Lenzing Ag Ord

Ladies and gentlemen, thank you for standing by. I'm Moritz, your Chorus Call Operator. Welcome and thank you for joining Lansing Group's Annals Call. Throughout today's recorded presentation, all participants will be in the list known below. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by 1 on your touch-tone telephone. Please press the star key followed by 0 for operator assistance. Your hosts today are Stefan Silaft, Nico Reiner, and Christian Skilig. I would now like to turn the conference over to Stefan Silaft, CEO of Lansing.

Thank you, operator. Also from my side, a very warm welcome to the presentation of Lansing's result of the first nine months 2023. With me today is Nico Reiner, our CFO, and Christian Skilig, our CPO. Let's go through our agenda for today. We will start with the executive summary, followed by an update on market developments by Christian and myself. Afterwards, Nico Reiner will guide you through the financials, and I will talk about our new holistic performance program, the completion of our expansion conversion program, and how we expect the next quarter. We will end this session, as always, with a Q&A. Let's start with an overview of the key developments and strategic highlights. The markets relevant to Lansing continue to be weak, and this keeps demand, especially for our fiber products, under pressure. Raw materials, such as chemicals and energy costs, remain volatile on elevated levels. In the light of the continued weak market environment, we took action and are implementing a new holistic performance program. This program will increase our resilience by strengthening the top line, enhancing our cost excellence, as well as full focus on free cash flow generation. As we have announced just recently, we successfully concluded our strategic investment projects as our site in Indonesia has received the EU eco label for environmental friendly fiber production. With that move, all of Lansing fiber sites are now 100% converted for specialty fiber production. Let's move quickly to the financial results. Revenue in the first nine months decreased to 1.9 billion euros, which compares to 2.0 billion euros in the first three quarters of 2022. The EBITDA reached 219 million compared to 263 in the first nine months of 2022. The net results after minorities and hybrid bonds was negative at Euro 149 million in the first nine months, which compares to plus 57 million in the same period 2022. The free cash flow significantly increased again in Q3 to positive 27 million euros, which compares to minus 33 million in the second quarter and minus 132 million in quarter one of this year. Looking at our guidance, we confirm that we expect EBITDA in 2023 to be in a range of 270 million euros to 330 million euros. With this, I would like to hand over to Christian Skillig for an update on some of our key cost elements.

Thank you, Stefan. Good morning. Good afternoon from my side as well. In the first quarter of 2023, both energy and chemicals costs came further down compared to the last quarters. However, if you compare those costs to the previous years, prices are still elevated. On the left-hand side, you can see the decline in energy costs. European natural gas prices were just above 30 euro per megawatt hour in the third quarter. However, what you don't see yet in the chart in the wake of the Israel Hamas war, they started to rise again and even exceeded 50 euro per megawatt hour in mid of October. Levels last seen in April of that year. Remember that in the first quarter of 2020, The price was below 10 EUR per MWh. In the US, gas prices started to rise already in the third quarter, as you can see in the chart. On the right-hand side, you see the price development of caustic soda. Prices normalized further in Europe and China, but increased slightly in Southeast Asia. Prices in all regions are still 30 to 50% above the level seen in early 2020. Also keep in mind, those are quarterly average market prices, which means the price increase in China following a hurricane in September is not yet fully reflected. Please keep in mind that those developments of market prices do not fully reflect the impact for Lansing as we are sourcing at better conditions in Europe and we partially source from Asia if the price delta is very high and benefit thereby from our import and storage facilities in Italy. By that, I hand back to Stefan Silla for the developments of the demand side.

Thank you, Christian. If we are looking into our markets, then one of the very important markets is our apparel retail sales. So when we look there in the third quarter of 2023, we see a softening of apparel retail sales trend globally. With the exception of the U.S., spending fell clearly compared to previous quarter. Apparel retail sales dropped by minus 5% in Europe and minus 3% in China. This softening demand weighs heavily on a global average down at minus 3% compared to last quarter. Consumers remain cautious about spending their limited discretionary budget in the third quarter due to cost pressure. In addition, in Europe, unusually hot weather delayed the start of the autumn-winter season, which was highlighted by several brands and retailers. With the new geopolitical conflicts and the economic uncertainty, no immediate turnaround is in sight. I'm sure we've shown this slide before. In this example for the US, you can see the US closing inventory. You can see that although closing inventories are now lower than at their peak in the second half of 2022, they are still higher than in the first half of 2022 and higher than in the long-term average. Since June, inventories, increased slightly, which is a typical seasonal effect with inventories building up for their holiday season. However, this seasonal increase is less pronounced than in an average year. This year, cost pressure on consumers have resulted in weaker sales outpacing inventory reductions. Inventories will need to fall further to align with weaker sales. Brand and retailers are expected to significantly increase promotional activities to clear inventories in the coming months. Looking at the fiber prices, Chinese generic biscuit market prices improved somewhat in the third quarter, particularly in August, mostly driven by increases in costs of chemicals, Also, the typical seasonal effect played a role where September and October are the peak buying season in the textile industry, supporting prices. Operating rates in Chinese viscous industry were high throughout the quarter, ending at 86%, and inventories reduced further below 10 days based on repeated sales promotions. Cotton prices were much less volatile recently, as you can see in the chart, but remained in a rather narrow band of $2 to $2.20 with an upward trend, even though the fundamentals in the cotton market are less positive. For example, inventories are expected to continue to build up in the new season, which started in August of this year. Polyester prices, not shown here, continue to largely follow the development of prices of intermediate polyester staple fiber prices advanced 9% in the third quarter of 2023. And DWP prices ended the quarter slightly negative, having boomed out in August, price recovered since then, supported by healthy demand production outages at some mills and a rise in paper pulp prices. Let's talk about our specialty pricing. Lansing had more than 75% of its fiber revenues from specialty fibers in the third quarter of this year. On the left chart, you can see how our specialty prices developed compared to commodity viscous prices on an index basis. Since 2017, Lansing could increase the premium of these specialty fibers compared to commodity fibers until 2019-2020. And it could largely keep this premium at solid level 6. This was supported by our strong branding activities. As you are aware, we are not a classical B2B supplier. That is always in danger to be commoditized. We are actively driving our B2B2B model through our co-branding programs and are highly successful with this approach. We operate a successful push and pull strategy, in particular in Techstar, built around blue chip customers through involvement in their value chain decision process early on. This resulted in numerous partnerships with sought-after brands in the textile industry. As part of the push-and-pull strategy, Lansing engaged in several gold branding programs in both textile and non-woven end markets through its strong and renowned brands Tencel and Viocell, as well as Ecobeo. And with this, I hand over to Nico Reiner for an update on the financials.

Thank you, Stefan, and a warm welcome also from my side. Let's start with revenues. They decreased in the third quarter by 9% to $616 million compared to the same period last year. Looking at the full nine months, revenue decreased by 5% to $1.87 billion from $1.97 billion in the same period last year. This development is mainly due to the decrease in fiber revenues, while pulp revenues increased. Fiber prices continue to remain under pressure. EBITDA reached 83 million, an increase of 11% compared to Q3 2022. This includes a positive impact from the valuation of biological assets of 16 million euros. Looking at the figures for the first nine months, EBITDA decreased by 17% from 263 million last year to 219 million this year. Let's move to the next slide. Looking at EBIT, it came out slightly positive again and reached about 1 million or roughly 15 million less than in the third quarter 2022. Deprivation and amortization were at 81 million and at similar levels as in the last quarter. For the nine months of 2023, EBIT was negative at minus 11 million euros. And for group net profit attributable to Lansing shareholders in Q3 2023, we reported a net loss of 44 million, which compares to a loss of 5 million in the same period last year. For the first nine months, net loss amounted to 149 million. Looking now at cash flow. Lansing significantly increased its operating cash flows to 90 million, which compares to 18 million euros in the second quarter or to minus 48 million in the first quarter of this year. CapEx was on similar levels as in Q2 at minus 63 million euros. and on much lower levels than in the three quarters before that. As a result, free cash flow increased by roughly 150 million compared to Q3 2022. Free cash flows have steadily improved since Q4 2022, and we are quite happy with the result in this quarter in the light of the current weak market environment. Going forward in 2023, we are confident that CapEx levels are further normalizing and investments will be focused on license to operate and maintenance CapEx as we have completed the conversion of our sites in China and Indonesia. Great working capital slightly decreased in the third quarter again from the peak levels in Q1 2023. Trade receivables slightly increased and trade payables decreased compared to the second quarter. Inventories went down by 42 million compared to Q2 2023. Due to ongoing working capital improvement measures, we are confident in our ability to further optimize our working capital, which will benefit our free cash flows going forward. Let's move now to the balance sheet. On the left side of the slide, we show historically net financial debt, quarterly evolution. Net financial debt significantly decreased by 19% compared to the second quarter and reached 1.57 billion euros. Lansing has raised 392 million of net proceeds via a rights issue to strengthen the balance sheet and the liquidity position and to provide sufficient flexibility to further support better growth strategy. It is important to also consider the maturity extension of 249 million So in total, it was a package of about 650 million euros supporting Lansing's balance sheet. The liquidity cushion reached a solid 1 billion at the end of September. With this, I hand back to you, Stefan. You will share some details on Lansing's new holistic performance program.

Thank you, Nico. As you know, the perfect storm hit us in the second half of 2022, and we have seen a continued weak market environment since. Also during half year two of 2023, with still low demand and negative pricing dynamics in global cyber markets. The market recovery initially expected by market observers in the second half of 2023 is taking more time than expected. As a consequence, Lansing continues to take action and initiated a new performance program. They successfully executed cost reduction program of 70 million euros launched in 2022 was simply not sufficient to support adequate profitability and cash flow generation in current weak market environment. The objective of the new performance program is to increase the resilience and competitive position of Lansing in a continued stagnant market environment. It will have relentless focus on profitability and cash flow generation. And we will improve our performance levels based on a Lansing's fully invested asset base. Let's look more in detail of what this program exists. We have set up a holistic performance program which integrates ongoing performance initiatives and projects. The program addresses all divisions, Fibers and PAL, as well as our overheads. And it is built on three key pillars. The first pillar is all about our top line growth. A strengthened top line and margin growth is prerequisite for profitability and free cash flow generation. We will strengthen the top line growth with defined sales initiatives in both push and pull. The second pillar is all about cost excellence. Enhanced cost excellence will be leading to sustainable profitability levels across pulp and fiber operations as well as overhead functions. And the third pillar is about the generation of free cash flow. We will give full focus on generating positive free cash flows. Let's look about some of the measures that that program will include and about the impact it is expected to have on our financials. Let's start with the top line. In order to strengthen our top line growth, we have defined a number of measures and initiatives. They consist of probably the most thorough commercial undertakings for Lansing in at least many years. We will enhance both our push sales organization with direct customers such as spinners, as well as our full sales or business development organization with key global brands. We have defined dedicated sales initiatives to grab growth opportunities in relevant markets for Lansing, in existing and new. We aim for higher share of wallet and strengthening collaboration with global brands. We will strengthen our sales processes to fully leverage the potential of Lansing's products also in demanding market conditions. The second pillar, to enhance cost excellence, we will make significant operational improvement and further strengthen our process excellence and have already identified detailed initiatives per site. We will further optimize our direct as well as our indirect spend. And we will make our overhead structure leaner and will further organize it around delivering value to our customers. The two first pillars by themselves will have positive impact on free cash flows. Beyond that, we will make our supply chain more stringent and tighten working capital management by further optimizing DSO, DIO, and DPO. On the CapEx side, as mentioned by Nico already, we will be restrictive with a clear focus on license to operate and maintenance CapEx. based on the fact that we are a fully invested asset base. We target cost savings of at least 100 million euros per annum with a full run rate in the year 2025, and we expect to achieve at least 50% of it already in 2024. The overall program impact should resolve in significant positive free cash flow in the subsequent quarters. Let's turn our attention now to the conclusion of our strategic investments. Fully invested operations. That is the right heading for this chapter. Even in a challenging market environment, our two new plans were delivered on time and in budget in 2022, and they are now fully operational. Additionally, Especially in the year 2023, we converted two plants in China and Indonesia towards specialty production. We have already spoken of the successful conversion of the production of one line in China to Moda. In Indonesia, we have now received in the third quarter the EU Ecolabel certification for the viscous fiber production. This allows us to upgrade the product portfolio to include specialty fibers as of Lansing, Ecobero and BSO brands. The invested cutback of over 100 million euros enables us to reduce emissions and allows for higher margin potential of specialty fibers. With this, all of the Lansing fiber sites are now 100% converted for specialty fiber production. Let's move to the outlook. This is a chart we have shown to you in the past. The International Textile Manufacturing Federation, ITMF, conducts a bimonthly survey among close to 300 executives in the global textile industry, which we believe is a helpful pulse check of the textile industry. The satisfaction with the current situation had declined since November 2021, so since two years. Yes, it improved slightly for the first time in the July survey, but remained on that level in September. Minus 27 is, of course, still a very negative read, mostly driven by the weak demand, which is on top of mind of over 70% of the respondents. However, you can also see the visibility along the textile supply chain is still low. As you can see in the indicator for the expectation In six months, many industry participants already at the beginning of the year had expected a recovery and continue to do so. However, it has not yet materialized and timing remains unclear. Here's an overview of some of the latest quotes from companies Q3 earning polls. While apparel brands and retailers are seeing softening demand, performance of non-bowling companies was more stable in Q3. Weakening consumer demand was particularly highlighted in the earning calls of Columbia Sportswear, Puma, and Levi Strauss. Columbia talks about weak consumer demand for apparel and footwear, so they continue to take a cautious approach on ordering. Puma stated that consumers choose different leisure activities than shopping in September, also due to the warm weather. Also, Levi Strauss highlighted the negative impact of the hot weather. In contrast, non-woven players such as Suomuinen spoke of positive signs for their business environment in 2024. So let's see now What potential impact this has for Lenze? To remind you, 2022 was an unprecedented year and we call the second half of 2022 the perfect storm. Costs in chemicals and energy were at unprecedented level. Demand for fibers in the textile industry declined, which led to a decline of fiber sales and sales prices for Lenze. Free cash flows were significantly affected by the cutbacks for our two new plans and inventories built up as well as by the resulting negative operating cash flow. In the first nine months of 2023, costs declined but were still elevated as explained by Christian. Non-woven sales and pulp, including co-products, remained solid, while textile sales started to increase compared to Q4 2022. Fiber prices, however, remained under pressure. DWP prices were relatively stable. Due to the completion of our new sites in Brazil and Thailand in 2022, CapEx decreased by more than 60% compared to the first nine months in 2022. In the remaining quarter of 2023, costs are expected to continue to remain volatile on elevated levels. We expect stable demand in pulp, including cold products, and relatively solid in non-volatile, while demand in textile fibers is expected to stabilize on relatively low levels. On free cash flow, we expect positive impact from the focus on maintenance capex and the expected decrease of trading working capital. Let's look now at our guidance for the full year. The outlook is characterized by a market environment which maintains to be massively depressed. We expect that the weak market conditions continue weighing on EBITDA. Demand is expected to remain on low levels due to the continued weak market relevant to Lansing in quarter four of 2023. Prices are expected to remain under pressure and costs are expected to continue to remain volatile on elevated levels. Our holistic performance program, which is being implemented now, is expected to have already an initial impact in Q4 2023. As a result, the Lansing Group confirms that they expect EBIT in 2023 to be in the range of 270 to 330 million euros. Despite the current weak market environment, we think that Lansing is in a great position, given we are well placed to take full advantage of market rebound after recovery. Let me quickly take you through the eight elements of our strong positioning. We cover the megatrends within the overarching framework of sustainability and circularity directly through our products and brands. Our market has structural growth drivers, including population growth and the improving middle class income globally. And in addition, we are the number one in the fastest growing sub-segment of textile market with specialty fibers. Number three, we are shifting towards specialities. As mentioned, all Lansing fiber sites are now 100% converted for specialty fiber production. Number four, we have a competitive cost and innovation advantage through our backward integration in DWP, further complemented by the recently completed investment in Brazil. Number five, with Tencel, Viocell and Ecovero, We have by far the strongest ingredient brand portfolio in the cellulosic industry. Number six, we have launched our performance program with three pillars. On top line growth, cost excellence, and cash flow generation. Our enhanced cost excellence will be leading to sustainable profitability levels across both pulp and fiber operations. Number seven, with Thailand, we have added 100,000 tons capacity in the fastest growing fiber market, Lyocell. And number eight, we are now fully invested with the two new plants ramped up in 2022 and the two plants fully converted in 2023. With this, I would end our presentation and would hand over to the operator for the Q&A.

Ladies and gentlemen, at this time, we will begin the question and answer session. Please note that the questions are only possible via telephone. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to withdraw your question, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. And the first question comes from Isha Sharma from Stiefel Europe. Please go ahead.

Good afternoon. I have a number of questions, but I will ask first three and then cue back and ask the rest later. On free cash flow, so on the gross cash flow, could you please help us with the bridge from Q2 to Q3? Seems like there is a sizable improvement in other non-cash items. Sequentially, if you could help us with that, please. And the second question also relates with cash flow. If we look at the working capital, you showed an improvement of around 35 million. Where is this coming from? Because we don't see this in the trading working capital at either of the three lines. And related to that, also on inventory side, we are still 50% above the normalized levels with basically no improvement versus last quarter. Is the low demand not allowing you to reduce inventories as you would like? And what kind of progress can we expect going forward here?

Thanks, Isha. So I will give these questions to Nico Reiner. So first on the development of the gross free cash flow, the gross cash flow from Q3 to Q4. Is this correct, Isha?

From Q2 to Q3, we saw an improvement in other non-cash items. I just wanted to understand what are the moving parts here, please.

So, thank you for your questions. I mean, we need to look into the topics here, what have been the real moving topics on that gross cash flow, because gross cash flow, I think this is something we need to check on later. But let's postpone that question and we will come to you in a later stage on the gross cash flow, as this is not one of our key KPIs managing the companies.

It was important for the free cash flow. But anyway, maybe we can talk about the working capital then. And if you could tell us about inventories and why are we still at such an elevated level and when can we expect progress there?

Yeah, happy to do that. As we mentioned already, inventories went down by 42 million in this quarter three. And if we look at the situation here, we have a clear program improving working capital going forward. We mentioned that already with our results in Q2. So we see a clear improvement and programs are running on and we will see also further positive sites coming from this development.

I just wanted to understand what magnitude can we expect because if we look at where it is from historical levels and we are still quite high and we have seen this at other companies that there has been working capital released already throughout the year. But at Lansing, we've just started to see it. So I'm just wondering if it is more difficult for you to place or reduce your inventories because the demand is so low and if that is something that will change going forward.

Yeah, we are intensively working on the improvement of inventory. Yes, that's correct. And we see here first positive signs. Overall, in the first going out of the fourth quarter, you will see the first improvement, as we mentioned already, that our key focus is on the generation of free cash flow and to manage the working capital, inventory, receivables and payables is one of our key elements. And this is a key target which we follow on for the rest of the year and also in next year as we want to achieve positive free cash flow going into the future.

Thank you. I will cue back.

And the next question comes from Brigitte Friedrich from BNB Paribas. Please go ahead.

Good afternoon. Thanks for taking my questions. I have three questions in total. First, can you please comment on the cost savings program that was announced in 2022? So could you please give us more color on the potential contribution for the fiscal year 23 by when you expect to achieve the envisaged 70 million in its entirety? Second, are the costs for the cost savings program already reflected in past expenses or is there more to come? And can you please comment on the cash outflow related to any such charges in 23-24? And the last one, based on the midpoint of the 23 guidance that you announced in September, implied Q4 FDA stands at 80 million euro roughly at the midpoint. Unless the market environment was deteriorated further, could you regard the quarterly 80 million or annualized like 300 million as a good yardstick for 24, to which we then should add the tailwind from the cost savings.

Thank you, Brigitte. So those questions also for Nico Heine.

So the first one I take, the cost saving question I take, if you don't mind, Brigitte. The cost saving program, which we announced of around 70 million, we will overachieve both in timing and impact. What are the components? We had a full year impact, for example, on the personnel cost of 40 million, of which 20 million will be contributed already in the year 2022. The other elements are mainly process cost savings, discretionary cost savings in the range of 15 million. And we have a special procurement or purchasing program in the order of magnitude of 20 million. I hope that answers your question. And then the handover, as we said, the full, the programs are now closed and we have this hype, the holistic performance program, and that will be the umbrella project, umbrella program taking all these initiatives on board as well. For example, on the operational improvement side, you can imagine a couple of initiatives which simply take time to implement. And they are all part now of this new target of the 100 million run rate in the year 2025, of which, again, 50% will be delivered in the year 2024 already.

Now, the next question, did I understand well, was that with regards to the costs, also implicating the cost of these programs? Or what was the question? Sorry, can you repeat, please?

Yeah, sure. I just wanted to know what about the cash outflow that is related to the charges in 2023-24 for this cost savings program? So what is the cash outflow? Because implementing all the measures costs money.

Oh, you mean costs for the people side?

So let me elaborate a little bit on that one. As we are saying that we are now in the implementation of this program, we are still clearly and closely watching all the developments here. And you might know that... to be able to have all these costs being posted, you need to be in a situation where the documentation is very clear, very strict and available. So what I can tell you at this point of time is, that we as a company are targeting to take care about these costs within our financial year 2023. So the whole evaluation of the total volume of cost is still ongoing. And this is the reason why I cannot mention any number at this point of time.

Okay, thank you. And the last question was with regards to the To the EBITDA going forward, am I correct, Brigitte? Yeah, that's correct.

That was about the guidance, right? Now, what we said is the outlook is characterized by the very cautious market expectation for Q4-23. We expect in Q4 that the weak market conditions continue and they will weigh in on the EBITDA. Demand is expected to remain on low levels, especially on textile fibers, and that will put pressure on prices as well. On the cost side, as Christian elucidated, we expect a volatile market on the cost side on an elevated level. And on the opposite side, our performance program will deliver first impact in Q4 2023. And if you take all of that, that makes us confirming the guidance between 270 and 330 million euros.

Yes, just like the backdrop of my question was that security guidance for Q for 23, like for 23 implies a Q for EBITDA of 80 million. And if we annualize that, it will be 300 million EBITDA. So if I add 100 million from cost savings, that would take me to 400 million. And however, condensed is it close to 500 million for 2024. So should we take this 300 million as the yardstick and then at the tailwind from the cost savings, or should we interpret it differently?

Look, I mean, you made some very individual calculations on your side. But please understand that we are not able to give any guidance now for 2024. And therefore, I'm not able to comment on what your calculations are.

Okay, thank you.

And the next question comes from Christian from . Please go ahead.

Yes, thank you very much. One question remaining. It's actually a 24 question. Sorry for that. But do you have any early view into 2024 in terms of demands, i.e. textile industry prepping for the summer collection or something like that? That would be very helpful. Thank you.

Well, as I elucidated, and you have seen maybe the graph, which we have shown in our presentation, we see that the expected recovery of the textile market in particular is simply taking more time. And that is how much I can tell you at this point in time, also about 24. And I hope you understand that we are not giving any guidance on 2024 results. So you've seen the outlook of the textile community. You see how wrong they were in the past. And we are simply saying that recovery will take longer than expected by market observers so far.

Okay, fair enough. Thank you very much.

And the next question comes from James from . Please go ahead.

Yes, thank you very much. Thank you for the presentation. I've got three questions, please. The first one is, given that you've been broadly unprofitable this year and you are selling the majority of your products at premium prices, why aren't we seeing substantial closures in the commodity grades, you know, mainly in China, or are we? The second question was you talked about very weak sales in Q3, which is continuing into Q4, but you mentioned that DWP demand has been quite strong, and I was wondering how we square the differences between the two. And then the third one is just understanding a big part of your business now is pulp sales, but you also say that you are a small net buyer of pulp, just trying to understand the dynamics there as well. Thank you.

Thank you, James. Now for the first question, I will hand that over to Stefan Zilauf.

Thank you, James, for the question. And actually, there are companies at the moment really struggling and mainly the small players, mainly those which are not backward integrated. And we see the one or other operation which had to go closed down. And for your second question, that was about pulp demand. I guess we would hand over that to Christian.

Yeah, we'll do that, Stefan, for sure. Yeah, we have seen between volatile pulp markets that at least pricing for dissolving wood pulp could be kept on a relatively stable level. as some of the market players had been taking downtime during the year, which supported prices on a stable base there.

One more question. I remember James said he has three questions.

Also with regards to DWP.

Yeah, yes, thank you. Yes, as usual, there were three questions. The third one was a quarter of your sales were pulp in the quarter. But I think you say that you're, you know, self-sufficient or maybe a net buyer of pulp. So just wondering how that works and, you know, how you see that going in the future.

Yeah, I would see that also for you, Christoph.

Can you repeat it once more?

Yes, sorry. A quarter of your sales are pulp and you're not a net seller of pulp. So I was wondering how that works out.

Look, we have both purchasing agreements that we are buying at quite favorable prices from third party suppliers pulp, especially those grades we are not capable of producing ourselves. And that brings us into the position selling market pulp as an excess to third parties. Hope that answers your question.

Thank you very much.

You're welcome.

And the next question comes from Lars von Cliff from Deutsche Bank AG. Please go ahead.

Yes, good afternoon. Thank you very much for taking my questions. Two remaining. The first one is, I'm wondering, your other operating income in Q3 was extraordinarily high. Could you give us the reasons for that?

I think that's a question for you.

Yeah, thank you. I mean, other operating income includes a number of positions. And I'm sure that you understand that we do not disclose more level of detail here. However, if you look back a few quarters, you can see that the level of this position can fluctuate quite substantially.

Okay. And then with regards to your financial result, it was more or less minus 12 million in the third quarter. And in Q1, Q2, it was rather minus 30 million per quarter. I mean, I completely understand that in between there was a capital increase, the leverage came down, but that is a significant reduction. Is minus 10, minus 15 the new normal we should expect for the upcoming quarters?

I mean, that's a little bit the same topic we are tackling here, but let me phrase it in the following way. My overall financial result also includes a number of positions, and we are not disclosing any level of detail here. But if you look at the FX development, you can assume that it also impacted this position. So giving you probably this directional answer to your question. Okay, thanks.

And the next question comes from Theresa Sheinwald from Five Eyes Bank International. Please go ahead. Sheinwald, your line is open.

All right. Can you hear me now?

Yes, we can hear you.

Oh, great. First question revolves around the cost savings program. Could you help us with getting a split on the variable, the cost of goods sold part of the program and the fixed cost part? Because so far we know it's about the 30 million euro target for the personal side, the staff cost side. So if you could help us with that. Second one also on the revenue pillar of the program. If you could give us a feeling on what you think is the potential you could either volume-wise or revenue-wise or percent. And the last one is coming back to the other operating income. It was at a level not seen in any quarter in the past 10 years. So I wonder if you could give us a share of what has been one-off. Yeah, that would be it.

Okay, let me comment on your first question, which is around the cost savings program. As we mentioned, it is a holistic program. impacting the full P&L. So impacting all positions what you mentioned, but at this point of time, we do not give a split on fixed and variable costs. So overall, we are tackling the 100 million of cost reduction and having an impact in 2024 already of 50% of that volume and the full impact in 2025.

Maybe one additional information we can disclose that we also disclosed today in town hall meetings, the personnel cost part of it is around about 20 to 30 million euros, which equivalent of 500 FTEs. And if you look at the personnel cost side, most of it will be in the overhead part. Yeah. The second part of your question was on the top line. Here we also don't disclose details yet. However, you can assume that we are expecting, especially in the fiber segment, a significant growth in revenue and margin. And your third question was again to Nico, right?

Yeah, thank you, Stefan. So around the operating income, I mean, you heard the answer, which I gave already, but clear to say that there's nothing else to add on this answer.

Thank you. And we have a follow-up question from Isha Sharma from Stephen Europe. Please go ahead.

Thank you for the opportunity again. Two left, please. One on the dissolving wood pulp prices. Christian, you mentioned that there were some supply issues there and the market is kind of stable. Do you also expect this to continue going forward? Because in the last update, you told us that there might be pressure on dissolving wood pulp pricing because of the extra supply that is coming in. And the second question, Just very simply, if we look at the range of your EBITDA guidance, it's still quite huge, around 50 million for Q4. What needs to happen for you to achieve either the upper end or the lower end? So how should we think about the drivers for both ends of the guidance, please? Thank you.

So for the first question with regards to the DWP prices, this I would hand over to Christian Skittich.

Yeah, I will take it, Sebastian. For dissolving wood pulp, we do see a rather stable market development over the next coming months. So talking about next two quarters, quarter four, quarter one of next year, we see a rather stable phase there, as well supported by price increases on the paper pulp side.

So what needs to happen to reach the one or the other side of the guidance? Well, basically, you have the two key levers, either on the top line, the market developed better than we expected in the medium and or the cost, as Christian elucidated, are still volatile, but not coming in better. Or if you want to think about the lower end of the guidance coming in worse. Yeah, it's these two main drivers which we see for having the guidance still that wide. And as you can see from the Fibers market, the response time is much, much shorter in these days. And therefore, we have to keep the guidance on that level as the market is much more on short notice than it was in the past.

Just to confirm that the midpoint of the guidance is when the environment remains unchanged.

Yeah, well, that is your interpretation. We are guiding the range and I explained to you, Isha, what is our background on that guidance, right? And yeah, I think that is enough said on the guidance, yeah? Thank you. Pleasure. You're welcome.

So there are no further questions at this time, and I would like to hand back to Stefan Sida for closing comments.

Yes. Thank you very much. I think clearly we have seen a quarter with still weak market environment at the same token. I think we have proven as a management team that we are taking action and you have seen that in the results of the positive results. free cash flow development. And going forward, this management team is taking the right action proactively. That's why we launched a holistic performance program. We have shown to you why we still believe that when the market comes back, Lansing is in a great position to capture that growth. With that, thanks a lot for your attention. Thanks a lot for your questions and have a good rest of the day.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.