Huhtamäki Oyj (HUH1V) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Huhtamäki's First Half and Second Quarter 2021 Results Presentation. My name is Calle Loikkanen, and I'm Head of Investor Relations. Today, Huhtamäki's President and CEO, Charles Héaulmé; together with CFO, Thomas Geust, will walk us through the highlights of the recent results. And after the presentation, we will, as always, end with a Q&A session. But without any further ado, let's begin with the presentation. So let me hand over to Charles.

Thank you, Calle, and good morning to all of you, and thank you for joining us today for the presentation of our first half report. I will start by saying that we are reporting today a strong comparable net sales growth with improved profitability for the second quarter and for the first half of 2021. The net sales and profitability are actually above the pre-pandemic levels, which is the good news, and confirming the trend that we were already seeing and reporting at the end of the first quarter, meaning that we are continuing to see a gradual recovery in the demand, particularly in the food-on-the-go product, which were, as you know, affected by the pandemic since quarter 2 2020. At the same time, in parallel, we continue to see a strong demand for retail tableware as well as for Fiber Packaging, all of it together supporting strong comparable net sales growth. At the same time, when we look at the P&L, and we had lots of discussions after Q1, this is, of course, an environment this year where we see a significant inflation on the cost environment, not just the raw materials, but particularly in the raw materials. However, we have pretty well mitigated the impact in our P&L. We will look at this in further details. Another important highlight of the second quarter 2021 is that we have completed the acquisition of the company Jiangsu Hihio-Art Packaging in China. This acquisition was reported in the end of the first quarter. However, we completed it on the 11th of June 2021. And then maybe a couple of highlights on new product launches, which I'm pleased to share this morning with you, that you may have seen in the different press release during the second quarter. But interesting to highlight that all of these launches have been in the fiber technology but in 2 different technologies, the smooth molded fiber as well as the rough molded fiber. So first example is our Future Smart Duo fiber lids products that we've launched in the second quarter, which are replacing 100% plastic products, all the plastic lids that you all know in the market. Well, this product, this fiber lids is now 100% plant-based. It's completely free of plastic. It is recyclable, and it is compostable. So a clear highlight in our innovation towards a more sustainable portfolio for our customers and for the consumers. Second highlight is the Smilepack, which is a new design. Of course, 100% plastic-free as well for eggs packaging based on our rough molded fiber technology. And this design is particularly dedicated to the U.S. market, where we see a strong trend towards demand for replacement of the polystyrene foam plastic packaging that is the traditional egg packaging in the U.S. So that's a trend that we may speak more in the future. And therefore, we have this new launch there to help us with our strategy to grow in fiber. As well as another specifically focused innovation called Futuro, which is specifically dedicated to the German market where there is a high demand for boiled colored eggs. It's a specific consumption pattern in Germany, where you have 80 million packs that are sold, not eggs packs, that are sold per year. And we are entering into and trying to conquer that market by a product that is going to replace a plastic solution, which is the sole solution today on the German market for these colored eggs packaging. Moving on to our business performance for the second quarter starting with the sales. We have reported net sales growth of 10% in the second quarter. It is important to identify that in this 10%, we have a negative 4% currency impact, which means that when we look at comparable net sales growth, it is actually 14%. Of course, this is compared to a fairly depressed quarter 2 in 2020, but we will come back to what it means overall compared to as well 2019. As I said, we are above 2019 level. Important to mention as well that we are growing in comparable rates, 20% in the emerging markets, so a very strong recovery as well. Moving on to the Page 6 of our report, which is highlighting the sales for the first semester of 2021 and where we see a positive sales growth despite, again, the significant currency headwind. This currency negative impact is minus EUR 81 million on 6 months. That's a 5% negative growth. So meaning that our net sales that increased 2% on reported statutory rates are actually in terms of comparable growth if 6% on 6 months, which is a very good level with 13% in the emerging markets. So going now slightly more into the details of this sales growth and looking into the sales growth per business segment. First of all, as I said, 14% overall growth in quarter 2 after a minus 8% in Q2 2020. This is what I was suggesting just before as a comment. That means that in reality, versus Q2 2019, which is the most comparable baseline we have, that means a growth of 5%. So that's to the concern when are we going to be able to recover and grow versus the previous normal, if I may call it like this, then we are there in Q2 with plus 5% versus Q2 2019. The demand for the foodservice has consistently been recovering towards the pre-pandemic level. On the foodservice, we are not exactly there yet in the pre-pandemic level but very close. Now we're talking about a gap which is a small single digit, very low single digit. The -- as I mentioned at the beginning, the retail tableware continued to be strong in North America, which is very good news. And the growth has as well picked up in the Flexible Packaging despite a continued volatility that we see. Depending on the market, we need to realize that, depending on the geographies, the situation vis-à-vis the pandemic recovery is not the same, for instance, in Southeast Asia or in India. The pandemic is still much more of a disrupting reality than it is today in, for instance, in Europe or in the U.S. And then we see a continued growth in Fiber Packaging. Let's remember when you see 1% comparable growth in Q2 or only 3% in the first semester, let's remember that this is on the back of an extremely strong growth in the first semester 2020. So in relative terms, it looks at least a little bit lower, but it's still a very strong, consistent business growth for the fiber business. Moving on to the Slide 8, if you're following directly on the file, to look at the P&L. We are improving our adjusted EBIT margin despite the inflation on input costs. So we see that with the net sales -- reported net sales growth of 10%, our adjusted EBIT margin is actually growing to -- by 14% to the level of margin of 9.1%, which compares to Q2 last year of 8.8%. And year-to-date, we have a 9.3% margin at adjusted EBIT level. Of course, you see with Q2, slightly lower. You can understand that there is a slight impact of the huge raw material inflation. But again, considering this very small impact, I would say we can conclude that the price inflation has been very well mitigated so far. The EPS -- adjusted EPS is increasing by 21% in the quarter and 13% year-to-date. And another indicator of the good health of the company and our business is we are increasing. We have suggested it in the -- at the end of first quarter. We are increasing our CapEx. And that's because we have many projects for growth, and we are very confident about our future in growing the different segments of our core business. So that's why we are actually investing more this year. A couple of words on the Slide 9 about sustainability. We had, since Q3 last year, started to publish our sustainability performance in line with our Strategy 2030, and we have committed to give you more news and update. We are delivering clearly a positive progress in the execution of our sustainability initiatives, which leads to a clear improvement in our GSI, so our -- what we call our GSI, our Global Sustainability Index. One important aspect is, for instance, that we told you in September last year, we had a revaluation of our MSCI rating from BBB to A. This trimester, this quarter, we have had an upgrade of our EcoVadis relating to the level of -- from Silver to Gold now. If I would highlight a couple of aspects that we have been improving and that are the results of a lot of efforts in the different units across the world. Renewable electricity, for instance, that from a level of 0% during -- at the beginning of 2020 to 4% at the end of 2020. We are now at almost 10% of renewable electricity, remembering that our target is 100% for 2030. Industrial waste as well, how much is recycled is improving. Our safety records are consistently quarter-after-quarter improving. And you can see that in the ratio of lost time injuries frequency rate, for instance. So all those aspects, without bringing you into all the details, but we continue to follow month-after-month, quarter-after-quarter all of our units, and our plans is showing a good commitment and a good progress. Jumping into the business segment highlights. The -- so starting with Foodservice Europe-Asia-Oceania, where, as I said, we are seeing a gradual recovery in the demand. You see the reported net sales growth is 41% in Q2. Of course, we need to be humble here with 41% growth. This is very much linked to a depressed quarter 2 2020 for obvious reasons. It was minus 28% sales decline at the time. Now it's plus 40%. When you combine the 2, it's actually basically flat versus 2019. So this, in year-to-date, translate into a 15% growth versus last year's same comments as for the quarter. We have said that we see a gradual recovery. That was already mentioned in Q1, but it's really even more the case in Q2. So this is, of course -- we should not speculate about the next quarters, but unless there would be very bad news on the pandemic waves in the next quarters, we are reasonably confident that we will continue to recover and rebound to full growth into foodservice, being aware that there are discrepancies, of course, between customer channels and markets, linked to the disruption of the pandemic. The EBIT has improved through pricing actions to offset the raw material inflation. But as well, we continue to focus on operational efficiency as well as on our transformational journey that is continuing. We started presenting it at the end of Q3, if you remember, last year. And every quarter, we have updated you on the fact that we continue this journey, not as a big bank, but as a progressive transformation on our portfolio as well as on our cost base in this segment. And this is coming very nicely, I think, into the results. North America, on the next page, where we have as well, consistently with the rest of the world, a recovery in the foodservice business but as well a continued growth in retail tableware that is continuing. That is giving us a growth that is hard to read because it says 0% growth in Q2 and minus 5% in the first semester. However, those numbers should be adjusted for currency. You all know the devaluation of the USD versus the euro between 2020 and 2021, and that has, at least on the first semester, a comparable period. That means that we should look at the comparable growth, which in Q2 is 9%; and in the first semester, sorry, is actually 4%. The mitigation of raw material price increases has been extremely good in North America and as well early, which supports a very good EBIT margin. And we should not consider -- we should consider this aspect when thinking about going forward in the margin of North America, where we believe that, I mean, we didn't have any time lag, let's say, in North America in the price mitigation. So if the raw material price would continue to increase in the third quarter or fourth quarter, then that would put further pressure on our margins. That's for North America. Then moving on to Flexible Packaging where we see a solid overall demand but very strong headwinds from raw material, where the main raw material is resins and polymers, and this is where we have seen the most consistent and the heaviest increase of the prices. So that has, of course, a pretty important impact on our -- or pressure on our margin, where the price mitigation has meant -- has suffered, of course, price lags. So we see a sales growth of 3% and comparable sales growth of 6% in Q2 against last year. And the earnings have been impacted, as I said, by roughly 1 point due to the higher raw material prices. India has been the region the most disrupted, both in terms of COVID but as well in terms of -- so COVID impact on the consumption, impact on the supply chain still but as well in terms of the impact from the raw material cost inflation that has been the most rapid to translate into the market during the first semester. Last point that is worth mentioning. You have certainly noted this during the quarter. We have announced that Marco Hilty has been appointed Flexible Packaging President, and he will join the company as of September 1. We are extremely pleased with Marco joining the company. He has a long and solid experience in Flexible Packaging business. He is a global leader with strong international experience, particularly in the U.S., but not only, and he will be with us as of September 1. Finally, Fiber Packaging, where we see a continued solid performance. Solid performance because we have a growth from our volume, particularly in Europe overall. And if I'm pointing out to markets, particularly in France and in Russia, the earnings have been slightly negatively impacted by the higher raw material prices. So the 2 raw materials where we have seen pricing really blowing is our polymers, but as well, as I mentioned, in flexibles, but as well, recycled fiber. That, despite an excellent mitigation in our pricing, had an impact on our margin. We are -- and that's where we need to be confident about the future. We are investing quite a lot in the fiber business, for instance, in South Africa. This has been announced in May, with a new factory in addition to the previously announced capacity expansion, for instance, in Egypt and in Russia -- with the second factory in Russia. With this, I will hand over to Thomas, who will take you through more details on the financials.

Thank you, Charles. Happy to continue from where Charles ended. So as commented so many times earlier, the growth is -- seems to be back, and then the margins are currently improving despite the heavy headwinds on the cost environment. We have a negative impact from the raw materials in the quarter and year-to-date numbers. That is clear. However, when you are looking at the gross margin levels, you will realize that we are approximately on previous year's level. So that's indicating that we have been good in cost management and, of course, also have had the benefit of better absorption coming into the system. So all in all, well recovered on the gross margin level and then also slightly improving on the relative costs below gross margin. So happy to report then an improved EBIT and EBIT margin. And looking at the items below EBIT margin, there we have a better finance cost level, mainly driven by lower net debt during the period and then a tax rate which is at 23%, from rounding point of view, higher than previous year but on the same level as end of year ETR. The adjusted EPS is, as you can see, up 21% for the quarter, 13% year-to-date. Reported EPS is, though, slightly lower than previous year, mainly due to the onetime benefit we booked in first quarter 2020. On the currency slide, which has been already highlighted to a great extent by Charles, but some more details on this one. So out of the EUR 81 million, roughly 2/3 comes purely from the USD. And 2 other currencies with the great impact is the Brazilian real and Indian rupees as well as the Russian ruble. If we think about where we are with the USD, we are currently, I believe, on somewhere around $1.18 in the currency rate. Here, we see that the closing rate was $1.19. If we think about closing rate 2020, it was at $1.23, so fortunately, moving slightly better than earlier. However, the year-to-date -- or sorry, the full year average rate, the one which is impacting the profit and loss, was on a very low level in 2020. So from that perspective, the negative currency impact will continue, though it looks like not necessarily with as high an impact as during the first half of the year. On the net debt-to-EBITDA ratios, we are continuing to trend on a good level, so 1.9, so below the corridor of 2 to 3. We have a gearing of 0.66. Here, you will get some more information when we get to the balance sheet, but a good level here as well or stable level. And the net debt, all in all, at EUR 933 million, whereof EUR 159 million is lease liabilities. On the maturity side, we basically remain on a similar maturity profile with the extensions and additions we have been doing over the last year. So a good balanced maturity level in our portfolio, and as said, also, the financing cost is on a competitive level. If we move to the free cash flow, so the free cash flow is slightly below previous year's level. Main difference coming from the working capital, which is improving versus previous year, but then the capital expenditure and taxes. So taxes, from a timing point of view, is currently burdening the cash flow. Going to the balance sheet. So total assets of EUR 3.8 billion roughly, up from previous year EUR 3.7 billion. Looking at the equity row, that one has now the impact of the dividend in, so not a fully comparable equity level as we took the dividend only in the second half of last year. So that one, on a comparison basis, impacting then both the gearing and the equity level. Otherwise, it's mainly currency translations again which is impacting the equity. From a growth perspective, we are now, for the first half, trending slightly above our ambition level. So a positive thing, obviously, coming in from, as Charles was highlighting, a low comparison in previous year. But as also said, we are now trending on levels above pre-pandemic levels. On the adjusted EBIT, we are moving upwards. So the trend is at least the correct one currently. And then as said, the net debt to EBITDA remains on a good level. And as we have been highlighting earlier, we have agreed on the payment of the dividend. So the 47% payout ratio is confirmed for payout of the 2020 result. Looking forward, the outlook remains unchanged. In the short-term risks, we have done minor updates, slightly changed the wording for the first part of it. And then we have added a sentence at the end saying that further natural disasters and social unrest may have negative effects on the group's trading -- on the group's operating environment. So with this one, I'll leave a little bit on this slide. This is a summary already highlighted. So the key takeaways we leave visible during the questions and answers.

Yes, that's correct. Thank you, Thomas, for the presentation. Thank you, Charles, also for the presentation. And now let's move to Q&A. [Operator Instructions] But now we can move over to the operator. So please, operator, go ahead with the instructions.

[Operator Instructions] Our first question comes from the line of Jutta Rahikainen from SEB.

Yes. A few questions, but I'll start then with one, as instructed. On India, maybe if you could give us the number for sales. How much it decreased or increased from last year? I guess, it increased then? And then also asking you the same question the other way around. If you compare into India now in Q2 versus 2019 Q2, how is the business performing? And what's your best guess, so to say, in India, what's going to happen in the second half of the year?

Yes. So Jutta, I'll take the comment on the growth in India. So yes, we do have a growth versus previous year of roughly 8% in year-to-date numbers and 6% for the quarter. We are slightly up only from 2019 levels, so a minor increase versus 2019, which is basically highlighting the business interruption that has been valid in the market.

All right. And then on the coming quarters here, any comments or thoughts on that?

Yes, yes. So I think India is remaining as a market, of course, challenging. We see the COVID situation still being there. We see interruptions in the supply chain and all of these things. From a commodity point of view, we hope that the picture will be slightly improving from the point of view that it seems like commodity prices in India, that's the first market which is being hit by high prices.

And the next question comes from the line of Maria Wikstrom from Danske Bank.

My question is on the raw material price impact. It seems that you guys were quite good mitigating the raw material inflation in the second quarter. And my question is, I mean, the outlook that what is your expectation that this -- the raw material -- the negative raw material price impact is -- do you expect that to be bigger in Q3 compared to Q2, or of the same level, or smaller? So how should we look at the raw material price impact for the upcoming quarter, please?

Maybe I will take this question, and then Thomas, you can, of course, complement. There are different variables, and it's complex to give you one snapshot answer on this. Why? Because the -- first of all, the raw material inflation, how it hits the P&L and our purchases is variable depending on the regions and the types of material. Again, as you remember, basically, we have paperboard that was really relatively flat. Then the strong increase was more on recycled fiber and on polymers. Depending on the regions, it has been -- for instance, India has been affected very early; U.S., much less. So to your question about how to project, there is another variable, which is in the price mitigation, there are areas where we have been able to avoid the time lag by a very good anticipation. They are as well mostly segments where -- of the business where we had a time lag, for instance, in the flexible business. And therefore, it's -- all these variables put together, it's a bit difficult to give you one answer about Q3 and Q4. There is one more variable is what are the raw material -- what is the raw material inflation going to give in the next quarters? Many experts are thinking that it's going to be a very temporary inflation and that should cool down in the second semester. So all in all, what we believe is that we will have different mix impacts, net impact in our different segments. But at group level, we believe that we should be able to, more or less, be in the same net position in the next quarters. But again, it's a very complex forecasting because of the number of variables.

[Operator Instructions] We have another question from Jutta Rahikainen from SEB.

Yes. Just a sanity check on the CapEx, obviously, looking for around EUR 200 million for this year, although you're slightly trending below that for the first 2 quarters. And then as a general thought, is that what we should have for the coming years as well? Or should we think that perhaps acquisitions make a comeback, and hence, organic CapEx is a bit lower in the years to come?

So maybe -- so 2 aspects: organic, inorganic. If I start with inorganic quickly, we are always saying that we are very active on building our pipeline and identifying the right targets for inorganic growth. So we don't have anything to announce today, but that's always in our strategy. And as Thomas was highlighting with our balance sheet, we have the firepower for it. Then on CapEx, yes, year-to-date, the CapEx may not -- may look quite in line with last year, and therefore, you refer to the EUR 200 million. Last year, I think that was EUR 220 million -- or EUR 224 million, the full year investment. This year, we're looking at a slightly higher investment level. And the reason is, as I mentioned, for instance, lots of investments linked to fiber business that we see consistently growing and demanded. So we have projects that are already initiated, which some will give growth in 2022, some as of 2023. And then second, in the smooth molded fiber where we have launched innovations, and now it's going to be about scaling the production, so that requires more investments.

So if I may continue on that one, and I think the reason for being slightly vague on the guidance, except for that we believe it will be higher CapEx, is really the timing issues as a lot of it will be towards the end of the year. So the decisions have been made, and there are quite significant CapExs in the pipeline. And therefore, we believe the CapExs will be above previous year's level. Jutta, to comment on your -- give some more -- a small correction to my earlier answer on the India side. So for the -- I assume you are referring mainly to the flexibles business, and there we have a growth of 3% to 4% roughly versus previous year.

Okay, good. And that was for Q2 specifically, the 3% to 4%?

Yes.

Yes. All right, so not 6%. Good. Yes. And then this links to the CapEx part, so I'll ask it now. Has the single-use plastics, directive from the year point of view, has it changed anything for you? You already spoke about the hassle with the printing, maybe creating some cost and issues there. And then also, has it impacted demand? So do you see actually a higher demand following this now coming into effect?

So I mean, short-term impact, no, but the -- whether the legislative environment is continuing to put pressure, absolutely. Actually accelerating the EU green agenda is actually expanding potentially right now, almost as we speak about the EU forest strategy that will have an impact more on the upper part of the value chain than on us. But still, it is showing that the EU green agenda is really boiling. No short-term impact. What we see, however, is an interesting -- I will, if you allow, expand to the rest of the world, particularly to the U.S., which have been often considered as not driving the same trends as in Europe. The -- in the U.S., we see a very rapid actually change of mentality, more than legislation actually, but mentality with strong demands for more renewable types of material in terms of packaging. So that's why we believe that there is a huge space to come in plastic substitution. Plastic is still extremely important in the U.S. because that's the only material that is recycled, I mean, not the only, but versus paper-based product. However, there is against all the polystyrene type of packaging, there is a strong opportunity there. Now back to your question on the EU, we are seeing at the same time that the EU legislation has been rushing so much that -- and it's so complex with many people, thanks, I would say, to -- we have been very vocal about the -- making sure that legislations are good and not restrictive and focusing on enabling innovation for the future and for the good of the planet. I would say that many are becoming conscious that there are potentially unintended consequences in the preliminary projects of legislations. And therefore, this has delayed the legislation agenda. So at the same time as there are more projects of legislations, they take a lot of time to come through soon. That's why short term, we do not see any significant impact to mention.

And we have one more question from Maria Wikstrom from Danske Bank.

Yes. I wanted to ask on North America as you had another very strong margin quarter, and I think me and consensus, we're looking the margins to come from last year given that the mix was different. But if we think about the Q2 last year, you have a strong share of the sales in retail tableware. I read that the retail tableware continued to grow -- I guess, continue to grow in the Q2 this year, but then at the same time, you saw the recovery in the foodservice, which has been the lower-margin business from you. So can you a little bit elaborate that is the -- the kind of the total margin of the business, is that currently that should we see that, that has improved, I mean, given that, I mean, the efficiencies, I mean, you have taken out in the system? Or how should we look at the profitability going forward in North America specifically?

So we believe that the current profitability of, let's say -- I mean, so the profitability of 13% in Q2 is not the -- clearly the full year profitability. We're looking towards a slightly lower profitability, but still with 12.6% adjusted EBIT margin after the first semester, we are pretty confident on the full year. We are clearly benefiting -- yes, you're spot on, Maria, when you say that with the foodservice recovery, it should have a negative mix impact. And it does not, for the reason that the retail tableware is the segment still most growing in Q2 and in first half of 2021, even on the basis of a very strong first semester 2020. What does it say? It says, but we should be very prudent with this, it says that the pandemic that has changed some consumption habits or reinforced some consumption habits, particularly in the U.S. market, are there to stay. But it's -- at this point, it's a little bit of a speculation based only on a couple of months of experience. Therefore, we have to be very prudent. A slightly lower sales performance or demand in the retail tableware would have a clearly negative mix impact. At the same time, and that's the last point of importance for North America, in the first semester with this 12.6% EBIT margin, we are benefiting from a very well anticipated pricing mitigation work done. And that, considering that we believe that we have not seen yet all the raw material inflation through our P&L because of the time it takes through purchases and inventory consumption and so on, we want to be reasonably confident at the same time as prudent about any extrapolation on the second semester.

And if -- in the same topic, if I may continue, I think it's interesting that you said on the consumption habits impacting the retail tableware. And if we a little bit dig deeper, is this coming from the overall like food takeout and food delivery trends? Or is it simply that, I mean, people, I mean, just eat more at home on the disposable tableware? So where -- like if we dig a little bit deeper, where does the strong sales in retail tableware is coming from in North America?

Well, maybe if you allow -- not just North America, but I think you said it all. So about North America, you said it all. This is the 2 elements at the same time. I think the pandemic has clearly pushed or created a new consumption pattern and enjoyment, I would say, at consumers' level with the takeaway, okay? So the takeaway has been blowing really very strongly across the world during the pandemic for obvious reasons. And once you have tested the convenience that it gives to your life, you don't want to give it up. So maybe it will erode a little bit. So we are not going to see the same growth in relative growth in percentage. But the consumption level is we believe there to stay. Very good for packaging, obviously, for our packaging. Second, to your point, the tableware, yes, it's another consumption pattern that is pushed, and that's specific to U.S. because this tableware is really specific to the American culture, North American culture. We believe that the convenience that has always been in the North American way of consumption is even more there when we see the -- and there to stay when we see the level of demand at the retail, particularly as -- for this year, as people enjoy a bit more freedom, a bit more partying and outdoor activities. This is -- so we believe that we are very confident about the fact that the retail tableware is really a trend to continue in the U.S. That's -- so basically, you had the 2 points in your questions that are valid and supporting the sales.

And we have one final question from Michele Filippig from Jefferies.

I have one quick question regarding your comments on the previous question on raw material impact outlook. You said that you believe that at a group level, you expect a similar level of raw material impact in Q3. Is this comment includes like the tailwind from price actions, or just like considering raw materials?

So I would say it's both, and again to the first question from Maria at the beginning, I think I was answering that there are so many variables into it. So if I try to keep it simple, one variable is the raw materials. And depending on the regions, I will take an example, so in North America, we are expecting much more -- the inflation to be impacting us more in Q3 than in Q2, okay? So to be very specific. At the same time -- so there is the variable of how long the raw material inflation is going to stay during the year, and I will not risk myself to make any forecast. That would be pure speculation. There is an opportunity that it's going to fade away, this inflation towards Q4, and then we would see the benefits, of course, in the P&L, but we can't forecast this. Now the other variable is that depending on the businesses, we have had our pricing mitigation action at different times due to the different contracting process that we have in the business as well as in some of the businesses, no contracting and, therefore, no time lag in implementing the pricing action. I will give 3 examples. Fiber, rough molded fiber business, so ex packaging, no contract, so therefore, when we saw the price increase, the raw material inflation coming up, then we've been able more or less on time to mitigate the price inflation. Second, flexibles. Our sales are strongly through contracts with global accounts, and there, we have a time lag of 6 to reduce to 3 months in many cases. Many price increases -- our price increase will come in place 1st of July. At the same time, whilst I think Thomas was saying, in India, we've been hit by the raw material inflation very early in the year, so in the full -- almost full first semester. In Europe, it's much -- it's going to be much more the case in the third quarter. So you see so many variables. Third example, North America, where we had our mitigating pricing effect in the -- already taking place in the first semester, whilst still a lot of the raw material impact in the P&L will come in Q3. So all in all, I'm not making the answer complex to confuse you. But that's why at a certain point, I said, if you want to more or less have our view, we believe that our net-net impact of all these variables should be more or less in line with the first -- the second quarter, in the third quarter, however, with swings between the different businesses. So -- but let's be relatively prudent as well in forecasting Q3 because the raw material inflation, all this turmoil on the raw materials and overall input cost is -- has a long phasing in and will have a long phasing out.

And as there are no further questions, I'll hand it back to the speakers for closing remarks.

Okay. Thank you, operator. This then concludes the event for today. Thank you very much for participating. Thank you for the presentation and the questions. And we will be publishing our Q3 results on October 21, so let's be back then with the next results. Thank you, and have a good rest of the day and rest of the summer.

Thank you.

Thank you.