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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, it's time. Welcome to UPM's Quarter 1, 2018 Result Webcast. My name is Jussi Pesonen, I'm the CEO of UPM. And I'm here with our CFO, Tapio Korpeinen.
Hello to everyone.
So let's get started and go to the Page 2. UPM continues to grow in earnings. Our Q1 comparable EBIT grew by 17% from that of last year, marking the 20th consecutive quarter of earnings growth. We also expect that the full year of 2018 EBIT to increase from that of last year.Commercially, first quarter was a successful quarter. Customer demand was strong and we succeeded to increase prices in all our businesses. On UPM level, we were able to more than compensate for the higher input costs and to expand our margins. Operationally, however, the quarter was not the strongest. This leaves room for improvement going forward.I would like to summarize the quarter in 4 main messages. First, demand is strong in all our businesses, and that is pretty clear.Second, we succeeded in increasing sales prices in all our businesses in Energy and Biorefining, this increased our EBIT clearly.In the other businesses, price increases offset by the most of the -- or all of the variable cost increases.And then thirdly, from operational efficiency point of view, this was not among the best quarters. As a result, we were not able to benefit from the strong customer demand by growing our deliveries. To changing wood harvesting conditions in Northern Europe limited our production clearly, during the Q1 and especially that was causing some challenges in Biorefining.In most of our businesses, including communication papers we were in allocation mode and could not deliver more and the main reason was the mill efficiencies. And then the fourth main message for the beginning is that we do have a lot of new growth options for going forward.But with these words, I will hand over to Tapio to further analyze our result. Tapio, please.
All right, thank you. Let's start with energy. In the end of last year, very first part of this year, we had an unusually warm and wet autumn and start of the winter, but then in February and March finally we ended up having a proper cold winter weather here in the Nordic area. This obviously was beneficial for our Energy business, and therefore the realized electricity price for us was 18% higher than in the first quarter of last year.Hydropower generation was also on a good level, and so the business area reported its best first quarter since 2014, the EBIT margin reached 39%.In Biorefining, average pulp price in euros was 21% higher than last year or 6% as compared to the fourth quarter last year. Biorefining increased its EBIT significantly, and the EBIT margin reached 29%. However, this was the case is part of the fact that our pulp production and deliveries were clearly limited by the challenging wood harvesting conditions that we had during the fourth quarter of last year and in the beginning of this year. The negative EBIT impact from this was about EUR 30 million in the first quarter, in line with the estimate we discussed in our earnings webcast 3 months ago.Specialty Papers and Communication Papers continue to show stable good performance. Communication Papers, by the way, you have perhaps seen the release from today that is the name for our business area previously known as Paper ENA. In both businesses demand was good, prices increased for all paper grades and in all markets. Input costs increased significantly, particularly for pulp, but the paper businesses were able to offset most of the impact with price increases.Plywood also reported a good quarter, demand was strong and the business was able to offset the input cost increases with higher sales prices. Unfavorable currencies had a negative impact.Raflatac reported somewhat lower EBIT in the first quarter due to lower deliveries and unfavorable currencies. Raflatac has been exposed to continuously rising input costs in the first quarter, we decided to increase prices to restore unit margins. In this, Raflatac succeeded but gave up some volumes in the process.On this next Page 5, on the left-hand side, you can see the EBIT bridge by earnings driver. The price increases across our businesses had a large positive impact and as you can see, more importantly, it was large enough to increase our group level margins, that is exceed the significant negative impacts of higher variable costs and unfavorable currencies. As far as variable costs are concerned, we continue our smart spend activities to improve our efficiency and management of variable costs and considering the fact that in this chart, higher pulp price means higher cost in the variable cost column here, significantly higher energy price has the same effect. We have continued to mitigate those impacts to keep our variable cost in check.Q1 deliveries were lower than last year, which as Jussi said, leaves room for improvement. Fixed costs were at the same level as in the first quarter, 1 year ago. On the business area level, Biorefining and Energy improved their EBIT clearly whereas the 4 other businesses were slightly down defending their margins in challenging cost environment.Our operations and eliminations had a combined negative EBIT of EUR 21 million in the first quarter whereas their combined EBIT was only EUR 1 million negative in the first quarter last year. So, our comparable EBIT growth came all from strong results in our 6 business areas.Here you can see our cash flow. In the first quarter, our operating cash flow was EUR 208 million, which on a quarterly level is clearly less than in the first quarter last year. This year, in the first quarter, our working capital increased by EUR 142 million, typically in the first quarter with tie-up cash in working capital which is then released later in the year.1 year ago, our working capital actually decreased by EUR 36 million, which is unusual as a point of comparison. At that time, our working capital reduction program was really kicking in and contributing to that figure for the first quarter cash flow 1 year ago. At the end of Q1, our net debt was down to EUR 41 million, so effectively at the moment, our balance sheet is debt-free.Page 7 summarizes our outlook for 2018 and as I stated here, we expect our comparable EBIT to increase this year as compared to 2017, underpinned by favorable demand and pricing. On a quarterly level, we will have a significant amount of maintenance activity in the second quarter as we already briefly discussed in our previous earnings webcast 3 months ago.And here we actually give a little bit more detail or background to that summarizing the timing of the more significant maintenance shutdowns this year and comparing that to last year. We continue to work to improve our efficiency in terms of maintenance costs and maintenance capital. We have been, therefore, developing our regime in terms of maintenance shutdowns in the big pulp mills and the maintenance cycle of our pulp mills is now typically about 18 months whereas in the earlier years, it has been 1 year or around 12 months.So therefore, in the second quarter, now we have maintenance shutdowns at 2 pulp mills, Fray Bentos in Uruguay and Kaukas mill in Finland. We will also have a maintenance shutdown at the Lappeenranta biorefinery and here, the maintenance cycle is even longer than for the pulp mills, this is the first full maintenance shut in the unit since it started up 3 years ago. As it shows on the slide, this is so-called turnaround maintenance shut, which you would expect for every 4 or 5 years.And then finally, there will be the annual maintenance shutdown at the Olkiluoto nuclear power plant during this quarter as well. The effect of this is that we estimate that the combined earnings impact of this larger maintenance shutdowns is about EUR 60 million in the second quarter if you see sequentially compare to the first quarter of this year or about EUR 30 million as compared to the second quarter last year where we had Pietarsaari pulp mill shutdown and Olkiluoto nuclear power plant only.In the second quarter, wood situation has normalized here in Finland, still the maintenance activity discussed here will probably keep our delivery volumes fairly muted in the second quarter, particularly in pulp, but then in the second half of the year, we will have the opportunity to also grow in terms of delivery volumes.At this point, I'll hand back over to Jussi for some comments on our growth projects.
Thank you, Tapio. As we started this whole presentation with 4 messages, as I said that commercially the quarter was successful, our customer demand was strong and we were able to increase prices in all our businesses, but operationally the quarter was not strong. But the 4th point is the growth options for the future and that is what I'm going to walk you through now. Obviously, we are still running quite efficiently our smart programs, variable, fixed and then the commercial capabilities are in use, but this Page 9 summarizes our current list of focused growth investments and then I will talk about our bigger transformative projects as well.Today, we are pleased to announce 2 new projects in the Specialty Papers to grow our attractive release liner business in a highly competitive way. First, we have decided to convert our PM2 in Nordland mill in Germany from fine paper to high-quality release liner production. When the conversion is completed in quarter 4 '19, the machine will and is capable to produce 110,000 tonnes of release liner per year to answer the growing customer demand in very competitive cost level.Like the PM3, at Changshu mill in China, the converted unit will be capable of producing both fine and high-quality release liner during its ramp-up time. And you remember that the Changshu ramp-up took us -- took only 12 months to be fully loaded with the release liner. In the same release liner business, we have established strong position in Asia market since the successful startup of PM3 at Changshu mill 2 years ago, now we are making debottlenecking investment already to that machine by increasing release liner production with 40,000 tonnes from Q1 onwards 2020.And then 3 months ago, we announced a similar debottlenecking project at our Jamsankoski mill in Finland, that project will help us to grow businesses also in short term. And you remember that in Q4, we completed 2 of our main expansion projects at Kymi mill and Raflatac, therefore for the short and medium term there is opportunities to grow.Ladies and gentlemen, then I would like to move to Page 10, which is reminding you of the more transformative long-term perspectives we are working on quite intensively in UPM, i.e. the Uruguay, the second preparation phase of the potential new pulp mill is proceeding. We believe in long-term outlook for pulp supported by global megatrends. We are working hard to make sure that if and when we invest in this pulp mill, it will be one of the most competitive units in the world and will offer attractive returns to our shareholders.In the biomolecules business, we are developing truly new sustainable businesses, that if everything goes well, could provide UPM with unique growth opportunities for the coming decades. Regarding the potential industrial-scale biochemicals refinery in Germany, the basic engineering study is in full speed. Results from the study are expected to be ready by the end of the year. And in biochemicals, we continue to explore further -- Biofuels, we continue further possibilities to scale up the business. In Q1, we initiated an environmental impact study in our Kotka facility Finland as a potential location for a new biofuels refinery.So, quite many things happening and then the Page 11 is only a reminder of how the Uruguay project and study goes on. There are 3 phases of it. As you remember, we signed agreement with the Government of Uruguay in November last year, detailing the prerequisites for the possible pulp mill investment and now we have moved to preparation phase 2 which is expected to take about 1.5 years to 2 years and this phase include significant steps and number of the important streams as shown on the slide, you can see it on the bottom of the slide, mill permitting, pre-engineering, rail permitting, tendering and so forth, port, roads, labor, investments and so forth and so forth.The second preparation phase is further divided in 3 gates and the first of the 3 gates is now ending and ended in April and therefore, we are moving on to gate 2 in the phase 2 and everything is moving as planned.Ladies and gentlemen, then going [ forward ] to summarize our presentation before the Q&A session, there are several very good prospects for the future, demand for our products is strong, sales prices increased in all our businesses during Q1.Our Q1 result was 20th consecutive increase in results and grew by 17% from that of last year and we expect the full year EBIT as well.Today we announced focused investments as we already presented earlier in release liner businesses and then we are preparing our future transformative projects and they are proceeding as planned.Ladies and gentlemen, I like to stop here by actually putting this advertisement to all of you, an invitation and we will have the Capital Markets Day on 31st of May in London, and that's -- it is the invitation and there you see the register and more information if there is a need for that.The theme of the day will be limitless opportunities of the bioeconomy. So that this theme for the Capital Markets Day. I really hope that we will see you all there, but now let's stop this prepared part of the presentation. Dear operator, we are ready for the questions. Thank you.
[Operator instructions] Our first question comes from Mikael Jafs from Kepler Cheuvreux.
2 questions, the first one is around your very good result in the Energy business, where we saw prices and profitability improve. Could you talk a little bit about this, I mean, what was it that drove apart from basically only the cold weather, will this sort of reverse now when we have spring arriving? And then in that also, how large part of your electricity sales going forward are hedged? So that would be my first question. And then the second is around your Communication Paper business area, changing the name. Could you talk a little bit about that? Isn't this sort of an area that's gradually will sort of continue to go down in terms of volumes with ongoing secular demand decline or are things changing there? Those were my questions. Thank you.
This is Jussi, let Tapio take the first question being the Head of the Energy business and then I come back with Communication Paper question.
Yes. Well, if we start with the Energy business, prices were, let's say, starting when the weather turned colder, particularly February and March, good and there was also, let's say, volatility in the Helsinki area price. So, we were benefiting from the higher market price, but also were able to benefit from our ability to optimize the hydro output to the, let's say higher value hours and days during that period. So that's obviously improved the average price that we were able to realize during the quarter, profitability as well. We had high availability of hydro, which added to the volumes and of course also lowered the average cost of power generated. We had good availability as in the Nordic area in general going into the quarter because of the wet weather that we saw in the end of last year and let's say, very beginning of this year. As the weather then sort of generally turned drier and as the, let's say, cold weather and higher energy prices also then incentivized hydro producers to run their hydro, the sort of overall hydro balance in the Nordic area. Actually, quite quickly developed such that we went from a relatively sort of wet hydro situation into a dry hydro situation which gave some support to the prices also looking forward. So, obviously now we're coming to the sort of flood season here in the northern part of the Nordic countries at the moment that will have some impact on the second quarter. But then, I would say that at the moment still this sort of hydro and the fact that CO2 prices have come up, even though they ease back down to some extent but are relatively higher than we have seen in the past, they are kind of supporting to some extent price outlook at the moment. As far as hedging is concerned, as you perhaps remember, we are hedging over time both our production portfolio as we are also doing for our consumption portfolio separately but -- and obviously tried to do that in a way that we kind of benefit from the price outlook going forward as we estimated, but we don't disclose the details in terms of what is our ratio of hedging going forward.
Thank you, Tapio. And then I actually go in somewhat more details in the Communication Papers. I guess that in our Capital Markets Day, there will be more actually [indiscernible] for the situation, but obviously [indiscernible] we have been doing actually over the years, now last 10 years on that business to take the cost down, to optimize the fleet, the optimization of the back-office services and how we are taking our own cost down, and at the same time, we have been very proactively building our commercial capabilities, optimizing the CapEx synergies is now paying back in a way. The decline, yes, this trend line can be 4%, even if it has been last 12 months, something like 2.5% to 3%, which is helping us. But at the moment, the business is on allocation, and this is the first time ever since 2001 that we are on that business on allocation, almost across the product -- all product line. So, the supply-demand balance and then the cost pressure that is coming from underneath for many of our businesses is yielding to a good pricing environment as well. And then finally, I guess that this supply-demand balance is helped by the lot of conversions towards packaging businesses in this business. So basically, this situation is somewhat better than I ever believed that we would be in allocation, but that is what we are currently.
Our next question comes from Lars Kjellberg from Credit Suisse.
Just sort of a bit on -- coming back to pulp, of course, you had quite a negative down 7% year-on-year. You have expanded this business through various debottlenecking investments and there's another one coming, I guess in Q2. What sort of capability, do you think you are going to have in the second half versus what the run rate now, and can you comment until how much volumes you lost in the first quarter on account of the wood harvesting issues? That was my first question.
Well, let's say, the volume impact that you see in the reported figures in the first quarter compared to the first quarter last year is coming from the sort of issues at the Finnish mills because obviously otherwise both quarters, last year and this year in the first quarter were sort of clean as far as maintenance and other things are concerned. So, that is coming from the wood logistics limitations, and I said situation is sort of normalized on that. So therefore, as far as the second half is concerned, we should be able to benefit from the capacity that we have in last fall, we started up the Kymi mill after the debottlenecking investment there, it's 170,000 tonnes. And we are now in this second quarter shutdown finalizing the debottlenecking investment in Kaukas, so those 2 together give us a couple of hundred thousand tonnes to 100,000 tonnes of additional capacity. And that we should be able to then benefit from during the second half of the year. We do have the Pietarsaari shutdown in the fourth quarter which will have some impact.
When you talked about the inefficiency in paper, you say -- what is behind that, is that also something to do with wood procurement because you do make of course quite a lot of mechanical pulps at those assets or is there anything else and why do -- should we expect that to reverse in Q2 onwards?
Yes, that this something that was also not only having an effect on our pulp business but also mechanical pulp business, mechanical pulp and the paper business here in Finland, but we didn't have as good a quarter as we had like third quarter last year, when it comes to other matters and operationally as well. Nothing particular, nothing big, but bits and pieces here and there, nothing to worry at all actually, it was not [indiscernible] kind of spot on like the third quarter last year was. But of course, the wood shortage was affecting also our paper business.
And then if you look in the Specialty Papers business, you talk about good demand and yet you see volumes declining too, what is the explanation behind that?
That is pretty simple. The deliveries from that of last year is at 3% down, there are 2 reasons, obviously the Changshu is now fully on release liner, i.e. not producing any fine papers. As you remember, the capacity for fine papers was some almost 100,000 tonnes more. And then obviously when we have had some challenges in our Raflatac business, the release liner business has been somewhat down here in Europe, but nothing that would actually be coming from the market, market is strong and the delivery should go up.
So, on that note, when you look -- looking at the Nordland conversion, how much fine paper will you ultimately lose from that 110 release liner? And the final question, just kind of trying to get some guidance on the other and elimination, as you call that, that was really the one thing that dragged down the numbers a bit. Can you give us any reason for why that big negative number and how we should do that for the balance of the year?
And I don't now remember the capacity of Nordland PM2 business...
A little bit less than 200,000 tonnes, something like when it was producing fine papers, so that over time obviously then will be phased out as the release production starts. And then -- well, there's always some, let's say seasonality in this sort of other and elimination lines. One factor in the eliminations lines is that there we kind of eliminate the impact of rising pulp and power cost as they are tied into inventories. So typically, what you have there, inventories in terms of produced paper, for instance, so there, you have a kind of timing impact which over time is neutral, but when prices are going up, then you have a negative figure on that line and when prices are going down, then you have a positive figure on that line. So that is that is one part. As far as the other operations are concerned, again the quarters kind of vary one from one to each other, but let's say for the full year I think there will be no big change, as if you look at, let's says, several previous years in the other operations line.
And just finally on Nordland, you had at least 1 machine idled, is this 1 of these machines idled that the one you convert now or are we operating all machines?
If that machine has been running and we have had -- last 2 years, it has been running this and previously it was idled as well and this is the machine that we are turning, but the last 2 years, it has been running.
Our next question comes from Alexander Berglund from Bank of America Merrill Lynch.
Just a quick question on your outlook on comparable EBIT being above 2018. In that assessment, is that dependent on you getting the price hikes on graphic paper in May and July or it's just assuming prices staying flat at this level?
We don't comment on that obviously, it's our estimate in terms of how prices for our products, but also our inputs are so in that sense, we don't sort of -- we don't give the assumptions more than behind that, but it's obviously the sort of margin development, as we estimate going forward.
Our next question comes from Robin Santavirta from Carnegie.
A question related to input cost inflation, what are you seeing at the moment for the rest of the year in terms of wood cost, chemicals transportation? So perhaps, you don't need to touch -- talk about pulp, but the other input costs, what should we expect for the rest of the year?
Well, we had around EUR 140 million higher variable cost for the first quarter, sort of net of our own actions, and I would say that we are obviously in an environment as we have guided where the input costs on the rise, but on the other hand, I think, let's say, the rate of cost increases probably was the highest now in the beginning of the year, and our expectation at this time is that we will see some, let's say, leveling or stabilization of that for the rest of the year, but we are in an environment of increasing cost.
And then related to the guidance of comparable EBIT improving this year, now obviously that EBIT includes the revaluation of forest or biological assets. How should we sort of view that, do you expect those, the revaluations to be in line with last year, those obviously can be quite volatile. So, would you mind to comment on guidance related to that?
I would say that the guidance is based on the profitability of the 6 business areas, so in a sense, I would not read into that anything special as far as the forest valuation or let's say that part is concerned.
And then finally, related to Uruguay 2 project. Could you comment on your situation related to plantations, and self-sufficiency of wood raw material in Uruguay?
That is definitely we can comment and I think that we have been commenting that as well. We have, obviously when we started this program over 3 phases, already at that moment we did have the critical mass of the plantations for going forward. And obviously there will be further developments and if you are assuming that the mill will be starting up somewhere in the future, you need to have the trees growing already. So, basically the critical mass is already -- we are above that.
And if I may, one more. Could you comment about the -- you mentioned mill efficiencies, some problems there, what is the magnitude of those problems in terms of results or earnings now in Q1? And are all of those problems now sorted out for Q2?
That we don't comment and obviously, I don't know what happens tomorrow, but basically no, our operations are now in a better shape than that of Q1.
Our next question comes from Linus Larsson from SEB.
Maybe if I could just follow-up and maybe if you could help me understand and if you could clarify, you talked about efficiency issues in the first quarter, you talked about the EUR 30 million wood supply impact in the first quarter, do I understand it right that those are 2 separate items? That's my first question.
They are and they are not. Obviously, there are -- when you're actually having a wood shortage, you need to run machines down, up and down also, and that is causing also some inefficiencies as well. When everything goes smoothly, then the efficiencies comes. But on top of that, we have also other operative challenges that we have had in our system. But like I said nothing, big one.
Because when we bridge then into Q2, so let's leave the mill efficiency topic aside, but then if we bridge Q1 into Q2 and we look at the wood supply issues, which had an impact of EUR 30 million in the first quarter, now you say maintenance will have an impact of EUR 60 million, so the bridge just combining those 2 is net EUR 30 million, do I understand that correctly?
Yes, in the sense then, obviously whatever else changes, you have to sort of net or add to that as well but in a sense, yes, there is a plus EUR 30 million, or let's say, kind of the impact of the EUR 30 million coming from the wood supply obviously is no longer there. But then we do have a negative EUR 60 million coming from the maintenance activity.
And then just would you mind commenting on FX and if you have a net figure possibly for full year 2018 versus full year '17 net of hedging, would you have any such indication for us?
No indicator as such, we have in the support materials, the usual sort of position that we have in terms of exposure to the different currency pairs and here you have it, so, as you remember, we hedge 50% of our estimated position 12 months forward. So, there you can sort of estimate that but no other guidance for the full year as such.
And then just finally, and I'm not sure you want to answer specifically on that either, but as you guide, you reiterate EUR 250 million of CapEx for 2018, and you have a lot of ideas now for CapEx in the pipeline potentially, I mean beyond 2018, should we expect an increase in CapEx regardless of maybe regardless of your guide, but you have a lot of other ideas, which you're presenting as well?
I guess that -- when it comes to this, as we call them, focused investments, that will be hovering somewhere EUR 350 million, EUR 400 million. And if you go backwards, we made with that money, we made the Changshu, we made the Lappeenranta refinery, we made all of the first and second phase of the Kymi pulp mill debottleneckings as making as well as Kaukas and Fray Bentos. So, basically this will continue and I think that with that money, we are gaining a lot. And therefore, it's easy to say that that would actually be on that level, I don't see that that would actually go beyond that as on average.
[Operator Instructions] The next question comes from Harri Taittonen from Nordea.
Well, first of all, the price increases that were sort of announced and kind of shown for the first quarter, were they fully in the sort of reported profit for the first quarter or is there any kind of spillover impact or benefit to second quarter? And related to that, I know that you don't have the habit of announcing price increases, but the trade press has suggested you are raising prices in Europe and also in the U.S., could you sort of confirm or deny those stories, please?
First of all, I don't confirm or deny any -- we just take prices up when there is a possibility and there is a need for that, that is obviously quite clear that when the costs have been rising and then we will report later on that what has been happening in the market. And then I think that during the first -- I don't know if Tapio, you have any view, most probably they are fully in our prices, what were happening in the end of the last year, they are fully implemented for the first quarter.
I would say that we've been -- in a sense, it's a matter of mix, how they kind of and currencies obviously how they sort of flow to the bottom line, but otherwise they have been implemented.
On the cost, last we talked about it quite a bit already, but were you able to benefit from the lower recovered paper prices at all and how do you see that balance sort of going forward in the European markets? And that overall do you -- so, I think last conference call, you saw similar sort of cost inflation rate when we talked about the results 3 months ago, but is that sort of statement still more or less valid or is it sort of -- does it look like more accelerating cost?
I would say, well, overall, it's probably still in line what we expected, now big surprises as such, but also as I said earlier, I think the kind of first start of the year has been with a higher rate of increase than what we perhaps expect for the remainder of the year. As far as recovered prices -- recovered paper prices are concerned, we have had some benefit as well from the lower waste paper prices or recovered paper prices in Europe. Direct impact to us, perhaps is to some extent affected by that, first of all, not all of our supply contracts are spot price based, and secondly, perhaps the biggest swings in the sort of prices that you have kind of quoted out there are in -- not in the deinking grade as such, but more in the brown grades and mixed waste, which directly have sort of less impact on us than perhaps on, let's say, producers of packaging board and so on. But we have seen some benefit in our cost as well, obviously.
Our next question comes from Lars Kjellberg from Credit Suisse.
I just wanted to come back to China. Obviously there's been a tremendous amount of pressure in the Chinese fiber market, which seems to be a principal driver for a lot of the fiber price increase, in particularly on pulp. Can you give us any sense how you see things in China from your vantage point, it does appear that China has become a target itself for potential exports from outside China and certainly it seems as if China is exporting less paper, which may not be a result of less fiber availability in China, but if you can share any thoughts how you see the business in China for yourself, and if you have any views on the market as whole?
On China, I guess that Tapio can continue, but from my point of view, China has been pretty strong for us all the way through ever since 2009, we are running our operations with full speed. The fiber market, we have been always in the high-quality pulp, when producing anything in China, i.e. the exported fibers that we use in that respect. But obviously, when -- if there will be restrictions like in the recovered paper or so, that means that there will be also then restructuring of the industry happening in inside China as well. So we feel very strong with the businesses that we are in, i.e. the release liner, fine paper or the uncoated fine papers and then the Raflatac businesses. Chinese market is moving strongly on how we see that market happening, but I don't if Tapio, you have anything to add on that.
Well, maybe nothing specific, but I would say let's say, again kind of the longer-term sort of drivers are positive, and let's say we are kind of shaping our business in China according to that and then kind of what we see in the immediate term, this year whether it's pulp or paper, or label demand, It has continued to be solid, quite strong demand for -- from our customers. So, in that sense, the business is solid in China for us.
If I may just follow up on one question, there's been -- some of the trade press have been talked about comparatively sluggish demand in China, parts of Q4 and in Q1. Is that something that you've seen in your business, or is that not relating to you, i.e. that you could see a rebound in that business heading into the second quarter? I just wanted to double check what you see.
We have not seen anything, I guess that the Chinese market and the economy that is related to what we do in China or delivered to China is very solid.
Thank you. There appear to be no further questions, I return the conference back to you, speakers.
Thank you, thank you all and hopefully see you in our Capital Markets Day. Thank you for listening us. Thank you, bye.
Thank you. This does conclude today's conference call. Thank you very much for attending. You may now disconnect your lines.