Kemira Oyj Ord

Good morning everyone and welcome to KEMIRA's Q1 2024 results webcast. My name is Mikko Poila from KEMIRA's Investor Relations and here with me today is our President and CEO Antti Salminen as well as our CFO Petri Kastren. As you surely have seen we have earlier today published our Q1 results and we had a strong start to the year. And during this webcast and during the presentation Antti will go through the main events of the quarter and also give some reflections from his post as President and CEO. And then we will go more into the financials, into the details with Petri. And as is the case typically, you can present your questions either on the teleconference line or then you can submit them via the webcast tool to me. But with this short intro, Antti, I'll hand it over to you. Thank you, Mikko.

What a way to start. What a way to start the year. What a way to start my stint as a CEO of Kemira. Really strong start for the year, as you've seen from the results. It's a great honor to be able to be here presenting these results as the CEO of the company. I've started the couple of first months touring around, meeting our people around the world, meeting our customers, other stakeholders. And it's been a really great experience to feel the support that I get from the organization, from our stakeholders, people around us, and the unleashed energy that we have in the company. So it's really good starting point. to start turning a new page in the history of Kemira. I'll talk a little bit about the kind of company that I have in a sense inherited and starting to kind of turn into the new era. Kemira today is in excellent shape and we have an excellent foundation to execute on our growth strategy. The financial performance as the Q1 is a good evidence of, but also the record high results last year we pulled in and really good results several years before that are witnessing the resilience of our business model. Also, the oil and gas divestment that we finalized during the first quarter of this year is another step there, kind of focusing the portfolio more and especially reducing the cyclicality of our business model and thus further increasing the resilience of our business model. The customer relationships are really strong. That's evidenced by the customer satisfaction. NPS score record high, way above any industry benchmarks. And also in the practical work, when we talk to the customer teams, there's a lot of co-development projects ongoing with our main customers and so forth. So really building the new future as our strategy outlines, is ongoing, and the really strong, good relationships are the foundation of the success. And also, as I mentioned, the employees, the organization, the people, really highly committed organization and people that... I have the feeling that the Kemira team, the large global team, is ready really to turn the page and go to the new future, executing the growth strategy. Now, when we look at the highlights of the first quarter, of course, me stepping into the CEO position, we have basically a relatively new, refreshed management board in the company. Harri Eronen took over then the pulp and paper responsibility, and we have Tuija leading the INW segment. She's been there for a year, and Linus heading the strategy joined last summer. So there's also some new fresh spirit in the MB of the company. I think that's one of the good ways to kind of start implementing the changes and step into new era. The oil and gas divestment, as I mentioned, was closed on February 2nd, and you can see the benefits of that already kind of short term in the stronger results in INW. So basically the portfolio is stronger in terms of profitability, and in the then mid and long term, that will be visible in the reduced cyclicality of the business. I think one of the main news for the first quarter is the sequential volume growth that we witnessed in both of the business segments. So that's kind of a healthy story telling about the underlying markets being in recovery mode and we being able to benefit from that by getting increased volumes. Even if the top line was shrinking, But the volumes underlying are kind of a giving of good confidence on future growth of the company. The political strikes in Finland had a very limited impact in our result, again witnessing the resilience of our business model. And then, of course, during the Q1, the annual general meeting approved the increase of the dividend, which is in line in our dividend policy of paying competitive and over the time increasing dividends. If we look a bit in more detail, the financial results, so as I commented, the volume growth is what I'd like to focus on here, because that is really kind of telling that the quarter on quarter, the volumes are improving in both segments. And the organic growth that we report is, of course, still declining. But we need to remember that the comparison point a year ago was extremely strong, q1 in 23 uh driven by the energy intensive uh bleaching chemistry and the really high extraordinary high caustic prices so so that should be normalizing as we move forward and get to the q2 the comparison point should be more normalized in a sense so even there's a organic revenue decline, but the volumes, underlying volumes were growing. And what is also really important to acknowledge here is that sequentially, quarter on quarter, our prices stayed stable. So even if we look at the world economy going into this year, it seems that it's softening and a bit soft, which typically is reflected in some release on the raw material sites and so forth. But despite this softness, overall economical softness, we were able to hold to our prices, which is, I think, another evidence of the good work that we've been doing over the past few years on building our pricing capabilities and our position on the market and the strong customer relationships that we have. Operative EBITDA margin stable year on year on the record high level. It's good to remember that even if there was not huge increase in the margins, but we are on the best level ever for this company and steadily above 20% level in terms of EBITDA. so really good performance there as well and the whole organization has contributed really well to this cash flow strong and really at all possible respects really really good strong start to the year if we then look a bit deeper into the pulp and paper Again, just repeating that despite of the strikes in Finland and the say roughly 10 million top line impact of that, the volumes grew. So if it would not be for the strikes, the volume growth would have been even stronger. And that market recovery you've seen also yesterday from many of our big customers announcing their results and commenting on the outlook for the year. So it's very evident from their results as well that the underlying pulp and paper market is at the steady recovery mode right now. And then if we look at the industry and water, also here we had volume growth, and also here we were sequentially able to hold the margins. And here, of course, when you look at the INW numbers, you have two sets of numbers because of the oil and gas divestment, so the external report it, and then internally we are, of course, following the like-for-like comparison without oil and gas, because that's what the management should be focused on. And here I'd like to turn the focus on the extremely high return on capital employed at 35%, which is really not only good for us, but I think it's industry-wide a really stellar performance. And it's again another evidence of the portfolio actions that we've been doing and their impact. divestment of the oil and gas business did not only help us improve the margins, but it's also visible in the return on capital employed, so the portfolio in INW being in that sense much healthier than previously. Then looking a bit forward and our strategy, as mentioned, the strategy as such, which we've of course started to review now, is unchanged. The fundamentals behind that are very valid and we are very confident that executing on this strategy will get us to a growth trajectory in the future. The three main pillars of the strategy are the growth in the water treatment side of the business, then growth in the renewable solutions and growth in the digital services led sales. And there, if we look at the water treatment area, there we are really looking at the geographical expansions to the areas in the world where we are not that strong yet and technological additions into our portfolio. So technologies that help us serve better the same client base, the customer base that we are serving today in the water industry and expanding our reach to the total water treatment chemicals market. us the main vehicles to grow there. When we look at the renewable solutions area, there we are nicely on the kind of trajectory to reach our communicated over half a billion revenue target by 2030 from there. 23 was a bit of a dip there, but that's to a high degree explained by basically the collapse of the pulp and paper market one year ago, spring 23, because a big part of the renewable sales today are going to the pulp and paper markets. But I'm really confident that we are back on the trajectory this year. And there, some of the highlights where we have been progressing very well are the so-called biomass balanced polymers, which especially in the water treatment area are selling now well across Europe, and we are getting a good start in the US as well for those. So replacing a fossil based polymers in the water treatment by biomass balanced equivalents. So that's progressing well. Also, the collaboration that we have with some of our partners in the biobase, IFF and Danimer, those both are progressing really well. And I'm very confident that later going into the year, we come out with commercial launches on really innovative new products for several application areas on this biodomain. And then when we look at the digital services revenue there, we actually, last year, we reorganized a bit and formed a kind of camera-wide platform to accelerate the development of new solutions for the digital phase. During a couple of first months, I've started a review and project on looking at how can we further and better use artificial intelligence to support our service business and innovation in this company. So there's a lot of good work going there as well. And I think these pillars are forming a good basis for future growth of this company, future profitable growth starting from this good profitable level and balance sheet really strong. So that gives us a good basis and good ammunition to execute on the strategy. So with these words, I hand it over to our CFO, Petri Kastrien, who will go a bit deeper into the financials. And the floor is yours, Petri.

Very good. Thank you. Thank you, Antti. So excellent performance from 23 continued into Q1. And as typical, I like to point out a few things, and I think the key takeaways from this quarter are volumes, the volume pickup, and I give you a little bit more data on top of what Antti was saying. Our management of pricing, I'll give you some additional data there as well. and also the resilience of our business model and now post the oil and gas divestiture we are really a lot less cyclical and of course the predictability of our pricing based on long-term longer-term contracts and also the predictability of our volume demand really gives us a good basis to really claim that our business model is really resistant or resilient is the word that I was missing for a second. Here's the traditional revenue and profitability bridge based on our reported numbers. When you read our report, you also see that we separately give comments on oil and gas adjusted basis. But here is the bridge on the reported basis. As Antti was saying, management is really looking at the business now, sort of post, sort of perform a basis adjusted for the divestment. And therefore my sort of volume comments and other comments that I offer here are sort of based on that sort of analysis. But still for clarity, the 763 million reported revenue that you see here and the 162 million of EBITDA, this still includes one month of oil and gas revenue. So the closing was February 2nd. So we have the January revenue included in the reported numbers. The adjusted numbers, 719 million revenues and 159 million of EBITDA in the report, those exclude the January oil and gas revenue and related profit. So looking at the revenue bridge, as you move past the divestment impact, next in the bridge, you look at the volumes. And Antti was already talking about the volume growth. So, there's a 1% positive volume growth. And the impact of the strikes in Finland, the political strikes, was roughly 1% on a group level, and about 2% for the pulp and paper segment, because this really impacted pulp and paper segment, not INW really at all. Moving from volumes to pricing. This is sort of the last quarter when we have a tough comparison. You may remember that year ago in Q1 of 23, we still had very high caustic prices. We had very high electricity prices. And that's of course reflected in the comparison period. And that's also reflected in our sales prices, because we were able to pass through a lot of those extra costs to our customers. So the 9% price decline, more than half is explained by those impacts alone, the caustic price, And the electricity price, and actually we're only looking at the electricity price in the Nordics, where we track it separately. So the impact of those is more than half of the 9%. which then of course means that the rest of the portfolio, the pricing was holding up really well and well below 5% annual price decline. And if you compare that to the rest of the industry, and I've been sort of glancing through the various reports that have come out, A number of chemical companies have reported price declines of significantly higher than 5% or so. So I think this is a very nice comparison and obviously a big driver for our good quarterly performance. Of course, there are competitive pressures in the marketplace, but our organization, our sales people, our customer serving teams have really done a good way to demonstrate the value of our products to our customers. Then if we turn our attention to the profitability bridge, sales prices I already commented, then of course the next item besides the divestment impact is the change in variable costs. And then the variable costs then include the mirror image of the electricity, meaning that a big part of the variable costs is also impacted by the caustic, which is partially a pass-through item for us. And then, of course, some of that high electricity was visible in our variable costs. So the key point, I think, which we are paying attention to a lot, and you perhaps should also, is the net impact. And the net impact of minus 10 million, I think it's a good outcome, particularly at this point of the cycle, since we are already sort of a well on the way under the sort of a variable cost reduction cycle, so that we've been able to manage it to this level is really good, particularly as the volumes are picking up. So the net impact, 10 million is almost fully offset and round numbers is offset by the volume growth. So a good outcome. I think the final comment I point out here is fixed costs. So fixed cost increase of 5 million. Again, I think that's a good outcome since we all know that we are all fighting against global inflation, impacting salaries, impacting all the services that we buy. So in that context, it's a very good outcome. So conclusion, the normalization of caustic prices and electricity costs, it has eliminated some of the extra benefit that we still enjoyed in Q1 of 23, yet we're still able to maintain the EBITDA margin at the same level as last year. This is a new slide. Again, trying to prove the point of the resiliency of our end markets. And the slide is about 12 months rolling average of trailing average of our volumes. And now after the oil and gas exit. So obviously over the last maybe eight years, we've gone through a number of cycles. And you'll see that typically the volume changes on this sort of cycle, 12 months trailing period have been less than plus or minus 5%. Now, last year was clearly a bigger one. roughly 10% on the back of what Antti was also describing as a very abnormally bad year for the pulp and paper industry. And also, 23 was also impacted by our exit from Russia, because we exited the Russian business after the Ukrainian war started in 23. So obviously the volume decline was visible in the 23 numbers compared to 22. Having said that, we have managed the profitability through these cycles extremely well. Variable costs, the headline says stabilizing. If you look at the big changes, you might wonder why we are saying that. But if we exclude the electricity costs, We're really and we're looking at consecutive quarters. This really looks a lot more stable. So our forecast for consecutive quarters and also the last quarters of now as a couple quarters of history is already relatively stable variable costs. History, they have been declining still a little bit in the last couple of quarters. Now our forecast is that we will remain roughly flat or roughly stable across the basket of raw materials that we buy. Of course, there are some areas where we have pressures. typically supply issue related, but then there may be some relief on some others. So across the basket, we're looking at the relatively calm variable cost environment. knock on wood, because surprises are always the one thing that we are mindful of, but the surprises are not visible. And again, I sort of commented on our ability to hold on to the pricing. A little more data on the strength of the balance sheet that Antti was already talking about. So 0.6 net leverage and net debt below 400 million, so obviously very strong numbers. And here I would sort of almost have to comment that the strong balance sheet is an enabler, but of course it's not a target on its own right, let alone a strategy on it right. But obviously it does provide us tools to execute our growth strategy, whether it would require external or inorganic investments. Antti was talking about commenting on the high capital efficiency, the 35% return on capital efficiency for our industry and water segment. Of course, it highlights really the value of our efficient manufacturing network in the business. I guess it's fair to say that it also includes somewhat older plants that while they have been very well maintained, I argue, they have been perhaps depreciated below their replacement costs. So that's sort of a comment there. So the 35% is not a threshold for new investments, not even the 21% for the new company, but rather something in the mid to high teens. Cash flow, again, strong quarterly cash flow, basically unchanged from last year. Last few years have been a bit atypical from the seasonality point of view because of the big swings in costs. But if we are sort of in a normal environment, our typical seasonality is that Q1 is weaker from cash flow point of view versus the rest of the year. And this is really driven by that we pay out most of our annual incentives during the Q1. We also pay a little bit higher level of cash taxes based on last year's of performance. And also our capex cycle is also driving the cash flow so that we often have a lot of capital investment completions in Q4, but those end up being cash outflows then in Q1. Our supplementary pension fund, Neliapila, returned 12 million in Q1. And this supplementary pension fund, if you are less familiar with that, first of all, it is a pension fund that was closed more than 30 years ago for new members. So it has all in all, it's 12 active members, but it has still a pool of over 1,000 retirees for which we are managing. But nevertheless, it is in strong financial position. It has a capital surplus of approximately 100 million. And as it's in the run-off phase, we will be gradually reducing the surplus. And that's why I think last year we took a roughly similar amount. And absent of really big shocks, this trend should continue. CapEx again similar to last year and the total CapEx for 24 ought to be similar or slightly more than the CapEx of last year, particularly if you look at the number without oil and gas. And Ananti was talking about our renewable business, renewable chemistries. So this now assumes that we will have a start of some additional investments into renewable chemistries. The assumptions for 2024 are largely the same as when we first published them a couple of months ago in February. volume growth in pulp and paper markets and steady market in water treatment. We assume that there will be no further major disruptions from political strikes in Finland or any other material disruptions to our operations. It is still early in the year and the last couple of months have shown that there have been new risks in the global environment, not particular business, but the new geopolitical risks that I'm referring to, particularly the Middle Eastern crises and tensions is just to mention one. One that has not really impacted us much, but it is there and hopefully it does not escalate. Against this backdrop, We have kept our outlook for the year unchanged revenue between 2.7 and 3.2 billion and EBITDA between 480 and 580 million. Those are compared to slightly below 3.4 billion reported revenue and 667 of reported operative EBITDA or adjusted for oil and gas divestment, those numbers would be slightly below 2.9 billion and 595 million of operative EBITDA. Finally, I mentioned our Capital Markets Day, which we plan to host in Finland in September this year. September 26th is the date, so that's an invitation. Please mark your calendars. I would love to see you here in Finland. That's when we plan to update you on our strategy and priorities, the strategy work that Antti was talking about. And this is also a date when we plan to provide an update on our long-term financial targets. With that, we're ready to move to Q&A session.

Thank you Petri and Antti. So just as a reminder, so you can post your question on the teleconference line, but we have a number of questions from the webcast tool already. So maybe we start with that and then let people on the teleconference line digest their questions first. Maybe we start with the outlook. So you touched upon this, Petri. So this is a question from Antti Koskivuori from Danske. So regarding the unchanged guidance. So strong Q1 implies annualized EBITDA run rate of approximately €640 million. Could you walk us through the negative drivers for the coming quarters?

Shall I try that? Yes. Okay. Obviously we can do the math, the multiplication up to four at least. So we know the numbers. I don't think there's really much anything to say that this is still early in the year. And there are these uncertainties that I mentioned. Our outlook assumes no political strikes. We have no uncertainty on that one. Our outlook and our view is sort of hinging that there will be no other political risks arising from some of the global tensions. Let's see. Let's hope that none of those materials, but we know all about those. But obviously it is a good start for the year and I think I'll leave the comments to that.

Thank you Petri. Then let's continue. The next question from the webcast comes from Petri Gostovski from Inderes. Two questions here. If we take the first one, how would you compare the impact of the strikes quarter on quarter? Will the impact differ on Q2 from what we saw in Q1?

Why don't you take that? Yeah, I can take that. So as we mentioned, so the impact on quarter one of the strikes in Finland was roughly 10 million on top line and a couple of millions in the results. So not material. And we don't expect any major impact on quarter two. if there are no new strikes. So kind of from the now ended strikes, minor impact in Q2.

Indeed. Then the second question from Petri Gostovski is, was there some difference in volume development in municipal industrial customers in industrial water?

No material difference so basically the volume development was a bit stronger in industry and water segment than pulp and paper because pulp and paper was impacted by the strikes but overall quite steadily across the businesses that we run we see positive volume development.

and within industry and water, a rather similar development volume between municipal and industrial customers. Still further questions from the webcast, this is more of a financial question perhaps for Petri. So from Sammo Wilhelmsson, so could you comment more on your near-term finances? You stated that the strong balance sheet is an enabler and you had 456 million of short-term interest-bearing debt. from which nearly half matures during the next months. Is this maturing debt going to be financed out with cash or refinanced forward?

Yeah, it's true that we always have a short-term cash because part of our Foreign operations are funded with short-term debt and then also we use just for cash management purposes some short-term debt. But yes, we do have a 200 million bond that matures in May, which we intend to pay mostly from cash reserves. We do have already negotiated 50 million long-term facility with one of our existing lenders. It's a long-term loan from a multinational institution, which we then will draw during the year, not necessarily at the same time, but during the year. So net impact is that 150 million will be paid from cash.

Good. And maybe here we go to the teleconference. There are still some questions from the webcast, but let's take some questions from the line here in between.

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 Martin Rodiger from Kepler-Cherv-Raw. Please go ahead.

Hello. Good morning, Antti, Petri, and Mikko. I have two questions, please. First, on your EBITDA margin, which was stable year over year, great performance, and excluding oil and gas, the margin was actually up to a very great level of 24%. What was the reason for that success? And the second question is on your financial communication. Just a couple of weeks ago, you issued this warning by the press release about the potential effect on the strike. And now we see that this strike had a very limited impact of just 10 million on sales and a few millions on earnings. Can you explain this kind of financial communication? Or do you regret that you have just issued a warning and then Finally, then the outcome was minor. Thank you.

Yeah, if I take that. So basically the really good margin performance, especially you were referring to the INW side and so forth. So as we have been repeating, I mean, this is a result of our really strong position in the selected target markets where we operate and the pricing power and capabilities that we have been developing. So these are yielding the results. There's no miracles behind it or anything. exceptional as i mentioned in in my speech the the kind of exclusion of oil and gas is positively impacting the percentage margins because that was dilutive part of the of the portfolio but but that's really it and when it comes to the communication uh i think we needed to do the communication because at that point we didn't know exactly how big the impact is us it's good to understand that that the impact for us was not coming from our direct raw material deliveries not being able to be delivered or from our products not being able to be delivered to overseas locations. No, the impact to us came via the pulp and paper customers that we serve. And they were already earlier running down many of the mills and lines that they were operating. And then there's some inventories in the value chain in between. So the impact for our operation comes with the delay. So at that point, we didn't know how quickly they will be ramping up and so forth. And if the situation would have continued, the impact would have been bigger and the close downs in our end would have been bigger. But our communication was really about the kind of operational ramp down of some of our lines, because there was at that point, it seemed that there's not enough demand to make any sense to run the factories.

And if I continue on that one. So first of all, Martti, we did not issue a stock exchange release. So this was a general press release. And this was really about the situation in the Finnish marketplace where the political strikes were continuing. And at the time of the release, there was no end to those and visible. We obviously now are smarter, but at the time of release of that, there was no And there was also sort of important that companies that need to shut down operations and need to put down employees out of work, that we send the message to the economy and to the society at large about that. So that was not primarily, actually not at all meant to be a financial release, but that was in the month of April and it was really, if those political strikes would have continued. If we were still in the political strike situation, our customers would be impacted much more than they probably are, they have been, and hence the impact would have been much more for us. So in that sense, we need to put that into a context that we had at the time of the release, but it was not a financial release.

Thank you very much.

The next question comes from Isha Sharma from Stifle. Please go ahead.

Hi. Good morning. Thank you for the presentation. Obviously, very strong performance in pulp and paper, and you have also mentioned APAC margin improvement. If I remember correctly, you also mentioned something like this one year ago in 2.123, so it seems like there is an ongoing improvement there in the business. if you could please give us a few more details on the margin drivers and if these are sustainable in your view. On industry and water, just wanted to confirm if it is fair to assume that the price adjustments due to lower raw materials are now reflected across your contracts because of the longer term structure. Was just trying to understand if this is now fully reflected in the results. And maybe the last one also on on the political unrest or the thing that the impact in Q1. Is it fair to say that in any case, Finland is less than 15% of your annual sales and therefore the impact would not be anything more than 15, 20 million per quarter on EBITDA in case everything was really shut down? Is that fair calculation?

Okay, I'll start maybe with that. pulp and paper strong margins that we've been having lately. I'll again return to my previous answer. So yes, basically, the kind of position we have in the markets and the value chain and our pricing capability, I believe, have led to the situation where, you know, of course, cannot comment exact numbers quarter per quarter, but that the basic level of profitability and margin levels in that business are much healthier than maybe some years back in history and we have been able to retain that bad times and good times so I have no reason to believe that that would be changing so that's the kind of new normal I think for us and then if we look at the INW and the balance. So it's good to remember that the customer contracts that we have don't expire at one particular quarter or month of the year. So there's a kind of a revolving cycle across the year when those change. So there will always be some fluctuation in terms of where exactly the raw materials are and where are the sales prices. But again, it's good to remember that the customer base in industry and water, especially the municipal side customer base, we are talking about thousands and thousands of customers. So basically, no single contract will have a material impact on the overall balance between the sales prices and variable cost in there. And then the last question was regarding the impact of the strikes.

Potential strikes in Finland.

Issa, that's difficult to say, and we haven't really calculated what would mean if our pub customers shut down for a quarter. Of course, that would have a significant impact, but what it would be in terms of profitability, no, we have not calculated that.

But you're correct, Issa, that Finland represents less than 15% of our annual revenues. That is correct.

Thank you. Maybe just one follow-up on APAC, because you specifically mentioned improvement in margins. Are you happy with where the margins are now, or do you expect more improvement there?

No, we are not happy with where they are, and they will be improving.

Yeah, but Asia at that point, obviously, they have been improving and the trend is very good. So I think we're happy with the trend, but not at the absolute level. But again, it's another area where you sort of compared to some years ago, the APAC was much heavily diluting to our average margins. Now the dilution is significantly less than it used to be, but it's still diluting. And that's why it's fair for Antti to say that we're not quite happy with it.

Very helpful. Thank you so much.

The next question comes from Anssi Rausi from SED. Please go ahead.

Hi all, and thank you for the presentation. I have to continue on Anssi's question about the guidance. So, I hear you saying that volumes are expected to increase during this year. and you also talk about the flat ish raw material costs or variable costs and then you also talk about the resilience in sales prices but like you're guiding like significant decline in your quarterly EBITDA run rate so is this something you actually already see to happen in the coming quarters in your sales prices or is this like overly cautious guidance that you're fearing something extraordinary to happen and that's why you're so cautious?

First of all, let me talk a little bit about, and I don't remember how long you've been following us, about the sort of guidance philosophy of it. So some companies feel that the guidance midpoint is really relevant and they are constantly moving their guidance based on that one. That has never been our case. So there have been times when we have been at various ends of the guidance and we have heard similar questions about that and we've been holding our guidance where that is. And yes, because I can do the math of multiplying four. But like I said, and I repeat that we're still early in the year and we're looking at the uncertainties and time will see whether some of those uncertainties that I mentioned or others will arise.

Okay, I guess it's clear. Then the next one about the industrial water segment. So is it fair to assume like flattish EBITDA Q-on-Q basis during this year?

Well, there's typically... Again, Petri mentioned earlier about the typical annual cyclicality that we have, and basically that's the volumes, but it has some impact on the margins as well, and typically on a normal year in INW, you would typically see that quarters two and three would be the strongest in terms of volumes and margins, and quarters one and four would be the weakest. But now, during the couple of last years, the world has been so unpredictable that this phenomenon in our cyclicality has not been visible, so it's difficult to say. But again, same applies as I said earlier about pulp and paper. I think we are solidly in a different margin era than we were previously, and we can be pretty confident that roughly the levels will be retained.

Okay, clear. And final one, I'm not sure if I missed this one, but did you mention pulp and paper volume growth in Q1 or did you split that number?

Volume growth, I don't think we split it in the number, but we commented that there was volume growth both year-on-year in paper and as well sequentially over Q4. So there was volume growth in both numbers and the year-on-year volume growth I think it was 1%. Yes, very slight. So very slight volume growth. But here I offered the comment that without the impact of strikes, it would have been 2% higher. And if you go back and remember the pulp and paper market last year, Q1 was still relatively strong in terms of volume deliveries and really the packaging difficulty started to hit in Q4. So even some of our customers really had to do corrections to their outlooks relatively soon in Q2 when the market was sort of dramatically fast dropping in Q2. So we still had a good or strong comparison point. So the comparisons all across the board will get a lot easier once we get to Q2.

Okay, thank you. That's all from me.

Thank you. Let's take some questions from the webcast tool here in between. This question comes from Timo Tuunainen. Dividend per share is not competitive from the point of view of the markets. Dividend per share of 0.68 euros is giving just slightly less than 4% dividend yield. When are you updating your yield policy? Perhaps this is a question about our capital allocation priorities in more general terms.

So, yeah, if I take that again, We are getting a number of questions on capital allocation, and dividend, of course, is one, and we're getting some others. I mean, certainly this is not the forum or the time to be deciding or implementing new capital allocation principles. I mentioned that the Capital Markets Day in September, we'll plan to talk about our financial targets. I'm not promising anything new on the capital markets, I'm sorry, on capital allocation, but of course it's sort of natural that either that or then the AGM invitation is the time when you address those topics.

Good. And then I'll continue still from the webcast tool. This comes from Miika Ihamaki from DNB. This is perhaps more for Antti. So following exit from oil and gas, your business has become more predictable and resilient. What kind of tangible benefits predictability brings to you in terms of strategy? And does lower volatility in prices and volumes allow you to be more aggressive in pulp and paper, industry and water, or in any other strategic area?

Yeah, of course, the kind of lesser volatility means that it's much more easier to plan on solid strategy execution. Now, like when you have a lot of volatility in one part of the business, then when things go really well, there's a lot of focus in supporting that growth with investments focused in there and so forth. And it takes attention away from the other places. And when things go really bad, everybody needs to be firefighting. And basically that takes the kind of it harms the ability to execute solidly on the strategy across all the businesses and that's I think what's one of the major impacts that now that we don't have it then the strategy is very solid it touches both of our current segments and we can execute on that and we can basically plan because strategic execution is a long-term job. So basically we can plan ahead and we understand that within certain limitations and fluctuations, the business models and the long range plans we said and so forth, they are relatively predictable. In this world, nothing is completely predictable, but they are relatively predictable so that we can then kind of systematically implement the growth strategy that we are after.

Good. And I believe there is perhaps one more question from the teleconference line. So let's take that one.

The next question comes from Andrew Nole from Chemical ESG. Please go ahead.

Andrew Nole Hi. Good morning, everyone. Thanks for taking my questions. There's a fair amount of, compared to the M&A scene right now, there's a fair amount of water treatment assets out in the market right now. So I wanted to ask, you know, if you can comment on the strength of the pipeline. It's difficult for you to sort of put a timing on these things, but do you feel more confident that you can get something sort of done in the next 12 months, you know, as a general sort of sentiment that you feel? And an add-on for that would, I'd be interested to know how you sort of filter these opportunities because you have added M&A strength to the company you know, fairly recently. So do you look for assets that sort of cleanly drop into the business or do you feel like you can take on something that's a bit more complex, you know, perhaps needs a bit of trimming afterwards? Actually, that's a long first question. So the second one is quite short, I suppose. And I kind of asked you about this before. It's about PFAS. You know, I saw the Zero F Projects focus on barrier coatings. I just want to sort of understand a bit better where you feel like you can play in this area, because some of your competitors talk about it, highlight it even on their calls. So it seems quite a vibrant area. So I'm just trying to understand where you could be and are your plans evolving in any way on that front? There you go. Thank you.

Thanks. So, of course, commenting about the M&A pipeline and the timetables is impossible. I mean, it always takes two to tango, at least sometimes even more partners in this tango. So it's impossible to put any timelines, but it's true. And we've been open about that. So the pipeline is very active. We are actively working on. We have increased resourcing and according to the strategy, probably will increase further. and there's kind of parallel streams that we are working on, and we're working on both small Bolton cases and some bigger ones, and which one of these then realizes first and when we can implement, we can't comment on that. And then whether we are after kind of a simple add-ons to the existing business or something which might be a bit more complicated, again, nothing is out of the table or out of the question. The one beauty that we have done over the years is that we've been building a backbone to this company, which is a really efficient kind of process and systems background, which is kind of a very good basis into which to integrate. So even if we have not executed on any major deals lately, I have a really high confidence that with this platform, it's relatively straightforward. It's never really straightforward, but relatively straightforward to implement business, whether it's really of the same, exactly same nature as our current portfolio, or whether it's something that is a bit more remote. But still a kind of a remark on that one. So what we are in the workshop space really looking at is something that is close to what we do today, either from the technology and chemistry perspective or from the customer-based perspective that we serve. So there's no plans to kind of, at least active plans to end there. We're too far from the core that we are doing so that the integration is manageable.

And then the second question was on PFAS.

So, yeah, I mean, we're actively working on several solutions. It's the PFAS removal and then you mentioned separately maybe the barriers and the developments there and so forth. So there's a lot of active work ongoing internally and with external partners. And as I mentioned in my part this morning, I'm confident that we can come out with some announcement of new launches this year. What is our competitiveness there? I think we are one of the front runners. We have world-class partners that we are working with, and we have really strong customer relationships, both in the water segment and pulp and paper segment. So we are really, I think, in a really good position to emerge as a winner or one of the winners from those races. What is, of course, when we talk about new to the world type of technologies, there's a lot of unknowns there. And that's why you see many companies announcing on this field and on very different, let's say, the bio-based barriers for the packaging. So there's very different horses in the race. And the world is still out there looking at which one is the best one. We have high confidence that the solutions that we have picked up are really robust and resilient and will be those ones that will be in the winner's table in the end.

Maybe one more comment and also a marker that we can put here. We have no products that contain PFAS. So in that sense, we're absolutely clear on our own products. We don't have any of them. None of them have PFAS in it. So in that sense, we have a very clean start. We don't need to replace any products. And we don't need to be worried about PFAS in our own products. We see PFAS removal as an opportunity to do business. And then perhaps in some of the barriers, perhaps being wind market share.

Okay. So it sounds like you're more interested in the innovation, bringing in new technologies than sort of playing in the reverse osmosis ion exchange, you know, the actual kind of filtration that size.

That's a fair assumption.

Yeah. Okay. That's great. Thank you.

And I think we've now emptied the question queue. So this concludes the webcast. So thank you for the questions and for the participation. Any questions after this, do reach out to me. We're happy to help. But with this, we wish you a great weekend. And as Petra said, do mark in the CMD date as 26th of September. So hoping to see you there at the latest. Thank you. Thank you.

Thank you.