is from Markus Remis of ODDO BHF. One moment. Over to you.
Good morning, gents. Thank you for taking the questions. I would like to start with the Fit- for- Future program. If you could outline the incremental cost reduction measures that you have in mind, which areas you have specifically targeted, where you see the untapped potential, given that, I mean, cost cutting has been the name of the game for a couple of quarters now. I would also appreciate if you're willing to indicate kind of the earnings impact that you expect from these measures.
Yes, pleasure. It might take a bit longer to answer that. Fit- for- Future is now a new cost reduction or profit improvement program. We started with this program one year ago in Giesing with an external consultant, and I was personally extremely surprised almost how well it worked. It is basically nothing peculiar. The difference is maybe that it is really only focused on sustainable cost reductions. It is not the normal cost reductions you get just from declining input prices, etc. This project was very successful. It meaningfully contributed already in 2024 to the results of this mill. We started then already some months ago a rollout in two other mills, now in a fourth mill. Now it is in the headquarter and central group services, divisional services, and basically it will be rolled out throughout the group.
I know it's always very difficult to assess the impact, but we had a meaningful two-digit million impact in 2024. At the end of the day, it has to be a three-digit number, which we might get, let's say, next year.
Three-digit million savings accumulated 2024, 2025, 2026?
No, no, not accumulated per annum. We ramp it up because, I mean, once you implement the measure, so to say, your running rate improves. Then depending if the running rate starts in January, you have the benefit the whole year. If it starts in September, obviously it takes another year or 12 months to be fully in the numbers. It will be a meaningful contribution, and it comprises everything from a different technical solution, also sometimes with short-term payback projects, to better procurement, fixed cost savings of all sorts. Step by step, we are moving forward in a highly structured process where we work partly with external consultants, partly with our in-house transformation.
Did I get it right that it started in the board and paper segment, and the findings are now also applied to the packaging divisions? Is that what you're [crosstalk].
Yeah, exactly. That's what it is. Yeah.
Okay. You mentioned continuous structural optimization. I mean, this is something that the group has been doing for quite some time. Should we take this term as a kind of prolongation of what we've seen in the past, that you might take out capacities here or there, kind of close smaller plants, or does that also entail bigger restructuring measures?
Yeah, it depends on what bigger means, but I would say like taking out smaller plants. I think we've started now with one process in France and further up to come. At the end, it's really about our real commitment to stay only with well-invested, strong assets. Some of them can be improved, and in some cases, unfortunately, we also have to—it would be too expensive, take too long, or it's simply impossible from the setup of a mill or a plant.
Okay. Then I would have two financial questions. Firstly, regarding factoring and remembering one year ago, we had a major cash flow surprise because you've massively stepped up factoring. I think it was EUR 267 million last year. Can you give us the year-end 2024 figure, please?
It was a net position that was slightly below EUR 400 million, so around EUR 380 million.
EUR 380 million. Okay.
380.
EUR 380 million. Okay. Okay. So quite a punch increase. Is that a rate that you feel comfortable with going forward, or do you still see kind of the potential to further increase the factoring level?
No, it is on a stable level. It will be a little bit reduced due to the disposal of TANN Group, but otherwise, we expect that it will be fairly in line on this level.
Okay. Absolutely. Very clear. Thank you. A question related to the buyback. You've limited the upper threshold to, if I'm not mistaken, EUR 83, which I guess at the current stage limits your ability to buy back. Is there any reason for this threshold, and do you consider kind of an increase of the level as an optionality?
Yes. I mean, first of all, at least according to the Oswald law, we have to give a range, which is always very strange because you also have to give a minimum number and a maximum number, which is published. We have to discuss in the management board together with the supervisory board whether we change it, but for the time being, it is a longer-term program. It was a reasonable amount when we published, when we were at the level of even below EUR 70. Now we have to consider is the money wisely spent to increase this number, or should we rather use it, so to say, free cash flow to reduce net debt or make capital expenditure? It is open.
Okay. Related to packaging and the margin outlook in 2025, you've indicated that price increases in board and paper are coming through. How should we think about the impact on the packaging segments, considering that order intake is flat, which suggests a rather muted demand development? Is there a margin pressure to be expected from price cost narrowing?
Yeah. I think, as it looks now, the price increases on the board and paper side were limited, and we will see how much, and they should be reflected in the EUWID and also in the PPI index numbers, which is, again, an important reference point for a number of larger contracts we have on the packaging side. Like with WLC, as our competitors have not followed our price increase, we will see what the actual mix is. There is some increase reported, but it's lower than on our side, and this is easy to pass on to customers. By and large, I would expect that without making now a forecast, but that margins will be rather flattish.
Okay.
Flattish meaning now that some price increases, which have in board and paper, can be passed on, but also not more.
Okay. Very clear. A clarification coming back to the Q4 development in board and paper. This EUR 12 million of positive EBIT, when you gave the guidance of a positive development upon the Q3 release, was that already including this inflation from the CO2 compensation, or was it initially board and paper being a bit more on the weaker side compared to initial expectations? Because, if you correct me, the underlying EBIT excluding CO2 would be slightly negative. Is that correct?
No.
No.
No, that would not be correct, but the number would be lower. I think this is where we stand. Let's say what you can't expect is that we have a big increase. The rest will really depend on the overall development also of our costs. Obviously, the fact that our competition did not follow in the WLC market with our price increase obviously has reduced the outlook for much improvement.
Okay. Thank you very much. I'll get back into the line.
Welcome.
Thank you very much. The next question is from Cole Hathorn of Jefferies. Over to you.
Morning, Peter. Thanks for taking my question. I'd just like to follow up on the pharma and healthcare markets. Are you seeing any kind of green shoots from the customers on order books and improving demand there? Because we've seen destocking from that segment for a while now. Some of the flexible plastic packaging players like Amcor are talking about kind of a stabilization there, small improvements. I'm just wondering what you're seeing at Mayr-Melnhof.
Yeah. What we see at the moment, not so many green shots, as you call them. It is a rather flattish development. However, there is no doubt that the GLP-1, so this slimming product, will finally get momentum. There we know that this will entail growth, and we will overproportionally participate in that growth. Unfortunately, the real big movements are out too because the capacities are still under construction. This development will help us more than in 2026 and mainly 2027. Otherwise, in the rest of the market, it is rather flat.
Peter, I would just like to understand how you're focusing on your mill system at the moment on the board side. I would like to look at the recycled card or the WLC and the FBB side. Am I right in thinking that in the WLC side, you're trying to invest in energy reduction, move down the cost curve, and try and be cost-position advantaged while everyone else has got elevated debt levels and not able to invest in your mill system? Are you effectively going for lower cost production as the only way to survive in WLC at the moment? Is that the key focus for you and mainly energy investments?
Yes. I think our strategy so far has been we have made two closures. One was already a couple of years ago in Austria, a smaller mill. One was a small machine in our Slovenian operation in Kolicevo. We have done, so to say, the first step to take out those assets where we, the fact, could not see that they would come close to any cost leadership in the market. Now we have a good network with good products. We have, due to the rebuilds, also still some one-off costs, which we have to carry, but that gets better and better. Now we have to further bring our costs down. Also, there are many ideas. Also, some products are overspecified in terms so much better than the competition, but we do not get the respective premium.
The focus is absolutely, as you say, it's mainly on energy costs, but also on fiber costs, personnel costs. We have to really take—I don't know if it's in English, but we have to take every penny around and look at it from every side and reduce the costs. That will finally make us, so to say, that will finally lead to improved profitability.
I don't know if this is the right way to think about it, but you do have an advantage being forward integrated into your converting side of the business. Is there any way to, well, any opportunities for you to further optimize your logistics and better utilize your mill operating rates by prioritizing your products for your converting assets? I know it works differently versus the container board market, but I'm just wondering if there's any opportunities to improve the utilization of your mills and prioritize your board volumes into your converting assets.
Yeah. In WLC, we are already very highly integrated. Maybe the numbers do not look like that, but we are obviously also converting operations in Chile or Colombia, which are not integrated. Otherwise, it is integrated to a very high degree. In FBB, there is still more to do, and we will, of course, do that. There is more to come.
Maybe shifting to the FBB side, what is the focus there for ensuring cost competitiveness in a market where Stora Enso is adding new supply? I suppose you're getting Metsä Board taking out some supply, but it's still challenged. I'm just trying to understand the cost positioning of someone like your Polish mill, which has probably got lower wood costs versus your Finnish mill. Just understanding the focus there for the business.
Yeah. As you said, our Polish mill does have cost advantages, not so much maybe in wood. Also, maybe some in wood, but it's mainly logistic costs and personnel costs. I think this mill is very well placed, but has the disadvantage also to be in the graphic segment with uncoated fine paper, which we've moved now gradually to packaging paper. That's overall a very competitive mill. As I said before, we have the opportunity there to take a lot of costs out. In Finland, after the startup of the new machine, the second biggest machine, FBB machine in the Nordics, and overall in Europe, the third biggest. It's a big sizable machine with a lot of capabilities and newest technology. Otherwise, in terms of wood costs, etc., we are in the same boat as other Finnish players.
We produce also some in Kolicevo, where it is more focused on niche products, but the proximity to some customers in Southern Europe is, again, an advantage. Overall, despite all that, as you say, there is overcapacity in the industry, which will increase, and we will see what consequences will be taken also by our competition.
I mean, hopefully, we get some capacity rationalization from the peers. In the interim before then, is there any commentary that you can give on how you're thinking about potential U.S. tariffs and how that might impact the European market, both in WLC and folding boxboard?
Yeah. Our exposure to the U.S. is fairly limited, even though it's also for us a strongly growing market, but from a small base. Our main competitors are very strongly exposed to the U.S. The positive scenario is that there are more import duties in the U.S. for products from China, which might be on the margin helpful because then continuing to export and even increasing exports to the U.S. is a good business. If we get tariffs on European imports, that would have very negative repercussions for the industry because the U.S. is a very important market for some players, and they will then have to redirect these volumes to Europe because the rest of the world, so to say, is also a difficult place because of the Chinese.
Peter, and then the final question is on Russia-Ukraine potential peace discussions. How could that impact your business, firstly from a wood cost dynamic, and then secondly, if the market did open up, would the Russian market ever be open again to folding cartons, do you think?
Yeah. At peace and the finish of if the situation normalizes again and we could import and export, it would be very positive for the wood market in Finland. Especially Kotka, which is less than 100 km away from the Russian border, it would be a definitive strong advantage. Also from an energy perspective, it would be an advantage. The markets themselves, because Russia has started the KAMA mill shortly before the Ukrainian war started, the market opportunities, I'm not too sure how big they would be, but definitely there would be some opportunities. Our group was especially high exposed to Russia, so we lost a very significant volume there.
Understood. Just on the Poland wood markets, would you get kind of Belarusian wood coming back that might support you there and improve kind of question as well?
Yeah. Opening would also be highly beneficial for Poland.
Perfect. Thank you very much.
Thank you.
Thank you very much. The next question is from Saul Casadio. Over to you.
Okay. Thanks very much for taking my question. Let's go back to your comments about doing whatever it takes to improve profitability. Also, in your outlook, you talk about structural optimization measures, and you single out overcapacity in FBB and WLC. I am wondering whether, at this stage, you can offer more specific plans in terms of how you're planning to optimize your footprint and in which grades.
Yeah. I've already alluded to this with another question. We think that our footprint is very competitive. When we say we will do whatever it takes, of course, it would, if it made sense. Also, it could also mean that we close a carton board mill if necessary. I just don't see from a competitive point of view that this would lead to anything because logically, those on the higher part of the cost curve have to do something before, and this is not out of, yeah, it would be just economically not justifiable. At the moment, this is, so to say, not an option, but if market everything changed, we don't exclude anything because in this market environment, it's really important that we return to a much higher profitability or to a very clear profitability, one has to say for board and paper.
A closure of one of our mills is something I can't see today.
Okay. When you mentioned in your outlook structural optimization measures, this is not something on the table today. That is just for packaging. Okay. Okay. Okay. I understand.
Yeah. For packaging, as I said, we are in the process now of closing a smaller plant in France. We are investigating some other possibilities. It can also be a downsizing of a plant. The importance of the message should be that we do not shy away, so to say, also from tougher questions because the industry has overcapacity. You really have to look at all your assets and bet on those which can long-term survive and not spend useless money in supporting those who, at the end of the day, will have very limited chances to supply. That's just our strategy, which seems to be, unfortunately, very special in this industry.
Okay. You mentioned your capacity utilization is around 90%. I was wondering whether you could split that between WLC and FBB, if that's.
It's pretty similar.
Pretty similar. Okay. Okay. Thank you. Thank you very much.
Thank you.
Thank you very much. Moving on. Next question is from Xavier Vandoorne of Homeport Family Services. One moment, please. Over to you.
Hello. Good morning. Thank you for taking my question. In your press release, you're talking about highly competitive asset base. We talked a bit already about it, but can you explain a bit more as, yeah, margins are not following the volume recovery in board and paper? Why do you think you're better positioned than the competitors? I don't know if they have some other advantages also as cheaper electricity prices or some other things. Why would you think that margins would recover? To what level would you be happy at the moment in the next few years?
Look, we have a number of benchmarking studies which are available from service providers. Then we can, in some very rare cases, compare our performance with competitors, for instance, because they are listed. All that indicates, or we see also from acquisition targets, examples, so to say, where the competition is, and obviously also people move from us to competitors and the other way around. Overall, we feel that if we start with packaging, we have a culture which is very operationally driven. That has always been a high mark of our group. When we've acquired now Essentra Packaging, we have found operational numbers to be weaker by a factor of 2 or 3, so not just 10%, but really weaker.
Equally, we see how difficult it is then to bring things up because it's linked to investments, it's linked to infrastructure, it's linked to people and what they are used to do, etc., etc., and the whole organization to work efficiently. We think from all what our comparisons tell us that there we are on the packaging side. Our traditional legacy Food & Premium Packaging is really highly efficient. We see now in pharma where practically 80% has been acquired or more than 80% has been acquired, that we are on a very good way to do it. In board and paper, we also do some benchmarking. We are taking costs out like energy, etc., where we dramatically reduce energy consumption. As you will see then from our annual report, we've not just reduced CO2, but energy consumption per se, also on a per ton basis.
This follows just a different, sometimes just a different organization, sometimes minor investments. In some cases, we also need some bigger investments, which we will do. Overall, we feel we are in a good space and with the spirit to be here at the top. Of course, there are other very good competitors or they have individual plants or mills which might also be better than we are. Was this answer satisfactory for you?
Yes. Thank you.
Thank you very much. As there are no more questions in the queue, I'm handing the floor back over to the host.
I think we have had a number of questions covering a broad range of areas. Thank you, Peter, for your in-depth answers. Thank you for participating and your interest in the company. Just for your information, our annual report will be published on the 9th of April. Q1 results on the 29th of April. With this information, we have two more questions pending, I think. Do we see that?
Yes. Exactly.
The moderator can take the questions.
Yes. There would.
We will answer those.
Perfect. Thank you very much. There are two follow-ups. The first one is from Mark Watts, Citi. One more time. One more moment, please. Mark, over to you.
Hi, there. Sorry for the later questions. The first one was just on the CO2 credit impact. Do you mind just elaborating? Is that a rebate that all peers would receive in the WLC carton board side, or is that specific to you? The second question was just on the margins, and when we're talking about the raw materials again on the WLC, what are you seeing on the OCC side and the import costs? We have been hearing across industry that maybe on the container board, there will be increased demand on that side. Do you think that's going to have an impact on input prices going forward in terms of it potentially going higher, or what's your view there, or what are you seeing so far?
Yes. Thank you. Let's start with taking part. I mean, to predict paper for recycling is obviously always very difficult. I mean, we have seen overall strong increases, which we could not pass on to the market, different to the corrugated packaging, corrugated board market. Now we've seen them softening a bit. I would also tend more to see the upward trend than a further downward trend. Yeah, it's always very, very difficult to predict it. Of course, if they move up, the question comes back, yeah, can we increase prices and pass these costs on? The first question you asked is, I mean, we have in every country different regimes, so it's nothing special what we get, but they are also very different.
Germany, Poland, Finland, Slovenia, and Austria are for us the relevant markets, and they have all sorts of different CO2, energy. I mean, maybe subsidized is the wrong way, but they have, yeah, they are subsidized in one way or another with caps or refunding or if you use the network. It is a very complex thing, but we did not get anything, that is your question, anything special, but we just run in the normal schemes of these countries. Yeah, it is complex to follow up on the rules and on the prerequisites. One has to get them, and so to say, we were now, we got last year more than we got in 2023.
Got it. Okay. I guess directionally, probably a little bit less expected for 2025, if at all, versus 2024, given overall energy prices.
Yes. That's correct.
Trending down. Okay. The final question, could I just clarify when you answered my question earlier about cost prices from competitors, was it the case that they had imposed those and they had not stuck with customers, or you have just been hearing they have not actually increased prices? I just wanted to clarify.
Yeah. What we hear from customers is that they, let's call it this way, in the majority of cases, which we learn about, and it's only a certain sample of everything, they have announced it but not followed through on it. At the end of the day, they could get a bit more volume, they rather took the void than the higher price.
Gotcha. Thank you.
Thank you very much. The next question is a follow-up from Cole Hathorn again. Over to you, Cole.
Thanks for taking the follow-up. I'd just like to ask on the long-term demand trends for carton board and your longer-term views on the export market. Am I right in thinking that the export market will probably continue to remain quite challenged, just considering competition from Asia, etc.? On the domestic European market, we're still well below what I would consider trendline demand, be it from more discount retailers using more plastic or various different items from a consumption perspective. I'm just wondering, what could be the green shoots to demand? What do you think could ultimately bring us back towards the trend European demand, or are we not going back to kind of a trend level?
Yeah. As in my opinion, we are not going back to a trend level, and I would see a growth of 1-2%. To make it a bit more detailed, we have a rather demographic flat development. We see the growth rates of main customers, which are fast-moving consumer goods companies, pharma companies, etc. There is an intact trend, which is replacing plastic with carton board, which is positive. However, I believe that many market participants far overstayed the practical effect. We do not talk about huge volumes. There is always what can be. There are also a lot of studies and a lot of marketing talk about what could in theory be replaced, and these are fantastically high numbers. We just have to acknowledge the plastic is cheaper. The European Union has failed.
They've introduced the plastic tax, but it's paid by everyone instead of by those who bring the plastic into usage in Europe. This is simply a wrong policy, but it is what it is for the time being. As people, there will always be a certain pressure to, yeah, just to people have limited money, so to say, which they want to spend. With all, whilst they might be in theory very enthusiastic about moving to carton board products, maybe if they're in the shop, they forget about it and take the cheaper product, which is packed in plastic. Therefore, the substitution of plastic to board is happening, but it's not happening for the time being as fast. Of course, if the economy improves and people are more willing to spend again, which is a cyclical effect, this will become better.
I think to believe in growth rates of 4%, 5%, 6% is something I wouldn't put my money behind. For exports, I see the U.S. market generally. The world market, Middle East, Africa will be difficult because of the Chinese. The U.S. is an attractive market unless Mr. Trump changes this from one day to another. Otherwise, I can see that the product which we sell to the U.S. is a superior product, and it's well received by customers, and there is some growth opportunities definitely in this market replacing SBS.
Thank you. That was clear.
Welcome.
Thank you very much. Another follow-up from Markus Remis ODDO BHF. Your team.
Yeah. Thank you. Just one clarification. This is [audio distortion] , cross-cutting program. Does that trigger any charges of meaningful size, or will it go rather unnoticed?
In this way, it's rather unnoticed, and I don't, sorry. Also to say this because also for our internal communication, it's important. I wouldn't necessarily call it a cost-cutting program. It's really thinking out of the box, our philosophy of think next. What can we do in a smarter way? This can be insourcing, outsourcing. This can be normal cost-cutting, but it can also be less. There are also projects how to increase sales, how to cover special niches. It goes well beyond. First, we had what we call the cash protection program, cash and profit protection program. That was really about, so to say, putting a brake on cash outflow and lowering costs just where you can. Now it's a bit more the sophisticated forward-looking, out-of-the-box thinking, so to say, project by project, developing ideas, screening them, and finally then putting them into practice and doing it.
There are no, with this project generally, no bigger implementation costs involved, except for some projects, but it's not major. These are not major costs.
Okay. A quick question for Mr. Hiesinger. You indicated a standard tax rate of 19%. Is that to be understood as kind of the P&L effective tax rate going forward?
Yeah. In average, we had a tax rate of 3.4%, which consisted of an ongoing tax rate of 19% in this year, also fairly low. That was compensated by a tax asset, which we have capitalized off the tax loss carried forward of some of our Essentra plants, especially in the U.K. and U.S.
Yeah. To make it clear, when we bought Essentra with a number of loss carry forwards, which we ignored because the business was break-even or in some cases loss-making, now we've achieved the turnaround. We make profit, and the loss carry forwards have become valuable, let's call it this way, or realistic.
It is a one-time effect. There is nothing to do that we have moved to another jurisdiction or anything like this. We decently pay our taxes, but we assume now that we can use a lot of our loss carryforwards from the Essentra business, ex Essentra Packaging business.
Right. That will bring the P&L effective tax rate down from the rather 25% that was kind of the benchmark in the past to 19% on a more sustainable level, on a more sustainable.
No, no. In 2024, we had 3.4% on a total average, taking into account our ongoing tax rate of 19% plus a tax asset. Going forward, it will be slightly above 20%.
Slightly above 20%. Okay. Thank you very much.
Thank you very much also from my side. As there are no more questions coming in right now, I am finally handing over the floor back to you.
Yeah. If I may pick it up, Stephan already, as I said, he's goodbye, and we are running over time. Just summing up, we believe that despite these difficult market circumstances, given our competitive asset base, strong management team, winning spirit, and solid financing, we are very well positioned to successfully navigate the challenging market situation in 2025. We believe in the long-term financial and strategic value of our sustainable and innovative packaging. Thank you.