Mayr-Melnhof Karton Ag

Good morning, ladies and gentlemen, and a warm welcome to the Meier-Mehlhofen-Karton AG conference call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Please note also that this conference will be recorded. Let me now turn the floor over to your host, Stefan Sweetspark.

Good morning and welcome on the part of MM. It's a great pleasure to have you joining this Q&A conference call on our 24 annual results, which we released just this morning. Besides the press release, a video statement of our management board, CEO, CFO, has been published on our website, mm.group. In this call, we want to provide you now with the possibility to direct questions on today's communication to our CEO Peter Oswald and our CFO Franz Hisinger. Since this call addresses an international audience, we would very much appreciate your questions to be asked in English in the following Q&A session. Before we go for that, Peter, may I ask you to start with a short summary of our key messages?

Yeah, thank you, Stefan, and welcome, everyone. I assume you've all read our announcement, and therefore, I just want to summarize the key points before we then go to the formal Q&A session. 2024 was a challenging year for the whole industry. and I'm very pleased to say that we've made significant progress by focusing on self-help. In our food and premium packaging division, we've again achieved market-leading returns, and we could show at least some volume growth. In farm and healthcare packaging, we are now halfway through the successful turnaround of the former essential packaging business. We have picked the low-hanging fruits, and now we have to advance the division towards M&Ms, market-leading operational standards. And here we are well underway, but equally we have significant further potential. At MM Board and Paper, we have made good progress in terms of volumes, which were up by about 17%. However, the results were flat compared to last year, however, with a positive tendency if you look at the quarterly development. Importantly, looking to the whole group, we've reduced our net debt and have now a strong cash cushion. We have made great progress in sustainability, reducing our CO2 emissions significantly. We have also, in tough times, and this, I think, sets us apart from some Some other participants in the industry increased our training and development intensity and we've strengthened our management teams with a particular focus on technological knowledge. And I would want to use this opportunity to thank our employees for their great contribution. We will propose a dividend increase of 20% to €1.80 per share in line with the net profit increase. We have launched a share buyback program at the beginning of this year. And as per yesterday, we have successfully repurchased more than 350,000 shares, which represents 1.7% of all outstanding shares. And as we have announced in December, we signed an agreement to sell our TAN business. The tipping paper had limited or no synergies with our packaging operations. and this will be closed in the second quarter. So what is the outlook for 2025? Of course, always with the caveat that it's impossible to predict the future in any way. So what we see at the beginning of the year is a flat order intake in both packaging divisions and a slightly increased order intake in board and paper. Prices show a very heterogeneous picture with some prices increasing, some decreasing, but overall marginally increasing. In recycled carton port, we have the positive news that a small mill will be closed down during this year, which will somehow improve the supply-demand balance. Unfortunately, in virgin carton port, we see the startup of a new mill. also a closure of the mill, but a much smaller mill, and so here we will see even more overcapacity going forward. Now, looking ahead, we will again concentrate on self-help, and we will do whatever it takes to improve our long-term profitability. CapEx in 24 was at a surprisingly low level. We had indicated a higher number. Some of that was obviously a rollover to this year, and so we expect for this year a capex of around €300 million. So we will continue to invest in our business in order to increase our competitiveness. Yeah, and with this brief summary, it's now your turn, and Franz Hiesinger and myself, we are looking forward to your questions. Thank you.

So, dear ladies and gentlemen, we will now start with the question and answer session. If you would like to ask a question, please press 9 and the star key on your telephone keypad now to enter the queue. If you find that your question is answered before it is your turn to speak, you may press then 3 and the star key to cancel your question again. But to state your question, please press 9 star now. One moment for the first question, please. So the first question is from Richard Phelan of Deutsche Bank AG. One moment, please. So please now go ahead, Richard.

Good morning. Thank you for taking my question. Just a specific question on WLC markets. I know that a price increase was attempted on January 1st. Could you give us an update in terms of where the price and environment stands, especially in light of a major competitor's closure announcement in Spain?

Thank you. Yes, so we got part of the announced price increase, so we have gone for €50. We've achieved all of that, but a significant part our competitors did not follow. But we basically don't see an erosion of our market share because our products are better, and I think the market has expected some increase.

Great. And so has the closure accelerated the ability to implement more price increases through the year? Is that sort of the direction of travel?

Yes, it does have a positive impact. What is a bit strange about this announcement is that it was announced for the end of this year. So we see some customers changing to us. but one has to be very careful. This competitor has announced once already another closure, so you never know whether it's really executed. So we'll wait and see if the closure really happens. And, again, it's a bit strange because it doesn't take normally 11 months to execute the closure.

Understood. Great. Thank you so much.

Thank you.

Thank you very much also from my side. The next question is from Mark Watts of Citi. Over to you.

Hi there. Thanks for taking the question, guys. Just one question on market consolidation. As we understand it, there's perhaps, you know, obviously quite a lot of pricing pressure. Do you envisage any kind of the smaller players potentially falling into trouble? Would you consider... Well, have you heard anything here? Would you consider potentially looking to acquire those competitors, I guess, mainly more in Southern Europe? Is that something that you're looking at?

So I think we have to differentiate between our board mills and our converting plants. As for board mills, there are some... small competitors where it's very difficult to understand how they continue, but some of them might have very specific features. In the forward area, I think we would not touch the smaller mills. On the packaging side, we are open-minded. We also see some bankruptcies. And of course, we look if there is any value for us, customer relations, know-how, machinery which would make sense to be taken over, but I think as it looks in the European landscape, Typical owners seem to be very optimistic people who always wait for the big jump in sales the very next day. And so probably the fast time of waiting for some people to make these decisions is still outstanding.

Got it. And can I ask on capacity utilizations on the board and paper side, what are you running at? kind of now maybe versus the end of the year or where do you envisage you will be?

We are now at roughly 90%.

Roughly at 90%. Okay. And then the other one I guess is just on the board and paper side, I kind of see a little bit of a reduction in free cash flow year on year. It looks like kind of a bigger decline on the cash flow from operating activities. Okay. Is this mainly working capital driven, given that you did report a sizable increase in EBITDA, or how would you kind of explain the kind of the weaker year-on-year comparable for operating free cash?

Yes, you are right. It's, I would say, exclusively, almost exclusively a working capital reduction, where we simply have the biggest scope in let's call it the first year of crisis than in the second year.

Okay, so it's not sort of a sign of the stocking. It's rebalancing or what was actually the driver?

I mean, one driver was factoring and the other driver that we systematically reduced inventories for all sorts of industry inventories from raw material to to finish good intermediate materials. I think that was a big focus. Another focus was to cut some receivables, so the terms with our customers. And the third leg was, as I said, was factory.

Got it. And sorry, one last one, if I could, just regionally, how you're seeing kind of the Italian market versus maybe German, like any kind of discernible differences in demand or on the customer side?

We see probably in Italy, so the Italian market is typically an even more competitive market in terms of somewhat lower prices, also more input pressure from, for instance, from Turkey, if one refers now to the WNC market. So there is a gradual difference, but equally not a big difference.

Thanks very much. Welcome.

Thank you very much, also from my side. The next question is from Michael Marschallinger of ERC Group. Please go ahead.

Yes, good morning. Thanks for taking my questions. First question, board and paper, what about the EBIT back to positive? You said this is mostly to the higher CO2 concentrations. Could you give us a number around this? in the quarter without this effect?

Yeah, I mean we see actually a very smooth development if one disregards the or spreads however you want to take it the annual shutdowns which we had in the third quarter so we were more or less break even plus 2 million in the second quarter. In the third quarter, it shows 20 million. However, if you – our costs were, I think, around 24, 25 million for the shutdown. So if you excluded that, it would be plus 4 million, and now it was 11 million. And, yes, we were – we got some of higher CO2 credits there. We booked them, so to say, in the fourth quarter, which also helped. So there is a positive underlying trend. However, I would also not overstate it because the issue of prices is still pending.

Okay, understood. Then a follow-up to the question on the market consolidation. You talked about these overcapacities in the markets, and what would be your best guess when this will resolve itself?

Sorry, to ask, so what is the extent of the overcapacity? Is that the question?

How long do you think the markets will take to absorb this capacity?

Yeah, I think we have an overcapacity in FPP of around a million tons and in WLC of around, whatever, 300,000, 400,000 tons. And it's very difficult to judge when some of the weaker players will decide to leave. I mean, I always expect it sooner than it really happens because... As I said before, this industry, there are a lot of visionaries who see the big market increase around the corner and wait for this. The question then often becomes if they can afford to do it. So I think during this year, I do expect some overcapacity reduction.

Okay, and the student last one on farm and health care. In your video statement, you said you're halfway through restructuring your center. So when do you assume this restructuring will be finished? Will this be already in H1? Can you assume already some margin improvement throughout the year, or what's your timeline on this restructuring measure?

It's overall when required, it will be the timeline of four years. So two years are gone, and two more years will be needed. If you ask the question, why so long? I mean, there were some low-hanging fruits, which we picked very quickly, and that went ahead of expectations in 23. Now that we really have to improve the underlying business, it's about qualification of people. We had to install new, more modern machines, and just to order the machines took more than a year. and then you need to install them, then you need to train the people, then there are startup curves, et cetera. That's basically what we've seen in 2024. So we expect steady progress both in 2025 and in 2026 towards a profitability level, which is at the level of our food and premium packaging business. And hopefully then, but we will see once we are there, we can make it even more profitable.

Okay, thank you. That's all from my side.

Welcome.

Thank you very much. Ladies and gentlemen, just a little reminder, to state your question, please press 9 and the star key, and to cancel your question again, please press 3 and the star key. Moving on, the next question is from Marcus Remes of ODDRBHS. One moment.

Over to you.

Good morning, Jens. Thank you for taking the questions. I would like to start with the Fit for Future program. If you could outline the incremental cost reduction measures that you have in mind, which areas you have specifically the way I see the untapped potential given that, yeah, cost-cutting has been the name of the game for a couple of quarters now. And, yeah, I would also appreciate if you're willing to indicate kind of the earnings impact that you expect from these measures.

Yes, pleasure. So it might take a bit longer to answer that. So Fit for Future is now a new cost reduction or profit improvement program. We started with this program one year ago in Kvitsin with an external consultant, and I was personally extremely impressed. surprised almost how well it worked. So it's basically nothing peculiar. The difference is maybe that it's really only focused on sustainable cost reductions. So it's not the normal cost reductions you get just from declining input prices, et cetera. And this project was very successful. It meaningfully contributed already in 2024 to the results of this mill. And we started then already some months ago a rollout in two other mills, now in a fourth mill. Now it's in the headquarter and central group services, divisional services, and basically it will be rolled out throughout the group. I know it's always very difficult to assess the impact, but we had a meaningful two-digit million impact in 24, and at the end of the day it has to be a three-digit number, which we might get, let's say, next year.

three-digit million savings accumulated 24, 25, 20?

No, no, not accumulated per annum. But we ramp it up because, I mean, once you implement the measures, so to say, your running rate improves and then... depending if the running rate starts in January, then you have the benefit the whole year. If it starts in September, then obviously it takes another year or 12 months to be fully in the numbers. So it will be a meaningful contribution, and it comprises everything from a different technical solution with also sometimes with short-term payback projects to... to better procurement, fixed cost savings, all sorts. So step by step, we are moving forward in a highly structured process where we work partly with external consultants, partly with our in-house transformation.

Did I get it right that it started in the port of paper segment and the findings are now also applied to the packaging divisions? Is that what you're saying? Yeah, exactly. Yeah. Okay. And then you mentioned continuous structural optimization. This is something that the group has been doing for quite some time. Should we take this term as a kind of prolongation of what we've seen in the past that you might take out capacities here or there, kind of close smaller plants or does it also entail bigger restructuring measures?

That depends on what bigger means, but I would say like taking out smaller plants. And I think we've started now with one process in France and further up to come. So at the end, it's really about our real commitment to stay only with well-invested strong assets and some of them can be improved and in some cases unfortunately we also have to, it would be too expensive, takes too long or it's simply impossible from the setup of a middleware plant.

Okay. Then I would have two financial questions, firstly regarding accessory and remembering one A year ago, we had a major cash flow surprise because we've massively stepped up back to ring. I think it was 267 million last year. Can you give us the year end, 24 figure, please?

It was a net position that was slightly below 400 million, so around 380 million.

380 million, okay. 300, 380. 380 million, okay. Okay, then... quite a punch increase, is that a rate that you feel comfortable with going forward or do you still see kind of the potential to further increase factory level?

No, it is on a stable level. It will be reduced due to the disposal of time group, but otherwise we expect that it will be fairly in line on this level.

Okay, thank you. Then a question related to the buyback. You've limited the upper threshold to, if I'm not mistaken, 83 euros, which I guess the current stage limits your ability to buyback. Is there any reason for this threshold and do you consider kind of an increase of the level as an optionality?

Yes, I mean, so first of all, at least according to the all-spread law, we have to give a range, which is always very strange because you also have to give a minimum number and a maximum number, which is published. And, yeah, we have to discuss in the management board together with the supervisor board whether we change it, but for the time being, it's a longer-term program. It was a reasonable amount when we published, when we were at the level of even below €70, and now we have to consider is the money wisely spent to increase this number, or should we rather use it, so to say, free cash flow to reduce net debt, or or make capital expenditure. So it's open.

Okay. And then related to packaging and the margin outlook in 2025, you've indicated that price increases in board and paper are coming through. How should we think about the impact on the packaging? considering that order intake is flat, which suggests a rather muted demand development. Is there a margin pressure to be expected from price-cost narrowing?

Yeah, I think as it looks now, the price increases on the board and paper side were limited, and we will see how much, and they should be reflected in in the UREIT and also in the PPI index numbers, which is, again, an important reference point for a number of larger contracts we have on the packaging side, like with WLC as our competitors have not followed our price increase. We will see what the actual mix is. So there is some increase reported, but it's lower than on our side. And this is easy to pass on to customers. So by and large, I would expect that without making now a forecast, but that margins will be rather flattish.

What's next?

Classes meaning now there's some price increases which have important paper can be passed on, but also not more.

And then a clarification coming back to the Q4 development important paper that is 12 million of positive EBIT when you gave the guidance of a positive development upon the Q3 release. Was that already including this inflation from the CO2 compensation or was it like a important paper being a bit more on the weaker side compared to initial expectations. Correctly, the underlying EBIT excluding CO2 would be slightly negative. Is that correct?

No. No, that would not be correct, but the number would be lower. And I think this is where we stand. So it's... Let's say what you can't expect is that we have a big increase. The rate will really depend on the overall development also of our costs, so obviously the fact that our competition did not follow in the WLC market with our price increase obviously so to say, has reduced the outlook for much improvement.

Okay. Thank you very much. I'll get back into the line. Welcome.

Thank you very much. The next question is from Cole Hathorn of Jefferies. Over to you.

Morning, Peter. Thanks for taking my question. I'd just like To follow up on the pharma and healthcare markets, are you seeing any kind of green shoots from the customers on order books and improving demand there? Because we've seen destocking from that segment for a while now. Some of the flexible plastic packaging players like Amcor are talking about kind of a stabilization there, small improvements. I'm just wondering what you're seeing at Meyer Mellenhoff.

Yeah, what we see at the moment, not so many green slots as you call them. So it's a rather flattish development. However, there is no doubt that the GLP-1, so this slimming product, will finally get momentum. And we know that this will entail growth and we will over-proportionately participate in that growth. Unfortunately, the real big movements are out too because the capacities are still under construction. So this development will help us more than in 26 and mainly 27. Otherwise, in the rest of the market, it's rather flat.

Peter, and then I would just like to understand how you're focusing on your mill system at the moment on the board side. And I'd like to look at the recycled card or the WLC and the FPP side. Am I right in thinking that in the WLC side, you know, you're trying to invest energy reduction, move down the cost curve and try and be cost position advantage while everyone else has got elevated debt levels and not able to invest in your mill system? Are you effectively going for lower cost production as the only way to survive in WFC at the moment? Is that the key focus for you and maybe energy investments?

Yes. I think our strategy so far has been we have made two closures. One was already a couple of years ago in Austria, a smaller mill. One was a small machine in our Slovenian operation in Kolichevo. So, we have done, so to say, the first step to take out those assets where we couldn't see that they would come close to any cost leadership in the market. Now we have a good network with good products. We have due to the rebuilds also still some one-off costs which we have to carry, but that gets better and better. And now we have to further bring our costs down. Also, there are many ideas. Also, some products are over-specified in terms so much better than the competition, but we don't get the respective premium. And the focus is absolutely, as you say, it's mainly on energy costs, but also on fiber costs, personnel costs. So we have to really touch... I don't know if this is in English, but we have to take every penny around and look at it from every side and reduce the costs, and that will finally make us, so to say, will finally lead to improved profitability.

And then I don't know if this is the right way to think about it, but you do have an advantage being forward integrated into – your converting side of the business. Is there any way to, well, any opportunities for you to further optimize your logistics and better utilize your mill operating rates by prioritizing your products for your converting assets? I know it works differently versus the container board market, but, you know, I'm just wondering if there's any opportunities to improve the utilization of your mills and prioritize your board volumes into your converting assets.

Yeah, in WRC, we are already very highly integrated. Maybe the numbers don't look like that, but we're obviously also converting operations in Chile or Colombia, which are not integrated. Otherwise, it's integrated to a very high degree. In FPP, there is still more to do, and we will, of course, do that. So there is more to come.

And then maybe shifting to the FBB side, what is the focus there for ensuring cost competitiveness in a market where, you know, Store Enzo's adding new supply. I suppose you're getting MetaBoard taking out some supply, but it's still challenged. So I'm just trying to understand the cost positioning of someone like your Polish mill, which has probably got lower wood costs versus your Finnish mill. So just understanding the focus there for the business.

Yeah, so as you said, our Polish mill does have cost advantages, not so much maybe in wood, also maybe some in wood, but it's mainly logistic costs and personnel costs. So I think this mill is very well placed. but has the disadvantage also to be in the graphic segment with unguided fine paper, which we've moved now gradually to packaging paper. But that's overall a very competitive mill, and as I said before, we have the opportunity there to take a lot of costs out. In Finland, it's after the startup of the new machine, the second biggest machine, FPP machine in the Nordics and overall in Europe, the third biggest. So it's a very – it's a big, sizable machine with a lot of capabilities and newest technology. So – but otherwise, let's say in terms of food costs, et cetera, we – We are the same boat as other Finnish players. And then we produce also some in Kolitsivu, where it's more focused on niche products. But the proximity to some customers in Southern Europe is, again, an advantage. But overall, despite all that, yeah, as you say, there is overcapacity in the industry, which will – and we will see what consequences will be taken also by our competition.

I mean, hopefully we get some capacity rationalization from the peers, but in the interim before then, is there any commentary that you can give on how you're thinking about potential U.S. tariffs and how that might impact the European market, both in WLC and Folding Box Board.

Yeah. So our exposure to the US is fairly limited, even though it's also for us a strongly growing market, but from a small base. Our main competitors are very strongly exposed to the US. So the positive scenario is that there are more import duties in the US for products from China, which might be on the margin helpful because then continuing to export and even increasing exports to the US is a good business. If we get tariffs on European imports, that would have very negative repercussions for the industry because the US is a very important market for some players. and they will then have to redirect these volumes to Europe because the rest of the world, so to say, is also a difficult place because of the Chinese.

Good. And then the final question is on, you know, Russia, Ukraine, potential peace discussions. How could that impact your business from, firstly, from a wood cost dynamic, and then secondly, you know, if the market did open up, you know, would the Russian market ever be open again to folding cotton, do you think?

Yeah. So, at peace and the finish of – it's the – If the situation normalizes again and we could import and export, it would be very positive for the wood market in Finland. So especially Kotska, which is less than 100 kilometers away from the Russian border, it would be a definitive strong advantage. Although from an energy perspective, it would be an advantage. The markets themselves, because Russia has started the Kamamil, shortly after or shortly before the Ukrainian war started. The market opportunities, I'm not so sure how big they would be, but definitely there would be some opportunities. And our group was especially high exposed to Russia, so we lost a very significant volume there.

Understood. And then just on the Poland wood markets, would you get kind of Belarusian wood coming back that might support you and improve? Yes. Yeah.

And opening would also be highly beneficial for Poland.

Perfect. Thank you very much.

Thank you.

Thank you very much. The next question is from . Over to you.

Okay, thanks very much for taking my question. So let's go back to your comments about doing whatever it takes to improve profitability. And also in your outlook, you talk about structural optimization measures and you single out overcapacity in FPP and WLC measures. So wondering whether at this stage you can offer more specific plans in terms of how you're planning to optimize your footprint and in which grades.

Yeah. Thank you. Yeah. I've already alluded to this with another question. We think that our footprint is very competitive. So when we say we will do whatever it takes, of course it could, it would, if it makes sense, it could also mean that we close a carton board mill if necessary. I just don't see from a competitive point of view that this would lead to anything because logically those on the higher part of the cost curve have to do something before, and this is not out of – yeah, it would be just economically not justifiable. So at the moment, this is, so to say, is not an option, but if market everything changed, we don't exclude anything because in this market environment, it's really important that we – return to a much higher profitability or to a very clear profitability. One has to say for word and paper that a closure of one of our mills is something I can't see today.

Okay, so when you mentioned in your outlooks structure optimization measures, this is a Not something on the table today. That is just for packaging.

Okay. Yeah, for packaging. As I said, we are in the process now of closing a smaller plant in France, and we are investigating some other possibilities. It can also be a downsizing of a plant. And the importance of the message should be that we do not shy away, so to say, also from tougher questions because the industry has overcapacity, and so you really have to look at all your assets and bet on those which can long-term survive and not spend useless money in supporting those who, at the end of the day, will fail. have very limited chances to supply, and that's just our strategy, which seems to be, unfortunately, very special in this industry.

Okay. And you mentioned your capacity utilization is around 90%. I was wondering whether you could split that between WC and FPP. It's pretty similar. Pretty similar. Okay. Okay. Thank you. Thank you very much.

Thank you.

Thank you very much. Moving on. Next question is from Xavier Van Doorn of Homeport Family Services. Van Doorn, please.

Over to you.

Hello. Good morning. Thank you for taking my question. In your press release, you're talking about highly competitive asset base. We talked a bit already about it. Can you explain a bit more as margins are not following the volume recovery in board and paper and why do you think you're better positioned than the competitors? I don't know if they have some other advantages also as cheaper electricity prices or some other things and why would you think that margins would recover and to what level would you be happy at the moment in the next few years?

Look, we have a number of benchmarking studies which are available from service providers. Then we can, in some very rare cases, compare our performance with competitors, for instance, because they are listed. And all that indicates, or we see also from acquisition targets, examples, so to say, where the competition is and obviously also people move from us to competitors and the other way around. So overall we feel that we, if we start with packaging, have a culture which is very operationally driven. That has always been a high mark of our group and we've acquired now a central packaging We have found operational numbers to be weaker by a factor of two or three, so not just 10%, but really weaker. Equally, we see how difficult it is then to bring things up because it's linked to investments, it's linked to infrastructure, it's linked to people and what they are used to do, et cetera, et cetera, and the whole organization to work efficiently. But we think from all what our comparisons tell us that there we are on the packaging side. So our traditional legacy food and premium packaging is really highly, highly efficient. And we see now in pharma where we've practically... 80% has been acquired or more than 80% has been acquired, that we are on a very good way to do it. And in board and paper, we also do some benchmarking. We are taking costs out like energy, et cetera, where we dramatically reduce energy consumption. As you will see then from our annual report, we've not just reduced CO2, but energy consumption per se. also on a third-tone basis. And this follows just a different, sometimes just a different organization, sometimes minor investments. In some cases, we also need some bigger investments, which we will do. And so overall, we feel we are in a good space and with the spirit of So to be here at the top, of course, there are other very good competitors or they have individual plants or mills which might also be better than we are over. Was this answer satisfactory for you?

Yes, thank you. Thank you very much.

So, as there are no more questions in the queue, I'm handing the floor back over to the host.

So, I think we have had a number of questions covering a broad range of areas, and thank you, Peter, for your in-depth answers. Thank you for participating and your interest in the company. Just for your information, our annual report will be published on the 9th of April. Q1 results on the 29th of April. And with this information, well, we have two more questions pending, I think. Do we see that? Yes, exactly. Perhaps the moderator can take the questions before we come to a close.

Perfect. Thank you very much. There are two follow-ups. The first one is from Mark Watts of Citi. One more time. One more moment, please. So, Mark, over to you.

Hi there, guys. Sorry for the later questions. So, the first one was just on the CO2 credit impact. Do you mind just elaborating? a rebate that all peers would receive in the WLC carton board side or is that specific to you? And the second question was just on the margins and when we're talking about the raw materials, again on the WLC, what are you seeing on the OCC side and the input costs? Because we have been hearing across industry that maybe on the container board that there'll be demand, increased demand on that side. So do you think that's going to have an impact on the input prices going forward in terms of it potentially going higher, or what's your view there, or what are you seeing so far?

Yes, thank you. So let's start with the second part. I mean, to predict paper for recycling is obviously always very difficult. I mean, we have seen overall strong increases, which we could not pass on to the market, corrugated board market. Now we've seen them softening a bit. I would also tend more to see the upward trend than a further downward trend. But, yeah, it's always very, very difficult to predict it. And, of course, if they move up, the question comes back, yeah, can we increase prices and pass these costs on? The first question you asked is, I mean, we have in every country different regimes, so it's nothing special what we get, but they are also very different. So Germany, Poland, Finland, and Slovenia and Austria are the relevant markets, and they have all sorts of different CO2, energy, I mean, maybe subsidized is the wrong way, but they have, yeah, they are subsidized in one way or another with caps or refunding or if you use the network. So it's a very complex thing, but we didn't get anything, that's your question, anything special, but we just run in the normal schemes of these countries. And Yeah, and it's complex to follow up on the rules and on the prerequisites. One has to get them, and so to say we were now – we got last year more than we got in 23.

Got it. Okay, so I guess directionally probably a little bit less expected for 25, if at all, versus 24 given – Yes, that's correct. Okay. And so the final question, could I just clarify when you answered my question earlier about cost prices from competitors, was it the case that they had imposed those and they hadn't stuck with customers or you've just been hearing they haven't actually increased prices? I just wanted to clarify.

Yeah, what we hear from customers is that they Let's call it this way. In the majority of cases which we learn about, and it's only a certain sample of everything, they have announced it but not followed through on it. Okay. So at the end of the day, they could get a bit more volume. They rather took the voice and the higher price. Got you.

Thank you.

Thank you very much. The next question is a follow-up from Cole Hathorn again. Over to you, Cole.

Thanks for taking the follow-up. I'd just like to ask on the long-term demand trends for carton board and your longer-term views on the export market. Am I right in thinking that the export market will probably continue to remain quite challenged just considering competition from Asia, etc.? ? On the domestic European market, we're still well below what I would consider trendline demand, be it from more discount retailers using more plastic or various different items from a consumption perspective. But I'm just wondering, what could be the green shoots to demand? What do you think could ultimately bring us back towards the trend European demand, or are we not going back to kind of a trend level?

Yeah, so my opinion is we're not going back to a trend level, and I would see a growth of 1% to 2%. So to make it a bit more detailed, we have a rather demographic flat development. We see the growth rates of main customers, which are fast-moving consumer goods companies, pharma companies, etc., There is an in-tech trend which is replacing plastic with cardboard, which is positive. However, I believe that many market participants far overstate the practical effect. We do not talk about huge volumes. So there's always what can be – there are also a lot of studies and a lot of marketing talk about what could in theory be replaced, and these are fantastically high numbers. But we just have to acknowledge the plastic is cheaper. The European Union has failed. They have introduced the plastic tax, but it's paid by everyone instead of by those who bring the plastic into usage in Europe. It's simply a wrong policy, but it is what it is for the time being. And so as people, there will always be a certain pressure to just to – people have limited money, so to say, which they want to spend. So with all – Whilst they might be in theory very enthusiastic about moving to carton board products, maybe if they're in the shops they forget about it and take the cheaper product which is packed in plastic and therefore the substitution of plastic to board is happening but it's not happening for the time being as fast. Of course, if the economy improves, people are more willing spent again, which is a cyclical effect, this will become better, but I think to believe in growth rates of 4%, 5%, 6% is something I wouldn't put my money behind. And for exports, I see the U.S. market generally, so the world market, Middle East, Africa, will be difficult because of the Chinese. The U.S. is an attractive market. unless Mr. Trump changes this from one day to another. Otherwise, I can see that the product which we sell to the U.S. is a superior product, and it's well received by customers, and there is some growth opportunities definitely in this market replacing SPS.

Thank you, Mr. Glenn.

You're welcome.

Thank you very much. Then another follow-up from Marcus Ramies, ODDR VHS, .

Yeah, thank you. Just one clarification. This Fit for Future cross-cutting program, does that trigger any charges of meaningful size, or will it go rather unnoticed?

In this way, it's rather unnoticed, and I don't, sorry, also to say this, because also for internal communication, it's important. It's not, I wouldn't necessarily call it a cost-cutting program. It's really thinking out of the box, our philosophy of think next. So what can we do in a smarter way? This can be insourcing, outsourcing. This can be normal cost-cutting, but it can also be There are also projects how to increase sales, how to cover special niches. So it goes well beyond. First, we have what we call the cash protection program, cash and profit protection program. That was really about putting a brake on cash outflow and lowering costs just where you can. Now it's a bit more sophisticated, forward-looking, out-of-the-box thinking. how, so to say, project by project, developing ideas, screening them, and finally then putting them into practice and doing it. But there are no, with this project, generally no bigger implementation costs involved, except for some projects, but it's not major. These are not major costs.

Okay, and then a quick question for Mr. Hiesinger. You indicated a standard tax rate of 19%. Is that to be understood as the kind of the P&L effective tax rate going forward?

Yeah, in average, we had a tax rate of 3.4%, which consisted of an ongoing tax rate of 19% in this year, also fairly low. And that was compensated by a tax asset, which we have capitalized of the tax loss carried forward of some of our central plans, especially in UK and US.

Yeah. So to make it clear, so when we bought a central with a number of loss carried forwards, which we ignored because the business was break-even or in some cases loss-making, now we've achieved the turnaround. So we make profit. And so... the loss carry forwards have become valuable. Let's call it this way.

Okay. So it's a one-time effect.

There's nothing to do that we move to another jurisdiction or anything like this. So we decently pay our taxes, but we assume now that we can use a lot of our loss carry forwards from the central business, ex-central packaging business.

Right, and that will bring the P&L effective tax rate down from the rather 25%. That was kind of the benchmark in the past to 19% on a more sustainable level. No, no.

In 2024, we had 3.4% on a total average, taking into account our ongoing tax rate of 90% plus tax. And going forward, it will be slightly above 20%.

Slightly above. Okay. Thank you very much.

Thank you very much also from my side. So as there are no more questions coming in right now, I am finally handing over the floor back to you.

Yeah, so if I may pick it up. So Stefan already said his goodbye, and we are running over time. So just summing up, we believe that despite these difficult market circumstances, given our competitive asset base, a strong management team, winning spirit, and as always financing, we are very well positioned to successfully navigate challenging market situation in 2025, and we believe in the long-term financial and strategic value of our sustainable and innovative packaging. Thank you.