Borregaard ASA

OSE:BRG

Earnings Call Transcript 2018-Q4

[Per Arthur Sørlie, President & CEO]

Okay. Good morning, and welcome to this Fourth Quarter 2018 Presentation for Borregaard. My name is Per Sørlie, President and CEO, and I'm joined this morning by Per Bjarne Lyngstad, our CFO.And we have the following agenda for you. We will go through the highlights for the quarter and the full year. The board has proposed a dividend for 2018. I will give an update on the market within each business area and also a strategic update following all the CapEx -- strategic CapEx that we have made done in the last couple of years. And finally, '19. And then Per Bjarne will take over and go through the financials in more detail.First, on the fourth quarter. EBITA-adjusted came in at NOK 94 million, compared to NOK 109 million in the same quarter 2018 -- or 2017. We continue to see growth in Industrial and Specialties for Performance Chemicals. But of course, with the investment in Florida, we have increased costs related to the ramp-up of the plant in Florida. And also, lignin distribution costs are at an elevated level at the end of 2018.In Speciality Cellulose, we continue to see higher wood costs compared to the previous year. And as previously reported, also lower acetate sales. Strong improvement in Ingredients, that continued also in the fourth quarter. And we also had a positive net currency impact compared to the same quarter last year.If we skip over to the full year 2018. EBITA came in at NOK 580 million down from NOK 749 million. Also, on a full year basis, we saw -- in Performance Chemicals, we had on the positive side increased sales volume, diversification, especially then growth in industrial products and also in specialization. And that, more or less, offset the challenges that we continue to see in the concrete admixture market.The Florida plant went online in the middle of '19 -- or 2018 and that gave us increased costs and depreciation. And we also saw higher lignin distribution costs in the second half of 2018.Speciality Cellulose was affected by lower sales of acetate, but also higher wood and caustic soda costs on the variable cost side.In Other Businesses, we saw a very strong improvement, and that was primarily coming from the improvement in Ingredients. And also, this year sort of signaled the completion of most of our strategic investment projects. So that we have laid the foundation for growth in future years in this financial year.Then onto the dividend proposal. Just to remind you the dividend policy, we want to pay regular and progressive dividend, taking into account the long-term earnings and cash flows of the group. And the dividend is targeted between 30% and 50% of net profit. So when we say regular and progressive, we mean that when we have an above normal profitability, we will pay out closer to 30%. And when we have a below normal profitability we will pay out closer to 50% in order to have a stable and regular dividend over time.For 2018, the board has proposed a dividend of NOK 2.25 per share. That is -- compares to 47% of net earnings. And the total dividend payment will be approximately NOK 224 million, taking into account the owned shares owned by the company.Then if we move on to Performance Chemicals markets in the fourth quarter, the sales volume increased by 3% versus the same quarter last year, '17. We saw volume growth both in Industrial and Specialties, and this is reflected in the price because the average price in sales currency was unchanged. It was in line with the same quarter last year, and that's a reflection that the concrete admixture market continues to be difficult and prices are under pressure. But this is at the average expense level, this is compensated by the growth we see in Industrial and Specialties. So all in all, the average price in currency is unchanged from the year before.If we look at the full year, we see a similar picture. The average price in sales currency was slightly down, it's 1% lower than the previous year. And this is exactly the same drivers that the diversification and specialization offsets the effect of price pressure in lignin products to concrete admixture.Overall, the total sales volume increased by 4%. We are especially pleased to see that the industrial sector grew a lot, from 157,000 to 170,000. So there was a fairly strong growth in that area.Also, Specialties continued to grow, 85,000 tonnes last year, up from 82,000 tonnes. Reservoirs, fairly flat in the construction area. And this is in line with the strategy we communicated at the Capital Markets Day where we said that our longer-term target, end of 2021, we expect a run rate where construction will constitute maximum 30% of our portfolio. So we can see here now, over the last year, that we are moving rapidly in that direction.Also, I'm pleased to report that, for the full year, the movement in finished goods inventories were quite stable. So that we did not -- in spite of difficulties in the admixture market, we did not build up the inventory during this year. We moved, more or less, what we produced.Then onto the Speciality Cellulose markets in the fourth quarter. The cellulose prices in sales currency were stable. However, because we are selling less into acetate cellulose, that highly specialized share of the market, this of course has a negative impact on the price, that we have a movement in the mix.In the Bioethanol business, we are now into a phase where more or less all our production is sold into biofuel, which commands a premium price. So we, in the quarter, we saw higher sales prices and then a better product mix since we are selling the bulk of the business going into biofuel. But we also saw lower sales volume, which varies from -- between quarters comparing -- depending on other factors in the biorefinery.In this business area, we saw a positive foreign exchange impact. This is the business, the largest business we have that is exporting out of Norway. So whereas the Performance Chemicals has a more diversified production globally between countries, Speciality Cellulose has all these production in Norway so that's why there is a higher FX impact in this area compared to the Performance Chemicals.Speciality Cellulose markets for the full year. Also, for the full year, prices usually are set for the full year, so there's no surprise that also, for the full year, we see that prices are in line with the same year -- with the previous year, 2017. But again, product mix had a negative impact because we sold less into the acetate market.Inside the highly specialized rates, we sold more and commanded better prices in the ethers market. So there is a blend, but altogether, a negative mix. As you can see here, the share of highly specialized, which is the combined sales into ethers and acetate, came down from 72% to 62% of the portfolio. And that's -- of the sales. And that's what explains why the average sales price came down. The sales price on -- in a comparable mix was in line with the previous years.Again, since we started up the Bioethanol upgrade that we did, was started up just at the beginning of the second quarter, we of course had 3 quarters of business last year that has an effect on the mix and a positive sales price effect because we sell more into the biofuel business.Then onto Ingredients and Fine Chemicals markets. Both -- this is combined slide for the fourth quarter and the full year. The Ingredients business has had a stellar performance in 2018. You can see that we have had increased sales every quarter last year, and this is explained by increased sales prices and, to some extent, also higher sales volume for bio-based vanillin. So it's the share of the business that goes into -- that has to do with the wood-based vanillin. That is the one that's driving the development in this business area. Altogether, we saw sales revenues increase 32% versus 2017.In the Fine Chemicals area, we had higher deliveries of a key product in the fourth quarter compared to the same quarter last year. But if you look at the full year, it was fairly flat. Sales revenues increased by 2%, and this is what you typically see in this business area, that you have delivery patterns that change between quarters and -- but on a full year basis, it's usually a stable development.Then just to remind you of the strategic agenda, and this slide is now 5 years old, and this is what we 5 years ago we came out and said where we wanted to take the company over a -- in a long-term perspective. And we said that there were basically 3 important things we wanted to achieve.One is that we wanted to develop the Performance Chemicals business in 2 ways. We wanted to grow it in absolute terms and we wanted to specialize it to aggressively grow the specialized part of the business.Secondly, we wanted to develop the biorefinery in Norway. And the way we wanted to develop it was to increase the value-added, rather than grow the volume that we produce at this particular plan. So we would do targeted investments to increase the value added of the product portfolio. And finally, we wanted to go forward with the Cellulose Fibrils and develop that into a new business area.So if we look at the situation now at the end of 2018, we have executed most of the CapEx that is related to the strategic agenda. And we have -- but we have also successfully developed the highly specialized part of Performance Chemicals. Since 2009, we have grown that by more than 50%. And we have started up the Florida plant last year, which is the single major investment in order to put in place the possibilities to grow the Performance Chemicals business.And we are close to completing the 500 million upgrade in Norway, which is related to further specialization, but also to cost reductions in the production line for Performance Chemicals. We have also extended a joint venture agreement in South Africa until the end of 2032.Then we have done a number of targeted investments in Sarpsborg. The Ice Bear project has been done in 2 steps, and it was completed late 2018, which opens up for more flexibility, more options in Speciality Cellulose.We completed the high-end Bioethanol expansion in the first quarter 2018. We're already seeing some impact from that in 2018. We have debottlenecked the Fine Chemicals by roughly 20% -- 20-plus percent capacity expansion. And we are close to finalizing this upgrade in the lignin operations. So we have done a lot of things in terms of CapEx.We completed the Cellulose Fibrils investment a couple of years ago, and we are still in the market introduction phase for that business. But all in all, we have sort of placed our bets. We have spent money on the CapEx. And partly, you can see that also reflected in the results for 2018 through more fixed cost and more depreciation at this point.So going forward, the focus will be on the markets, obviously. I mean, we have now laid the foundation for growth in the next several years. And the new lignin volumes from Florida is on top of the list for what we want to achieve going forward, to introduce those lignin volumes into the market at the planned rate. The Ice Bear product range gives us more flexibility in Speciality Cellulose. The Cellulose Fibrils, we are working hard at developing the market and we will continue, of course, to develop the specialties in Performance Chemicals, as we have successfully done, and also in Speciality Cellulose.The focus will also be even more on the market because, with the success that we have seen in the Ingredients business, particularly in 2018, we continue to believe that there are upside opportunities for us in our product at a much lower CapEx. And also, Exilva can do a second step at a much lower CapEx than the initial step. So those are the most likely next steps, but we will also look at some smaller add-ons, strategically, probably most related to the biorefinery in Norway.Then just a quick word before I go to the outlook on the sustainability. We -- like I said, we continue to believe that we can offer several things to the market in terms of sustainability, and we will continue. We will actually increase our efforts to market these advantages connected to our product portfolio.This slide describes how we want to approach this. I mean, on the one hand, our raw materials are absolutely sustainable. And all the raw materials that we use at the biorefinery in Norway, but also use at the lignin operations that we have outside of Norway come from certified wood. So the forests -- and it means that we have a sustainable supply chain, raw material supply chain.The processes that we have in our businesses are sustainable. Last 10 years, we have reduced CO2 emissions by more than 10% in the biorefinery in Norway. And we are working hard to deliver on target base CO2 reductions according to the Paris Agreement and now, lately, the agreement in Poland.And what we can offer the market are really 3 things. In certain areas, we can offer positive climate accounts, CO2 reduction, better greenhouse gas footprint for the customer. And we do that through life cycle analysis. For more than 10 years, we have documented for all our products how using that product will affect the greenhouse gas footprint for our customers. And Bioethanol, of course, is a clear example of that where we can take down the greenhouse gas footprint by 85% compared to traditional fuel.Then we have the bio-based, where we see a strong trend at the moment for bio-based. And the megatrend in bio-based goes back to the people who want to have products that have a natural raw material. It can go through an industrial process in order to produce the product but the important thing is that the starting material is absolutely natural. And the bio-based vanilla flavor that we sell and produce is an example of that.And then, finally, we can offer environmental health and safety benefits to our customers. And this is particularly relevant in the agrochemical area where you can have more environmentally friendly pesticides. You can do granulation so that -- lignin can do granulation so that the farmer is not exposed to toxic material in the pesticide, et cetera. So there is a whole range of sustainability criteria or advantages, if you like, that we can offer to the market. And we are stepping up our marketing efforts to gain -- to benefit from these advantages of our products.Then, finally, I will round off my presentation with a look -- the outlook for next year.First of all, Performance Chemicals, we continue to see this strong competition and price pressure in the concrete admixtures market. But like we have seen now over several years, we expect it to be compensated in the -- by diversification and specialization. However, we are not sure that it will be fully compensated. So the same pattern, if you like, as we have seen in the last years, but the price pressure is not looking better in construction.The sales volume, we expect that to increase by approximately 10%. And this is, of course, mainly explained by the ramp-up of production volume in Florida. So that's roughly 50,000 tonnes increase in the sales. The distribution cost, that came up in the second half of 2018, are expected to gradually decline over the next quarters because they were partly related to reshufflings prior to the start-up in Florida and some other specific issues related to un-normal weather and so forth. So we expect that to normalize over the next quarters.The Florida plant will now have a full year of operation, and the fixed cost and depreciation increase, from '18 into '19, will be roughly NOK 40 million.Then if we go on to the Specialty Cellulose, the average cellulose price in sales currency is expected to be in line with the 2018 level. This will be a combination where we see that we expect an improved product mix in 2019 compared to '18 and that will compensate for slightly weaker prices into the acetate and we also expect it into textile cellulose segment.Wood prices will increase further from the beginning of 2019. The wood cost in the first half of '19 will increase by approximately NOK 50 million compared to the first half in '18. The prices are not set for the second half of '19, so we don't have any prediction or information related to that.The first quarter sales is expected to be lower than the first quarter of '18, but with a similar product mix.Then if we go on to Other Businesses. Ingredients, as we have talked about, had a stellar year in 2018. But we also expect that to continue to improve into 2019. And this is driven by the positive market trend that we see for bio-based vanillin. So it should continue and it should improve compared to what we saw in 2018.We don't expect any changes, really, in the market condition for Fine Chemicals. Cellulose Fibrils is continuing. Sales are continuing to increase, but the lead times, as we have communicated before, are long and we don't expect a really steep increase in the sales price -- in the sales volume, even now for 2019.Also, the remaining grant from the EU Horizon 2020, which we published in December that we had extended the grant for 1 year until the end of April 2020. We expect that the grant will cover a smaller share of costs in 2019 than it did in 2018. So in other words, in order to have a changed result, we need to increase the sales to compensate for a slightly lower grant in 2019.So that completes my presentation and the outlook, and I will hand over to Per Bjarne Lyngstad for the financial figures.

[Per Bjarne Lyngstad, Chief Financial Officer]

Thank you, Per, and good morning, everyone.In the fourth quarter of 2018, Borregaard's revenues increased by as much as 7% compared with the fourth quarter of 2017 as a result of higher sales in other businesses, especially in Ingredients, and also higher sales in Performance Chemicals. EBITA-adjusted was NOK 94 million, compared with NOK 109 million in the fourth quarter of 2017. We had a strong improvement in Other Businesses, but both Performance Chemicals and Speciality Cellulose had a decline.Sales were affected by continued challenging markets for lignin products to the concrete admixtures and for acetate cellulose, partly offset by the strong performance in Ingredients and a positive net currency impact.Costs and depreciation were significantly higher compared with the fourth quarter of 2017, with the impact from the new Florida plant, higher lignin distribution costs and wood costs.EBITA-adjusted was -- margin was 7.7% in the fourth quarter of 2018, about 2 percentage points lower than in the fourth quarter of '17. And earnings per share were NOK 0.80, compared with the NOK 0.90 in the fourth quarter of 2017.For the full year of 2018, Borregaard's revenues increased by 4% compared with the previous year. And that was mainly as a result of higher prices in Ingredients and increased volume in Performance Chemicals.EBITA-adjusted ended at NOK 580 million, compared with NOK 749 million in 2017. Also, for the full year, Other Businesses results improved, while Performance Chemicals and Speciality Cellulose had a weaker result.We had a strong development for bio-based vanillin in 2018, but we had weaker markets for lignin products to the concrete admixture market and for acetate cellulose.Both costs and depreciation increased significantly in 2018. Higher wood and caustic soda costs increased lignin distribution costs and the Florida ramp up hurt the result and margins. The net currency effect was positive by NOK 45 million for the full year. And EBITA-adjusted margin ended at 12.1%, a reduction of about 4 percentage points compared with the previous year.Return on capital employed was 12.7%, down more than 6 percentage points from 2017. Strategic investments in the Florida operation, the lignin upgrade project and the Ice Bear investment amounted for approximately 2 percentage points of the reduction in return on capital employed. And the earnings per share decreased by 16% to NOK 4.76 for the full year.Revenues in Performance Chemicals increased by 6% in the fourth quarter, mainly as a result of 3% higher sales volume, driven by the growth in Industrial and Specialties. Market conditions continued to be challenging for lignin products to the concrete admix market. For the full year, revenues increased by 3%.EBITA-adjusted ended at NOK 42 million for the fourth quarter, compared with NOK 76 million in the fourth quarter of 2017. The reduction was primarily due to NOK 22 million higher fixed costs and depreciation for the Florida plant and higher distribution and other operating costs. Distribution costs were, however, slightly reduced from the high level in the third quarter of 2018. Net currency effects were insignificant in the fourth quarter for this area.For the full year, EBITA-adjusted was NOK 314 million, a reduction from the NOK 449 million we achieved in 2017.As for the quarter, fixed cost and depreciation for the Florida plant, together with higher distribution and other fixed -- other costs -- operating costs, were the main reason for the EBITA-adjusted reduction.LignoTech Florida, alone, explains a significant part of the reduction. LignoTech Florida had an EBITA-adjusted in 2018 of minus NOK 75 million, compared with a loss of NOK 7 million in 2017.Increased sales volume, diversification and specialization offset the effect of continued strong competition and weaker prices for lignin products to the concrete admix market also for the full year.The net currency impact in this area for the full year was slightly negative, and the EBITA-adjusted margin ended at 14%, compared with 23.9% in 2017.In Speciality Cellulose, weaker product mix for cellulose and lower sales volume for both cellulose and Bioethanol resulted in a 2% reduction in revenues compared with the fourth quarter of 2017.For the full year, revenues also decreased by 2%, mainly from the weaker cellulose product mix.EBITA was NOK 50 million in the fourth quarter compared with NOK 67 million in the fourth quarter of '17. Increased wood cost and lower sales of acetate cellulose were the main reasons for the reduced EBITA-adjusted.Sales prices in sales currency were, in total, stable compared with the fourth quarter of 2017, whereas the net currency impact was positive.For Bioethanol, a lower sales volume was offset by higher prices and improved product mix. And the result for the fourth quarter was in line with the previous year.For the full year, EBITA-adjusted was NOK 257 million, compared with NOK 350 million in 2017. Increased wood and caustic soda costs and weaker product mix was partly offset by positive net currency effects and lower energy costs. Wood costs, alone, increased by NOK 80 million from 2017.The Bioethanol result increased due to improved product mix and increased higher sales prices. The improved product mix was a result of the new dehydration plant for water-free Bioethanol. And the weaker result led to the EBITA-adjusted margin decreasing to 15.4%, a reduction of about 4 percentage points compared with the previous year.In the fourth quarter of '18, Borregaard's -- sorry, for Other Businesses, revenues were 33% higher than the fourth quarter of '17, mainly from higher sales in Ingredients. In addition, Fine Chemicals had higher deliveries than in the fourth quarter of 2017. For the full year, revenues increased by 18%, mainly from higher sales in Ingredients.EBITA-adjusted was a plus NOK 2 million in the fourth quarter, compared with minus NOK 34 million in the fourth quarter of '17. For the full year, EBITA-adjusted was plus NOK 9 million, compared with minus NOK 50 million in 2017.Ingredients had a significantly stronger result from increased sales prices and higher sales volume for bio-based vanillin, both in the fourth quarter and for the full year. For the full year, this trend explained in vanillin -- bio-based vanillin explained a strong improvement in EBITA, both for Ingredients and for Other Businesses.Fine Chemicals had higher sales in the fourth quarter, but also increased costs and a result in line with the fourth quarter of 2017.For the full year of 2018, sales in Fine Chemicals were in line with 2017, but higher costs resulted in a decline in the result.Cellulose Fibrils had a slight improvement in EBITA-adjusted compared with the fourth quarter of 2017.Cellulose Fibrils had a positive pipeline development in 2018, but also continued low long lead times to convert customer prospects to buying customers. For the full year, increased sales were offset by plant optimization and marketing costs, and EBITA-adjusted was in line with the previous year.Net corporate costs were at the same level for both the quarter and the full year, same as in 2017.Net currency effects for Other Businesses were slightly positive in the fourth quarter but insignificant for the full year.The net currency impact on EBITA-adjusted was approximately plus NOK 25 million compared with the fourth quarter of 2017, the positive impact affecting Speciality Cellulose and Other Businesses.Hedging losses were reduced by NOK 9 million. In addition, currency rates were more favorable as the Norwegian kroner weakened by about 2% compared with the fourth quarter of 2017 if you are using Borregaard's currency basket.For the full year, the net currency impact on EBITA-adjusted was approximately plus NOK 45 million, the positive impact primarily affecting Speciality Cellulose.Hedging losses for the full year were reduced by NOK 61 million to 11 -- to a loss of NOK 11 million in 2018.Using currency rates as of yesterday, the full year 2019 net currency impact is estimated to be a positive of NOK 17 million compared with 2018. The corresponding impact for the first quarter of '19 is estimated to be plus NOK 30 million compared with the first quarter of 2018.Borregaard's cash flow from operations was lower than in the fourth quarter of 2017, mainly as a result of less favorable development in net working capital.In the fourth quarter of 2018, net working capital increased due to higher sales and accounts receivable and reduced accounts payable. However, we consider the increase in net working capital to be within normal temporary fluctuations and we had that also in the past.The average ratio, net working capital over operating revenues, ended at 18.6% for 2018, which was below our 20% target and in line with previous years.Investments were, in total, lower than in Q -- in the fourth quarter of 2017 and also lower than our forecast, mainly as a result of lower payout than expected for the lignin operation project in Norway and the Florida plant.Both projects are on time, and we expect these 2 projects, in total, to end at about NOK 50 million below budgeted investment. Total carryover to 2019 is about NOK 75 million compared with our previous forecast.Net interest-bearing debt increased by NOK 201 million in the fourth quarter. Increased net working capital investments, negative impact from hedging on net investments in subsidiaries and other currency effects contributed to the increase in net interest-bearing debt.At the end of 2018, Borregaard is well-capitalized with an equity ratio of 56% and a leverage ratio, which is net interest-bearing debt over EBITDA, of 1.44.The implementation of IFRS 16 regarding leasing from 1st of January 2019 will have limited impact on Borregaard's balance sheet and result.Our equity ratio will decrease by about 2 percentage points. And our balance sheet, our assets will increase by about NOK 230 million due to this change in the leasing standard.Based on the outcome for 2018, we have updated our investment forecasts for 2019. The forecast for 2019 is increased with the NOK 75 million carryover from 2018, of which NOK 25 million is related to replacement investments and NOK 50 million to expansion. Remember that part of the lignin operation upgrade in Norway is considered to be a replacement investment.The carryover also reflects the NOK 50 million reduction in expected investment in the Florida plant and in the lignin operation upgrade in Norway.Replacement investments are targeted at the depreciation level, in total, and is expected to be close to that level also in 2019 and 2020.Expansion projects in 2019 will mainly be remaining work at the new Florida plant and the lignin operation upgrade in Norway. Potential new projects, which so far are unknown or have not been communicated, may lead to additional investments.And that concludes our presentation today. Now Per Sørlie and I will be ready to answer any questions.

[Eivind Sars Veddeng, Analyst]

Eivind Veddeng, DNB Markets. Two questions. First, with the lower textile cellulose prices, can you comment on what's happening with the Spanish operations and Sniace? Secondly, just to clarify on wood costs. Is the higher wood cost in the first half of 2019 just a continuation of the price levels you saw in the first -- sorry, the second half of '18? Meaning, if prices remain flat just from these levels, what is the effect for the second half and the full year?

[Per Arthur Sørlie, President & CEO]

Okay. I mean, the -- it's very hard for us to comment on the Spanish operation. What exactly we are saying is that it's true that the Spanish operation that we have in lignin gets its raw material from a company in Spain that produces 100% of its production into textile cellulose. I assume that's the background for the question. And what we are saying is that, during the fourth quarter, we saw a decline in textile cellulose pricing. That will have an impact going forward. Borregaard itself has a fairly limited sale into that segment. So our comment was mostly related to that acetate pricing, also will come down somewhat in 2019. But everything else equal, of course, with a strong euro and a low price in textile cellulose, that's definitely not a positive for the Spanish pulp mill. You want to comment on the...

[Per Bjarne Lyngstad, Chief Financial Officer]

Yes, the wood costs. We have an increase in wood cost also from January 1. The negotiations with the forest owners led to an increase. And out of the NOK 50 million, between NOK 15 million and NOK 20 million is related to the additional increase. Remember also that we had an increase of, on an annual run rate, of NOK 60 million in the -- from the second half of last year's. So we have both those effects. More than half of the increase now is from the increase we had for the second half of last year. And NOK 15 million to NOK 20 million is the additional increase we had now.

[Jo Erlend Korsvold, Research Analyst]

Jo Erlend Korsvold, SEB. Is the run rate earnings we saw in Q4 within Ingredients representative for 2019? And the second question is construction is coming a less important part of the portfolio, while Specialties and Industrials are growing. When are we reaching the inflection point where the positive contribution from the growth within Specialties and Industrials are larger than the negative effect you see from the price pressure within the construction industry?

[Per Arthur Sørlie, President & CEO]

Okay. First, the Ingredients business, as we have reported throughout 2018, we have seen an increase, and that increase has gradually strengthened throughout 2018. And what we said in the outlook for next year is that we expect that improvement to continue. So that we expect to see a continued upgrade, if you like, in the market for bio-based vanillin. So in other words, the improvement in the first quarter will be higher than the improvement in the fourth quarter, I think, for this coming year because it's gradually coming up. Then the -- since the construction market started to have some headwind, we have, more or less in the last year, has been able to compensate in the average sales price. The improvement that we have seen in specialties and the improvement in industrial products have compensated for the price reductions in construction, so that they are fairly flat pricing, overall, for Borregaard. And the target that we talked about at the Capital Markets Day, where we tried to reduce the exposure in the construction market will, of course, also at some point lead to a balance in that market. It's impossible for us to predict exactly what's happening. But generally, there are 2 factors going on. One is that we are converting business from construction into other segments, and that is because that's more profitable than selling into construction. But the more successful we are at doing that, the closer we are to a balancing of the construction market. So I think that the best case, of course, is that both things will happen eventually. But it's impossible for us to predict exactly where we are on that curve, and our best estimate at the moment is that there will be headwind in the construction market also into 2019.Okay. Very good. Thank you very much.

[Per Bjarne Lyngstad, Chief Financial Officer]

Thank you.