Huhtamaki Oy Ser 1

Good morning all and welcome to Huhtamäki's investor call for the third quarter of 2024. My name is Kristian Tammela, VP of IR. Following our normal procedure, we will start with presentations by our president and CEO Charles Elmé and our CFO Tuomas Geust. And after that, we will have a Q&A session. With that, let's get started and handing over to Charles.

Thank you, Christian. Good morning to all of you, and thank you for joining our session today for the Q3 2024 result, where we are delivering a solid profitability in a gradually improved market. So I'll jump straight ahead on the summary for the quarter, starting with a few comments on the market trends. where we have seen market conditions improving, improving slightly. However, with differences between geographies and categories, we'll come, of course, back to this point. For instance, we have seen improvement in the categories on the shelves, while we have seen that the on-the-go categories for food packaging have remained relatively subdued with impact, remaining from the high inflation accumulated over the last year since the pandemic, but also the more longer-term perspective. Also on the go category, we have seen a continued impact from the indirect implications of the Middle East crisis with boycotts to the economy. international brands from a financial performance in the third quarter we see ourselves being comparably to last year flat with however this quarter slight volume growth which is a the good sign where we are seeing gradual improvement on the market And we continue to see the same pricing pressure, which is a lot linked to the environment of a lower volume or demand. From a profitability point of view, our adjusted EBIT is improving versus last year, plus 2%, reaching or actually remaining at the H1 level, so year-to-date September 10%. which is for the quarter, but also year-to-date after nine months. And this is a lot driven by the cost savings actions that we have implemented since the latter part of 2023. We have also reduced our investments compared to last year. We will come back to that point. And that supports a good cash flow, a solid cash flow delivery for the third quarter, but also obviously year to date. So as I said, the cost savings are significantly improving our economy. our result in 2023 and are so far above the linear trajectory of our program. So a couple of words on the third page about this efficiency program that is contributing to profitability improvement. You may remember that we announced that program for a savings or cost efficiency savings of 100 million euro over three years from 2024 to 2026. This program comes with a one-time cost also of 80 million. That's what we have announced at the end of 2023. And it covers basically all input costs aspect, particularly procurement, manufacturing practices through waste reduction, labor productivity, and also footprint optimization. So where are we in the delivery of that program at the end of the third quarter 2024? We can say that the program has generated savings significantly above the linear saving trajectory. So if we would take 100 million savings over three years, this linear trajectory, we are well above. And so far, the programme-related costs have accounted for €18 million. The savings are basically consistently delivered across all the different streams. And I would like to highlight, particularly on the bottom of the page, the footprint optimisation, where we have gradually announced a number of decisions. We have closed... and already completed the closure of two food service factories in China and one in Malaysia. We have also closed one factory in UAE, consolidating three factories into two facilities in UAE, and that project is still ongoing but will come to closure this year. Looking now at our business performance in more detail and starting with the sales, for the third quarter, our sales decreased, reported sales decreased by 1%. This is affected by a minus 1% of currency, meaning that the comparable sales are actually flat for the third quarter. with, as I said before, a negative pricing and a slight positive growth of our volume. This is, when we look at the year-to-date nine months, this is showing that Q3 is delivering a better trend than the first semester, because year-to-date our net sales reported decreased by 2%, with comparable net size decreasing 1%, with volume being relatively flat. So as I said, in Q3, the volume is delivering a positive growth. So this is showing a better trend. And we see the same currency impact year-to-date as in the third quarter. Next. On the breakdown of the sales by segment, we see that the food service packaging demand has remained soft during the third quarter and during all the quarters of the year. For the key reason of the inflation, we'll come back to a bit more explanation on this. In North America, the demand has improved in basically all categories, with the exception of ice cream consumption, therefore ice cream packaging. The demand for flexible packaging has also improved, but with significant differences between the different markets or regions. And then, last but not least, fiber, particularly for egg packaging. Fiber packaging sees the volume improving, growing quarter after quarter. And this is, however, slightly offset, this very solid growth on the egg packaging. It is slightly offset by the stable food-on-the-go products like the cup carriers delivered to the food service sector. Going to the P&L, with the net size at minus 1%, we see the adjusted EBIT at plus 2%, reaching €102 million for the quarter 3, and a margin of 10.0 points at the adjusted EBIT margin level. Also, the EPS conversion is pretty solid, 9% growth versus last year. And we see also Q3 in line with the first semester where we are reducing the capex, the investments, by roughly 30% in the quarter and year-to-date. And this is obviously supporting the cash flow. Thomas will come back to that in a few minutes. Looking now on the slide 10 at the more granularity by segments, and I'm starting with the food service, Europe, Asia, Oceania, where I said before the consumption remained soft in the third quarter in line with the first semester. The demand remains tough, particularly very affected by the high inflation. The inflation in that sector has reached, on average, year-over-year 10% over the last, basically, five years, but also, when we look more long-term, 10 years in many areas of that sector. We're talking about a 10 percent inflation year over year. So this has started to impact the demand. And we see that most of the brands are conscious of this and taking action on the market with a reduction of prices, but also promotional activities in order to push further the consumption. There is also something that we said since the beginning of the year, the impact of the war in the Middle East that is causing boycotts of a number of large international brands. and that means also an impact on our sales. The net sales decreased particularly in the Middle East and Africa, but overall across the board in all the markets. I'll come in a minute to North America, to the exception of North America, where we are seeing a revamp of the consumption growth, which is maybe a good sign for overall that sector. From a P&M point of view, we are supported by paper bond prices, which have decreased if we compare Q3 2024 to Q3 2023. And that has supported, together with our savings, our adjusted EBIT profitability. However, this profitability is, of course, subdued by the lack of volume in the year. Moving on to North America in the next page, North America, where we see that the demand has improved in the third quarter. And that's basically in all categories, particularly in food service. That's really good news. Not in all the brands, but in basically more the local brands in the market and the markets. That is supporting good results in this North America segment for the third quarter, with reported sales growth of 3%, comparable growth also of 3%, so no major impact from currency in the quarter. And we have only the exception of ice cream packaging that is still relatively stable and not yet growing. The pricing continues to be a headwind. However, thanks to all the actions for cost efficiency that we have across all the segments, but also in North America, we are able to continue delivering a very solid profitability for the quarter at 13.8%, adjusted EBIT margin, and year-to-date a very healthy 14%. Moving on to flexible packaging on the next slide. Flexible packaging has seen also better news with an overall demand improved in the segment in the third quarter. However, with significant variations by market, so a better situation in Europe and Asia than in Europe. for instance, Middle East or in Turkey and in India. The adjusted EBIT margin has also increased slightly, not probably to the level we would like it to be, but gradually also within the quarter. So September was within the quarter a stronger month. So this is showing to us that the actions that we are taking are starting to unfold into a better situation. And overall, the margin of the quarter was 7.3%, adjusted EBIT margin 7.3%, compared to 7.2% a year ago. And fiber packaging, as I said, better situation from a volume point of view. We've seen the overall demand for fiber-based egg packaging improving across all regions, basically. And also, this is the result of the additional capacity that we have put in the market and that we continue to put in the market with, for instance, two new lines under installation in South Africa that will provide further growth. We have seen higher prices also, but the pricing has not in the quarter been yet adjusted according to the raw material price increases. The recycled fiber has increased in the market very recently during the third quarter significantly, and that explains why the profitability is temporarily reduced. subdued in the fiber packaging, as we see, 9%, 9 plus percent, which is not to the level of our expectation, and that will come back to a much better, much more healthy margin level, with, in short, just a time lag due to the pass-through pricing of these higher raw material costs. With this, moving on to the financial review is Thomas.

Thank you Charles and jumping immediately into the more detailed P&L. I would highlight maybe though it's still disappointing to see the net sales declining all in all. Charles highlighted that we have a slight uptick in volumes and then a negative on pricing and then obviously what you see here is a a all-in-all movement of minus 1%, which is then currency driven mainly. The disappointment comes mainly from food service. I would highlight that one where the customers are still struggling with finding the medicine to recover the volumes after the steep price increases over the last years. campaigns and other are expected to at one point start helping them to recover to get back into growth and then we hope also to see our volumes in food service recovering. If you look at the profitability development that's obviously well supported now by the cost out initiatives although it's not fully visible as a net impact in the results. That's obviously partly driven by the still lack of volume growth and then also due to continued high inflation in, for instance, labor. Still a good managed profitability in this still, I would say, partly subdued top line environment. It is also clear that we in the quarter are having tailwind on a comparison level when it comes to other activities. I think we have roughly seven million lower costs on that level or lower impact on that row in our results. That's mainly driven by timing of incentive accruals, but also partly driven by a very high level of accrual base in 2023. So in 2023, we increased accruals already in Q3. When it comes to the tax rates, you will find that the tax rate is roughly on the previous year's level when it comes to the adjusted tax rate. And then obviously on reported tax rates, we have this comparison rate with regards to high inflation countries. And then if I would take the adjusted EBIT margin, the adjusted EBIT margin has roughly 0.3% point impact from the IACs. So if I would take out the IAC, it's roughly 0.3% lower. It's on the same level as we had IAC impact in previous year. And then the financial items, you see that they are starting to trend more positively now in Q3. as the net debt is improving and as also we haven't seen any negative impacts of the high inflation countries when it comes to the currency side. If you look at the currency all in all, it is continuing to trend negatively, starting with the USD. As you see in the closing rates, we have a negative minus six. Fortunately, I would say from our point of view, from a translation point of view, the latest USD Euro rate is roughly 108. So again, trending more favorably when it comes to translation. Indian Rupee, as you see, is worsening, while then the Brazilian Real is also strongly worsening versus the average rate. And then other currencies to always keep an eye on is the development of the Turkish lira and the Egyptian pound. On the net debt to EBITDA, you can see that we are now at two. It's the same level as in previous quarter. I would use more decimals, we would be slightly improving. Maybe a few comments out of this one. We have roughly 112 million of lease liabilities in the number. Sorry, we are deleveraging roughly 112 million from previous year, and our lease liabilities are up roughly 10 million, up to 163 So, deleveraging roughly 8.5% in total net debt, and if I take out the lease liability, roughly 10% versus previous year. Yearly improving, so all in all, we are continuing on the positive trend when it comes to deleveraging. On the loan maturity side, we have extended our 125 million term loan to May 26, so therefore moving into long-term debt, and then we actually repaid the 100 million bond visible in the column for 2024 here in October. Maybe also to point out that the second and final installment of the dividend has been paid now in early October. Looking at the cash flow graph, it's clear that we are still seeing positive development out of the EBITDA development. The change in working capital looks quite dramatic. That's more looking at how the how the working capital was at the end of the year, you will find that we are actually improving in working capital versus Q3 previous year. And we are also improving in days of working capital by roughly 10% versus previous year. So this is more how a timing related working capital impact for the company. And then, as you can see, the capital expenditure is on a significantly lower level versus previous year. We predict that we will be on a significantly lower level also with regards to CapEx this year versus previous year on full year numbers. Jumping into the financial positions, so here you can see what I just mentioned on the working capital down from previous year. Net debt also, as mentioned, down from previous year. On the equity and non-controlling interest, we have a negative impact of currency of roughly 20 million in the 1952, which you see on this page. Otherwise, the numbers trending favorably and then if we look at the long-term ambition we have now as you recall in previous quarter we had already a 10% adjusted EBIT margin that one converted now to a also year-to-date 10% adjusted EBIT margin so we are currently in the lower corridor of our profitability ambition on the compatible net sales as highlighted trending trending far below our ambition level, and then the return on investments are slowly, slowly trending towards the lower corridor of our ambition. Net debt EBITDA is at 2, so really on the low end of what we have stated as an ambition level for that one. And then, as mentioned, the dividend was paid out We have no changes to our outlook, neither to the short term risks. And with that one, we would be ready to open up for Q&A.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Gaurav Jain from Barclays. Please go ahead.

Hi, good morning for taking my questions. So I have three questions. One is on the potential margin improvement. So there is margin improvement. to 10%, but it is still much below your long term target. And, you know, in particular, you know, while you have consolidated footprint and shut down some factories, you know, this seems that the administration costs, you know, the line item that you report in your P and L that will be leveraged. So is there any plans to control the administration costs as well? So that's my first question.

You want us to take question by question then? Yeah, OK. So maybe on the on the potential margin improvement, if I start with that one, I would say the additional triggers we are needing is definitely the growth. So in our company, when we when we have have a strong volume growth, we would also get to get the leveraged impact on our profitability. So I would say that's the number one factor, as we have now been quite diligent, I would say, on all the cost-out items. The administration line as such, I would say it's a moving line, which has also significant impacts on, for instance, accruals related to various incentives programs so it's a difficult line to to compare but obviously but obviously administration is also part of of the focus areas when it comes to cost management sure thank you uh my second question is on your capex so clearly this year it seems it is coming much below uh you know what we had expected uh and you know

you know, futures years, CapEx, like how should we think? Because, you know, if your volumes are lower than expected this year, then clearly the capacity utilization is lower. So should we expect that CapEx remains at low levels for maybe the next couple of years?

So maybe I can start with the question and then Thomas, you can complement. So yes, you're spot on and giving basically the answers to the question. We have invested in the last years. We have invested both in capacity and in innovation. The demand has been subdued in 2023 and 2024 compared to expectations, and that's the result of inflation. this recession we've seen last year. Therefore, we have a utilization situation where we believe that we can grow more than the investment we will put in now in the company. Therefore, to your question, what should you expect? Well, you know, five years ago, we were investing around 200 million per year. At the point, we have increased to 300 for the reasons I explained, capacity and innovation. A good average in between is what you should expect going forward.

Thank you so much. And my last question is just on margin improvement as we look into 2025 and 2026. And I'm not looking for a guidance here for 2025. But should we expect that, because clearly volumes are uncertain, But should we expect like, you know, 50 basis point kind of margin improvement in 25 or lower than that, higher than that based on what you see today in terms of demand?

So I think Thomas gave a good part of the answer before. It is all linked to volume. So we will continue harvesting efficiencies and savings, but we cannot make cost savings our core business. Our core business is to produce packaging, and particularly sustainable packaging, and therefore also innovate. Volume is of essence in order to use our capacity and absorb our structural cost and organization and cost. So that's the key going forward. And if we get the volume as we would expect the recovery after a declining year 2023 and a flat year 2024, then probably you are in a good assumption in the number that you were assuming for 2025.

Thank you so much, Jack. Thank you so much, Thomas.

The next question comes from Louis Merrick from BNP Paribas Exxon. Please go ahead. Louis Merrick, BNP Paribas, Exane, your line is now unmuted. Please go ahead. The next question comes from Maria Wickstrom from SEB. Please go ahead.

Hi, this is Maria Wickstrom from SEB. I as well have three questions. I'd like to start with the margin improvement in the flexible segments. We saw the Indian business numbers yesterday, which were not that impressive on the profitability. So I kind of would like to dig a little bit deeper on the sources of margin improvement in flexible segments, please.

Thanks, Maria. So the margin in, you know, I said at the beginning that in flexible packaging, it's relatively improved in terms of demand, but with significant variations between geographies. And that's exactly what you are pointing out. So India, disappointing. However, we have a solid plan. And In India specifically, our volume growth is positive. We have a relatively good volume growth in Q3. Not, however, in line with our expectations, particularly from contribution. What do I mean is Indian market is under very fierce price competition. And that means that driving for volume growth means accepting the pricing pressure and therefore low margins. So therefore, we need to continue in India not only selling better our portfolio, but also reducing our cost to be as competitive as possible. So to your question, where is then the improvement coming from? Well, if we would not have at this point the disappointment from the Indian numbers, I would say it would show at segment level solid performance because in Europe, for instance, we have, except in Turkey, we have very good results from a profitability point of view. And also we are growing double digit and with a very solid margin in Asia so that's basically in a nutshell the balance of what I meant with the significant variations India being the issue Istanbul being Istanbul meaning Turkey being late in delivering the turnaround that we're expecting and then strong solid results in Southeast Asia Oceania and in Europe

Yes, thank you. And then my second question would be a little bit more on the outlook in food service, Europe, Asia, Oceania. I think you nicely pointed out that you see that the consumer demand for food service, and especially on the second tier in the US, is coming back. But then given that we had such a weak trend in Europe, Asia, Oceania, what are your expectations there? And then if you could give a more color, if there are variations between, like, fast food and coffee on the go.

So, yes, we would like to read the trend in North America as a positive signal for the world overall, because the problem with food service is across the board worldwide the same. There has been too much inflation in that sector. And we see consumers basically diverting from big brands to eventually more smaller brands, local brands, or simply consuming more at home. That, by the way, is visible with the egg consumption. There is egg demand everywhere. strong demand basically across the markets. That's a very clear signal. But the revamp of growth in North America is a good signal for the rest of the world. What are the expectations for our demand in the rest of the world, particularly in Europe? It's at this point in time difficult to say when the recovery will start. We believe that it will come because all the brands, the big brands, are conscious of the problem and driving it. competitive actions, promotional actions, and so on. Second, there is a clear need to work also towards the small, maybe cheaper local brands that may be winning in this inflationary environment.

Yes, thank you. And then my final question comes on the fiber packaging segment where the profitability came down from both Q2 and Q1 this year. And we've seen quite substantial price hike in recycled paper in Europe. So do you think you can reprice this price hike in recycled paper? And if you can, I mean, when we should expect that to happen?

Yeah, that's a very good and clear question. So the margin in Q3 is clearly disappointing, but clearly also temporary. We have suffered some operational issues in Q3 which are resolved. And also, as you know well, the recycled paper market, which is very much a spot market, unlike paperboard or other virgin material, this spot market is fluctuating very quickly, depending on the worldwide demand of e-commerce and other valuables. The price increase of the recycled paper has been in the range of 50% in Q3 as bad as this. So the recycled paper, so our raw material. And we have not been in a position to react immediately. There is a time lag in passing through. And to your question, when are we going to see? Well, immediately in Q4. We're going to see the impact of the pricing measures. Thank you so much, Javi. For the two reasons. Thank you.

The next question comes from Kaile Loikanen from Danske Bank. Please go ahead.

Hey, and good morning, gentlemen. It's Kaile Loikanen from Danske Bank. I also have three questions, if you don't mind. And starting with North America and the top line or the organic growth has been surprisingly good in Q3. And I was just wondering that have your customers been taking market share in the US or has the overall market been stronger?

Good morning, Kelly. I would say that in North America, we are benefiting from the slight restart of the market and also not our customers gaining market share. We gain market share with smaller brands, cheaper brands, smaller players in food service particularly, where we've been able to develop very good. a commercial relationship and bring our volume up. So there is, on the contrary, us gaining market penetration.

And on top of that, the food service recovery has been quicker now in North America with the campaigns hitting in earlier. So that's also helping.

The promotional campaigns were actually starting in the US. For instance, the... give a brand name. The McDonald's $5 menu started back in July and it started in the US, not in Europe. So that's why to Maria's previous question, I was saying we want to see North America revamp growth as a good signal for the rest of the world.

I would maybe like to compliment still on Maria's question on the coffee and QSR. I would say The high-end coffee chains have a tougher time than the QSR chains to recover market share from the point of view that they sell a product which is significantly higher priced than in the low-end sellers. So it's a difficult play as such. In the QSR space, the big players can always play with a wide portfolio and therefore

uh attract customers into the shop easier than a high-end coffee chain yeah thanks thanks for adding i had forgotten that part of maria's question yeah all right thank you that's that's very clear clear and helpful um and then i was wondering about the about the ebit margin improvement uh year to date so almost one percent point uh higher than than in last year uh for three first quarters And I was wondering that how much of this improvement has actually come from tailwind from raw material prices? How much has come from the efficiency program? And then, of course, you have had some headwind from inflation as well. But could you perhaps break down the margin improvement slightly into various components?

Yeah, so I would say the main contribution comes on the value add line, and therefore it's really driven by the raw material side. And on the raw material side, it's a strong combination of tailwind of the market and the additional cost-out activities related to that one. When it comes to the other lines, I would say we are mainly compensating for the inflation on those lines, so we don't really have a tailwind as such on what I call conversion cost and not on the SG&A side either. But if you look on our overall SG&A from an absolute point of view, we are on a pretty similar level as previous year and therefore it's mainly the top line drag which is impacting the relative numbers.

So did I understand correctly that most of the margin improvement that we see now in the numbers is from raw materials?

on raw material activities and cost-out activities related to those items. We also have benefits in cost-out items in the non-traditional raw materials, so also on consumables, which to some extent are explaining the explaining the relatively strong performance on SG&A despite us adding capabilities and despite having a strong labor inflation across the company.

Okay, got it. Thank you. And then lastly, about your own capacity utilization currently. Obviously, there's probably a lot of variation between businesses and markets and so on, But kind of on an overall level, where are your capacity utilization currently?

Well, we can't give one number linked to, for the company, linked to the diversity of our portfolio and technology. We cannot swap one technology to the other one, as you imagine. But yes, we have underutilization linked to two years of clear... creating a clear positive gap, if I may say positive, versus the assets that we have and the investments that we have implemented. So this is a great opportunity going forward when the market is... is recovering and return to consumption growth. I would expect roughly overall a 10% potential volume growth without changing or without adding further capacity. And in addition, we have capacity coming on, like the egg packaging in the U.S., folded carton in the U.S., egg packaging in South Africa, and a few more additions that we are providing in the world between 2024 and 2025. So that is creating potentially a positive trajectory for the company, again, when the consumption is returning to growth.

To still tighten that answer a bit, in the legacy products, we have capacity, and in the new categories, we are adding as demand is increasing. So to be very explicit.

Okay, thank you. Thank you. That's helpful, and that's all for me. Thank you.

The next question comes from Mika from DNB Markets. Please go ahead.

Thank you. This is Mika Ihanoki from DNB. Can you give us an update on the flexible strategy? Now we saw a thin margin improvement, but

In particular, how are your new products gaining traction in the region, and when should we expect them to start contributing positively to your flexible figures?

Okay, so the update on the flexible strategy, three things. Number one, our flexible blue loop portfolio, which stands for recyclable monomaterial structures deployment. That's number one and absolutely paramount to our strategy. Number two, turnaround of our currently underperforming areas, which have to do with, as underlined earlier, India, but also Turkey, where the macroeconomy in Turkey is not helping us, but we are hopeful of this market revamping to growth. So that's the second aspect. And third is continue our continuous improvement program with, number one, the cost efficiency, but also driving better practices from a from a commercial management point of view. So those are the three big pillars to drive success in our flexible packaging. And we are very hopeful with the evolution going forward. Thank you. You asked about how the deployment is going of our recyclable packaging. It is with hundreds of tests at all customers, very positively received. It takes, obviously, in the food industry, in the healthcare industry, it takes quite some time to qualify new structures which have to be adapted to the existing assets. But we're going to see more and more positive benefits unfolding, particularly as the legislation in Europe is pushing all companies to have a sustainable packaging by 2030. So we will see an acceleration in the second part of the decade.

The next question comes from James Perry from Citi. Please go ahead.

Thanks for the presentation. I'd just like to ask about the cost savings programme. You mentioned that you're above the linear savings trajectory. So just to be clear, does that mean we should expect savings below the linear trajectory in the coming quarters? Or should we expect linear in future still and that the overall savings could be above 100 million? And secondly, on the end markets, you mentioned the importance of promotional activity. Would you say that this has stimulated much of a volume response so far? And do you think that any extra volumes would actually be sufficient to offset the pricing pressure for you? Thanks.

Yeah, I can take the first one. So on the cost saving program, I would say we are seeing a continuous addition of the pipeline. From a timing point of view, it is quite difficult to at this stage say whether we will keep up the pace exactly in line with what we have today, which is. as mentioned clearly about the linear, there is a number of negotiations during the fall time, which will bring confidence to how the program is continuing. So I would propose that we get back to that more in detail in and during the last quarter.

Second question regarding the way we approach the end market and our commercial practices, what benefits we would see, including on the volume. Well, we have communicated extensively since a year about cost efficiency program. I'm always saying cost efficiency is not the end goal the end goal is to sell and to sell value um in order to to to to create more value for the company so the cost efficiency as one objective is to make us more competitive and we will continue linking to your first question we will continue we're not going to just stop activities because we are in a ahead of the the plan However, we will come back to what does that mean for the next quarters, not just Q4, but for 2025, 2026. When it comes to the cost competitiveness as such, once we are... becoming more competitive, we need to drive our organization, our sales forces, to sell better that competitive position. And that's the whole concept of this commercial excellence initiative that we're launching in order to drive and sell more value to the market, more value thanks to our innovation, but also thanks to the improved competitiveness in order to gain market share. Also on the... on the environments or the markets where there is much more price competition. Okay, thank you.

The next question comes from Louis Merrick from BNP Paribas Exxon. Please go ahead.

Good morning, gents, and apologies for the issue earlier. Three, if I may, and I'll take them sequentially. One of your tableware competitors in the US has just recently opened and is ramping up quite a large-scale facility. I'm just wondering how the market and competitive dynamics of that niche industry that you have in the US is responding to that extra capacity. Is that perhaps one of the reasons why you've seen a bit of price softness in the North America division?

Yes, they are ramping up. I think it's officially a 400 million investment. We are talking about, not mentioning the name here, but I think in a way, one should always read into the fact that people are investing, that there is a reason for investing. No one is throwing capital into a market which wouldn't be attractive. So that would be my first comment to that. Obviously, the retail has been progressing quite well in the US over a long time. Secondly, we have the conversion going on from foam to paper-based products. And then maybe as the third element, all kind of speculation around... tariffs into the country are things which, in my view, are supporting investments in the US for us and for other companies. That would be my reply.

Thank you. And pricing within the food service EO division turned negative during the quarter. As we approach year end and more contracts come up for repricing, how should we think about that pricing effect evolving as board costs are now a tailwind for you on a year-over-year basis?

So the pricing pressure in the food service sector has been not just an annual cycle. It has been much more coming up with lots of tender processes during the year because of lower demand. The way we see it is the name of the game, back to something we have said several times already, is volume. Consumption... increasing will mean more volume, more volume demand in a sector where there is today too much capacity because of the lower demand. The time the demand restarts, then we are in a much better position and that will help us to leverage our structure, our capacity, but at the same time stabilize the pricing that is today under pressure due to these obvious reasons.

And the other activities, Lioness, generally had a smaller impact to EBIT during the year. Can we just dig a bit further into the driver of that? You mentioned timing of incentives. So should we expect this to increase back to historical levels or has there been some actions taken to structurally reduce that going forward?

It's basically a timing thing, but we will not have, in my view, a as big deviation on the other activities line as what we had in the year-to-date numbers in Q4. So Q4 should more normalize or even be slightly above previous year. That's my current view on it. Thank you very much.

Thank you all for attending. There seems to be no more questions, so thank you for your time and we wish you a great day. Thank you.

Thank you.