Kemira Oyj Ord

Good morning everyone and warm welcome to Kemira's Q3 2024 results webcast. I'm Mikko Poha from Kemira's IR and here today with me is our President and CEO Antti Salminen as well as our CFO Petri Kastrén. As you might have seen we published another set of solid results earlier today with continued strong margin performance. And during the webcast Antti will go through the main events of the quarter including the new operating model after which Petri will go through the quarterly financials and also the new financial targets that we published end of September. And do remember if you have any questions, there's a Q&A at the end, so you can submit your questions in the teleconference line, or then you can submit also then via the webcast tool. But with these short introductory remarks, we're good to go. So Antti, go ahead.

Thank you, Mikko. And a warm welcome on my behalf as well to this quarterly results webcast. And we are happy to report another really solid quarter. Financial performance, very solid. Organic growth, 2%, driven especially by industry and water, with very robust demand in the water treatment markets. Whilst the pulp and paper market, as we all know, is a bit weaker and the well-studied recovery of the market in Q2 has somewhat slowed in Q3, but despite of that, we had a solid result in both of the business segments. And that led to an operative EBITDA margin of 20.3%. And as said, both segments contributing very, very solidly to this good margin. In our Capital Markets Day earlier this autumn, we published our new long-term financial targets, reflecting the kind of growth ambition and the our idea to execute on that growth plan whilst maintaining the current margin levels, which are, as we have communicated, structurally higher than any time previously. And I think this quarter three confirms that very well, that there's this structural improvement in our margins. We also published during the quarter several investments to fuel this growth, adding coagulant capacity in Europe, in Spain and Norway, and exploring new manufacturing opportunities for our new bio-based chemistries to fuel the longer-term growth. And these all are really on our priority to grow in water business, so fueling that growth for the future. Another news from the quarter was the announcement of our emission reduction targets for scope one, two and scope three, where we think that we are kind of sustainability leaders in the industry, being one of the few companies that actually are committed to the science based targets in regards of the scope three emissions. So strong sustainability drive both regarding our handprint, but also our footprint. And with this performance in Q3, we retain our outlook for both revenue and operative EBITDA unchanged for the full year. Now let's start from the SBTI targets, where basically these are scientifically, science-based validated targets for greenhouse gas emissions where we are amongst very few globally, very few chemical companies that have the commitment for the full scale of scope one, two and three. Now we have already earlier had the scope one and two target, which is more than 50% reduction by the end of 2030. But now as a new thing, we have the scope three target validated as well, and the scope-free target is very easy to remember for anybody. It's scope-free 33% by year 33. So five threes there. And of course, kind of behind all this is our commitment to carbon neutrality by 45. Now then, next, let's look a bit at the financial results. Petri will elaborate more on those, but I'll just take a couple of highlights here. So first of all, considerable volume growth year on year, over 5%, and coming from both of the segments. I think this is important here. Furthermore, sales prices sequentially are rather stable, so holding on to the prices and pricing levels from Q2. And our organic growth, as mentioned, was 2%, and that's highly driven by the solid, robust demand in the water treatment chemicals in the INW segment. And Operative EBITDA, 147 million, and the margin improving to 20.3%. And if you look at the year-to-date EBITDA corrected for the oil and gas, or adjusted for the oil and gas divestment, we are almost exactly at par with last year, an inch above in terms of absolute EBITDA contribution. And it's good to remember that 23 was the all-time best year for Kemir. So we are at the same speed at the moment. And of course, kind of following this, then solid cash flow for the quarter. So all in all, really good, robust performance. Now, if we look at the two different segments then, starting from the pulp and paper, where volume growth was clear and margin improvement as well. And this despite the slowing down of the recovery of the end pulp and paper market. So, sequentially, sales volumes were stable. We know that there was some turbulence on the market and some curtailments and so forth. But despite of that, we were able to retain our sales volume stable and So were we able to retain the sales prices as well, which shows the strength of our business model and capability to perform, even if the markets are not optimally supporting the performance. And then as a result, the margin was 17.7%. which I think is the best ever Q3 for our pulp and paper segment. So again, let's remember the within-year cyclicality that we have, and typically Q3 is stronger than Q2, but if you look at the previous years, this is the strongest Q3 for our pulp and paper here. Now, then if we look at the INW, of course, there the strong organic growth, this is the spearhead of our growth strategy that continued and margin performance was continuing on the high level that we have been achieving. Again, just once more underlying and highlighting the structurally stronger margin position where we are. Year-on-year segment grew by around 5% in terms of volumes, and also sequentially from Q2, the volumes were growing in INW. And sequentially, sales price is stable, even if year-on-year there is some slight decline. And always good to remind, when talking about our INW segment, the return on capital employed continuing on the strong level way above 30%. Then, if we look a bit forward for the rest of the year, Of course, the operative priority is to maintain the growth track in the water business in INW and hold on to the strong margins. And then being able to be a child to adapt to the somewhat predictable pulp and paper market demands. So being able to cope with this temporary softness on the market and react fast when hopefully then next year the markets are continuing the recovery. More strategically, we continue our work on the both organic and inorganic growth opportunities, especially in the water business. And then of course, we are now finalizing the design and implementation of our new operating model and organization, which is planned to be in operation as of 1st of January. Then let's conclude this by revisiting some of the kind of strategy messages we've had and the focus that we have going forward. So as mentioned, the margins are structurally stronger than ever before. We are able to hold on to those better and worse times. At the same time, we have a clear strategy to accelerate the growth, driven especially by the water business and the renewable solutions. And then we are accelerating the execution speed with the new operating model, new organization and many other internal changes, enabling us to be more agile and fast on the marketplace. As we announced, the new organization will be more customer-centric, having three business units in terms of two, the drivers being, as mentioned, the speed and agility at the face of the customer. The main changes that this structural change will lead to as well is centralization of operations. And again, purpose of that is to gain even more efficiencies out of our strong supply chain, enabling and helping us to hold on to these higher margin levels whilst we invest into growth. Now, we also decentralize big part of the product development closer to the customer to be able to faster commercialize on innovation. And then we invest more into the centralized kind of longer term, especially these bio-based chemistries and the future platforms for longer-term growth. And we also, with this change, we strengthen our strategic and especially M&A capabilities, as the M&A pipeline, and working on that is very important for our growth. So then we also published the new long-term financial targets, and these are really forming a frame or set of guide rails. So our ambition is to grow more than 4% on average per year whilst maintaining this marching bracket of 18 to 21%. And of course, growth means investment, so it's important to set the kind of a baseline for capital efficiency as well, and that's why we included the over 16% Operative ROSE target here in the targets. Now then, if we quickly look at the strategic priorities that we have communicated. So first of all, we plan to expand in water, setting the ambition for doubling the water business over the time. There are many good drivers supporting this, both regulatory and market driven drivers. We will introduce new technologies to this area. We are looking at geographical expansion, so there are many avenues where the growth will come from in the water business. maintain our target of achieving more than 500 million of revenues from the renewable portfolio. We are well on track on executing that, and that's part, these chemicals, these renewable chemicals will be supporting both of our current business segments, all of the three business units going forward. And then as the new third strategic priority, We actively work on unlocking the growth potential from new platforms, new businesses to be served, which are suitable for our model. So basically finding these fast growing market segments, which are out of our traditional core and building the longer term growth capability of the company. So with these, I will end my part and hand it over to Petri, who will guide you deeper into the financials. Go ahead, Petri. All right.

Thank you, Antti. So, really, well, actually, just still on this one before I go into the details. So, key points that I see from the report. First of all, organic revenue growth. So, we are continuing to grow, and this growth particularly strong in INW. Very good volume growth and volume growth in both segments, as Antti was already talking about. And then absolute profitability. Increased EBITDA is improving year on year, it's improving sequentially, and it's actually improving for the group and for both segments. So in that sense, it's a check mark in all comparisons. So good starting point in my view. So, Mikko already mentioned that after I go through the financials, I will also, similar to what Antti did, refresh some of the key financial themes from the CMD. Now into this bridge as we traditionally or as I traditionally start the report. So I start with the comments on pricing. So yes, we've seen about 5% year-on-year price decline. And this price decline is pretty much consistent what we have been seeing through the year. And so, yes, there is some market pressure on the pricing. Directionally, the INW has held prices better, so the price decline is less in the INW side, and of course then proportionally higher in pulp and paper. But I think the key point is that we have been largely able to offset that with variable cost declines, as you can see from the bottom of the page, bottom graph. And of course, from the financial results, like I said, which are improving. volumes growing 6%. It's a very good outcome. Our long-term growth in our market is not at that level. So this is a very good outcome during the quarter, particularly considering the weakness that we have seen in the pulp and paper segment and which has been well documented. And some of our customers have offered fresh commentary and fresh data points on that one. And of course, the China pull or lack of China pull is one of the big reasons for that. However, volumes did grow modestly sequentially. Organic growth, 2% fully driven by INW, pulp and paper was flat year on year as there was pretty much an offset between volume increase and the price decline. In IW, while we saw a very good volume growth, there was nothing particular driver for this. Maybe we can highlight a very strong demand in North America. So whereas on the profitability side, you can say that the positives outweigh the negatives, meaning that variable cost reduction and volume growth offset or more than offset the price declines and the fixed cost price inflation, which of course then is the net result is an improving EBITDA. Year on year, the net impact minus 12 million between prices and costs. But I think the really good news on this slide is that the individual components are actually starting to trend towards the horizontal flat line, meaning that we are seeing less dramatic changes regarding variable costs. We're seeing less dramatic expectations on sales prices. And I think that's good for everyone. It's a better environment if we can maintain that towards the horizontal flat line there. Going forward, we are expecting the variable cost decline to end. And across the board of our variable or raw material basket, we're now starting to see a modest increase for raw materials, relatively modest, but still an increase. and of course there is a variation between product groups or raw material groups and regions as well. To offset that pressure and offset the fixed price or fixed cost pressure of course we will need to do our own actions and we do those continuously. But we are, as is our competitors in the industry, have been setting out some price increase notices of late. Talking about balance sheet, so we'll continue to deliver our balance sheet. Leverage is now at the record low, half turns or 0.5 times operative EBITDA and return on capital well above the 20% number. Just to highlight that delevering is not a target on its own, but obviously it's just an outcome of good profitability and good cash flow. Talking about cash flow, again Q3, very solid cash generation. We have now generated more than 300 million operative cash flow through the year. A good level, if not quite at the level of last year. Now, as we are growing, growth does consume some working capital, so that's why the working capital trends are reversing a little bit on year-on-year. A few words on capital expenditures. Now, we expect that the capex will fall slightly below last year's level. The reason is really timing of projects. We're not actively managing the capex to any particular level, but we want to execute on the needed maintenance and needed growth investments that also Antti was talking about. But there is a timing aspect of it where likely we will be less than 200 million in 2024. But the flip side of this, that this may actually put some upward pressure on 25 capex estimate, but we'll come back to that when we report our Q4 and give out guidance for 25. Outlook, totally unchanged, so no change to the financials and neither is there any change to the assumptions behind the outlook. So revenue between 2.8 and 3.2 billion and operative EBITDA between 540 and 640 million. A little refresher on the CMD messages and the financial long-term targets that we published just prior to that. So average annual revenue growth of 4%. This is defined as over time and over the cycle. So we want to achieve a pace which averages more than 4% over the cycle. It is faster than our expectation of market growth. So, obviously, to achieve that, we will need to continue to invest. We will need to continue to invest in capacity expansions, as we have done, and Antti did mention a few of those. And we will likely announce some new ones as time goes. And we are also investing into some of the operating expenses, if you will, so to bring up and bring out some of these new renewable chemistries and these, for example, the digital services that are part of our strategic priorities. So we will need to continue to invest some to be able to achieve this longer term growth level. And then the Operative EBITDA target or the profitability target was increased. It was increased by a meaningful amount from 15% to 18% to 21% but still some people have been asking whether that's an ambitious target as for the last almost two years we've been operating well within this range and actually even above the midpoint of that range like during the most recent quarter. But we really want to set this as a guardrail that we are looking and we see the value creation is through this growth. And because we will need to invest into this growth, however, the investments that we do for the growth, we will be managing it so that we will stay within this operative EBITDA range as the profitability target has been defined. The capital efficiency target, the Operative ROSI target, it's a new target for us. And here again, similarly, it acts as a financial guardrail. So clearly our current Operative ROSI is well above that. But this is sort of in anticipation that if we are to do M&A moves. M&A moves will likely put some pressure on this capital efficiency, but we will always maintain that M&A appetite and that M&A strategy so that the return on capital stays above this 16% level. Absent of M&A, I don't really see any reasons or any issues that would put significant pressure on the capital efficiency target or current level of capital efficiency. Then, as Antti said, we will be publishing or we'll be going into three reporting segments and three business segments beginning of next year. So I think you as financial analysts and investors, this will give you more transparency to our business. and you'll see more transparency on the financials and also the business drivers. So in that sense, that should be good. However, please, we want to highlight that these segments now have different profiles and that's why they will also be managed somewhat separately. And this page is sort of a proxy to describe the key differences between the financial profiles. For example, fiber essentials, typically very predictable customer relationships, very predictable revenues because of the long-term nature of the customers and customer contracts. However, it is more capital intensive, perhaps growth rates somewhat lower, but nevertheless valuable because of the predictability of those cash flows. On the other hand, water solutions, which is really the biggest segment for us, and clearly an area of our strategic focus and strategic investment, it has highest market growth, and we believe that it will continue to have the highest profitability profile and very efficient capital efficiency as well. Those are some examples. Then, at this time of the year, we typically give out a sort of a, if not a teaser, but at least a snapshot of how we are looking into 2025 next year. I offered this already in the CMD, but basically, if I repeat the key points here, is that the We expect that the solid good market demand will continue in the pulp and paper market. We have some, I'm sorry, in the water treatment market, we have some additional capacity coming online, particularly the the ASA line in China. And particularly if we should see a market pickup in China, that would be really a valuable asset in that type of a scenario. Uncertainties, clearly the biggest uncertainty is the recovery of the pulp and paper market. We clearly see that it stalled and expectations for the rest of 24 are really modest. So the recovery has been pushed into 25. But when that will materialize and how strong that is, it is really a question mark that I think everybody is sort of wondering at this time. And then, of course, there are fixed cost inflationary pressures that we need to tackle. And I already mentioned that we need to do our own cost savings there. And some of that will need to be offset by pricing going forward. So I'll stop here. These were my prepared comments, and I think we're ready to move for a Q&A session now. So operator, please.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Martin Rodiger from Kepler Chuveryux. Please go ahead.

Hello, this is Martin Rudiger from Kepler Chevro. I have three questions, please. In your written outlook, you say that the input costs remain stable. But Petri, you said in your speech a minute ago that you see a modest increase in the raw material basket. And you announced a couple of price increases already in recent days. So my first question is a clarification question. Is the primary reason for the price hikes to tackle the rising raw material costs, or is it to compensate for fixed cost inflation? And secondly, sorry, then start to answer the question, and then I'll follow up the other two.

Yeah. Well, my commentary is that the modest variable cost increase basket, it is very modest. So compared to the few previous years, you can probably say it's relatively stable when we have seen 30 or 40% annual increases in variable costs. So, certainly stable from that point of view, but we are expecting some very small percentage increase across the basket. Now, regarding the price increases, announcements that we have said have put out. My commentary was really applying to the overall variable cost basket and raw material basket, but there can be quite significant changes between raw material sources and regions as well. So it depends a little bit on the regions and the product lines of how much of that cost increase, that is the driver behind these price increase announcements, is variable costs and how much of that is due to fixed cost increases. But both play a role.

Okay. And maybe this is my second question related to the raw materials, can you provide a few examples which kind of raw materials you see already increasing significantly so that they drive the basket up? Is it more silica or acrylonitrile or amines or any ester products that would be helpful?

Maybe I take that so... As Petri mentioned, there are moves ups and downs, but the overall direction is rather slightly up than down. But then if you want some examples, I think the most clear example is coming from the water side, and we talk about hydrochloric acid and chlorine in North America. I mean, that's a clear area where we have much higher increase is expected than for kind of maturity of the basket. And this is kind of almost magnitude bigger than anything else. So we have these kind of areas where different drivers are impacting different raw material chains. It's important to understand that we are tapped in very big variety of different feedstocks and raw materials. I mean, starting from the oil derivatives to inorganics, mining outputs, chloralkali, you name it. So basically that's why there is so much variety in the market.

And my final question is, I understood from your capital markets say that you want to be financially disciplined when it comes to acquisitions. What does that mean, this financial discipline?

Financial discipline means, I think Petri put it very well when he described the kind of framework of the long-term financial target. So we want to grow, that growth means investment, both inorganic and organic. And in terms of inorganic actions, we have set these guidelines on kind of, you know, that we want to retain the profitability as we grow.

if I can sort of elaborate on that one. And Martin, I know that you're asking, this is a tough one. So basically, we see that financial discipline in two ways, both what it means, the group, the financial profile, what it means, absolutely, how much could we lever ourselves? And we talked about the financial guidelines. We always want to maintain solid investment credit profile. The second aspect is, what can we pay for an individual deal? There we say that we want to be prudent, but it's difficult to put a financial profile because some of the acquisition targets can have really different, they can be in a very different stages of maturity. And of course, if you are acquiring hypothetically a PFAS startup that has a unique technology, but is just going to the market, that might not have any profitability, hypothetically. Whereas if you were to do a coagulant consolidation, you might have a very solid frame of what coagulant companies are trading at.

Thank you.

Thank you, Martin. I'll take one question from the webcast tool as we talked about variable costs. So the question from Antti Koski from Danske was what level of increase do you see in variable costs that we already talked about, slight increase across the basket. But do you see the increase starting already in Q4 or is this more of a 2025 issue? Just to clarify.

Well, I think we are now in the kind of, you know, we've seen, as Petri showed in the slide, I mean, in the variable cost, we saw really high spike and increase, then variable cost coming down after that, and it's now leveling off. I think it's very evident. So basically, we are exactly now living the times of when basically the tide is changing in a sense.

Good. Let's go back to the audio conference.

The next question comes from Tommy Raylow from DNB. Please go ahead.

Hi, it's Tommy from DNB. Starting with the first one, on the pulp and paper side, price pressure, do you think that there is further pressure or intensifying price pressure from the customers in the fourth quarter, or is it accelerating from there? kind of a consistent 5% what you mentioned throughout the year.

Well, I mean, if you talk about pricing pressure from our customers, we are dealing with the leading pulp and paper companies of this world, and you've seen their results announcement. They're always tough negotiations. But we need to understand our position in the value chain. So kind of price pressure is normal for us. That's the name of the game in that industry. And I think we have evidence over the couple of last years that we can quite well operate in that environment and pull in good results. in spite of the pressures.

Just kind of a follow-up, maybe the sentiment that we can further, as you said, kind of a recovery stalling. Is it fair to assume that also the pricing negotiations get tougher?

Again, price negotiations with our dear customers in this industry are always tough. And of course, I mean, this environment, which is now at the moment not looking that positive, may have some impact. But then again, the whole industry is viewing that the recovery will continue. It's just stalling for a moment. So we are expecting kind of causelessly the recovery continue next year. And if we are talking about price negotiations now, we are talking about next year's prices, not this quarter's prices. It's not spot trade that we do there.

Good, thank you. And that actually leads to my second question, that to what extent this price increases and what you see in the in the variable cost increases as well, kind of a preparation for 2025 rather than just kind of a short-term fourth quarter management.

The price increases, is this also preparation for next year or was it sort of more shorter term sort of preparation?

Meaning our price increase announcement?

Yes, this is how I answered the question, Tommy, right?

Yes. Yeah, if I take that, I'll give Antti a breather. So, if you read the announcement carefully, I think they all say that price increases as the contracts allow and as we are really in contract business. So, obviously, this will be a sort of when you start negotiating the next contract, that's how you start it. Certainly, like Ananti said, we don't do spot trade, so these price increases will have very little, if any, impact on Q4, but it's really how do we... In APAC, they may have some, because APAC, there is a little bit of spot nature that's very short-term pricing nature in the APAC market, but elsewhere, everywhere else, much more longer term or sort of annual types of price validity. So this is sort of impacting and preparation for next year.

Exactly. So you have started to spot slight variable cost increases and you are proactively kind of starting to raise your own prices into 20,000.

Was that a question, Tomi? No, it was just a statement.

I think that's fair.

Thank you for that.

Okay, third question. You keep a wide range in terms of sales and the clean EBITDA for the quad-quad. Anything to watch out there? Is it kind of listing the possible positives or negatives, risk levels, things to keep in mind? Any comments there?

Well, the factors we're really looking at next year already. And so, to be honest, there's fairly little that we can impact Q4 anymore. I mean, the nature of our customers is longer term. And so... In that sense, particularly on the water side, we already have a very good visibility on what the customer demand is based on just past trends. I use this as an opportunity to remind that there is some seasonality in the water business. And there could be some seasonality in the pulp and paper business as well. depending on a little bit how electricity costs go, because typically we see higher electricity costs during the winter months here in Nordics. And just a reminder why I say that is that the higher electricity costs are beneficial to us because our Our product is priced off the market price of electricity. I mean, that's a shorthand. Whereas our input costs of electricity are stable and don't have the seasonality, simply put. So that's why the electricity price may have an impact on winter quarters and winter months of profitability, but it's not really in our control. So that's why we are giving you the guidance and focus on next year and we rather manage our business a bit longer term in Horizon than month or quarter.

Perfect, thank you very much.

Thank you, Tommy. I'll take one question from the webcast as we talked about the pulp and paper market. This question comes from Martin Evans from HSBC. And the question is, is the temporary softness that we referred to in pulp and paper more structural as consumers spend less on packaging goods after the post-pandemic boom, which is leading now to lower demand for products such as cardboard and packaging, and then which then ultimately reduces the demand for your paper chemicals?

Well, I think if you... think about the end consumption of packaging board, which is really the kind of main driver for this. So definitely there was this hangover from the COVID times, and we saw that clearly in the kind of quickly dropping demand in pulp and paper segment. the previous year springtime, and that was the shock impact from there. And now we've seen the slow recovery after that starting, and that's the recovery that we kind of now see stalling a bit in this time. Now what drives that is the kind of overall state of the economy. the consumer behavior globally, because it's a global consumer base. And then particularly, of course, the economy of China is a big driver for that, because a lot of the global demand is fed from China, and thus the kind of packaging board demand in China is driving longer chains. So it's driving the pulp demand from South America or Nordics. and then it's kind of feeding to the consumer base in the developing economies. Well, if you take, in a sense, that view, then you would at the same time say that the whole global economy is about to enter a kind of long stable period of decline. I mean, that's basically what would lead to your kind of a scenario there. So if and when we believe that the local economy will pick up and thus also the consumer demand will pick up, then also the demand for packaging will pick up. And additionally to that, what feeds to this kind of a paper Wood fiber-based packaging is the fact that the world will need to move away from plastic packaging. And that's an additional driver that is kind of speaking for the longer-term viability of the demand in the packaging sector for us.

Good. Let's go back to the audio line.

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

Hi, good morning. Thank you for the presentation. You mentioned softness in APAC in pulp and paper. Could you please talk a little bit about the market dynamics there? The region has been quite a strong contributor in the recent past. Is it just simply the whole economic scenario or is there specific something in pulp and paper we should be aware of? maybe it's a good time to remind us because you are much more resilient in a difficult environment when it comes to your EMEA customers in the pulp and paper segment. It would be nice to get a refresher in the sense that the dynamic there is not one-to-one comparable to the one in your business and the reason for your resilience and how we should think about it if, let's say, this segment remains difficult for longer and we see more production curtailment. Thank you.

Thank you, Issa. Well, yeah, I mean, I think I already alluded to this first question in my previous answer, so I think that We say that softness in the APAC market, but it's predominantly the softness in the Chinese economy, which is basically behind this. And of course, now we've seen the Chinese government stimulus package, and we don't know the long-term impact of it yet, but the government has finally kind of woken up to the situation that they need to do something to feed the economy for faster growth. And China is so much in the center of everything in terms of not only being a big middle class consumer base, but also being the manufacturing hub of the world. So basically, that's why what we see happening in China is then having a direct impact, as I mentioned, not only for our business in APAC, but for the whole industry, pulp and paper industry, and the kind of industries feeding it like ourselves globally. So that's why the APEC kind of demand, and there's nothing particular about pulp and paper in APEC. You can look at whatever indicators of construction industry, shipbuilding, car manufacturing, you name it, and it's all about the same kind of macroeconomical development. So that's why I don't see anything particular for pulp and paper industry there. And then if we talk about the different nature of our business in EMEA or North America versus the APAC. So as Petri also already said, again, it's not so much about us and the customers, but the kind of how the markets operate in different geographies. The APAC market is more short term in terms of all the normal contractual basis. There's more spot trade in there anyways. We have also some long-term contracts there, but it's shorter cycles. It's always been that way. Whereas, especially in EMEA, it's more about the long-term commitment and partnership with our customers. And of course, we've been working with, especially with the Nordic paper companies for decades and decades and decades. And it's not only about supplying chemicals, it's about the longer term R&D collaboration and joint developments and so forth. So the partnership is completely different in nature. And I think that is also kind of partly explaining the resilience of the business model in EMEA.

Thank you so much. Maybe just a last follow up, and I know you've been asked so much about the raw material costs. If we look at your net pricing, it's obviously in the negative territory, but that's because you're coming from a very high base last year. Can we expect this to turn already with Q4 in the positive territory?

We don't give that prognosis and it's difficult to also estimate and actually there's a little bit more factors in it before you need to count into your inventory rotation days and everything that before you can sort of see the timing of how price increases and raw material increases. they don't immediately flow through the P&L. There's a lag of about a quarter or so, two to three months, depending on the product group as the inventory turns over. So, no, I don't venture to guess on this call on that one.

Thank you. It was worth the try.

Indeed.

The next question comes from Andres Castanos Mola from Burenburg. Please go ahead.

Hello, Andres Castanos here. I would like to ask about the 5% organic growth in water, and if you could break it up for me in terms of price, volume, market share, wins. Thank you.

I don't break it to you precisely, but I already gave you this a little bit. So yes, 5% organic growth. And we said 5% for the group price decline. I said that directionally it was less in INW. So it is a number smaller than five. which then mathematically reads that the volume growth is mathematically a number higher than five. So there you go. And so we don't want to go into that specifics because then we are constantly reporting these numbers and they do have some quarterly quarterly fluctuations and I don't encourage to draw trend lines from one quarter on any given days, but rather look at a little bit of longer time horizons. But very nice volume growth, nicely held up prices in IW. So in my mind, it's actually a very good result in there.

And Andres, if you read our report, there's more sort of granularity on the regional developments. For example, in the Americas, the organic growth was the highest. So that is where we are particularly seeing a sort of good underlying demand. Yes.

Thank you.

Another good try.

Thank you, Andres. Do we have any more questions?

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

And it appears there are no further questions. But should there be any after this, so please reach out to me and we're happy to help. But we'll conclude the webcast. Thank you for the questions and have a great weekend ahead. Thank you. Thank you.