Kemira Oyj (KEMIRA) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to Kemira's Q4 and Full Year Results Webcast. I'm Mikko Pohjala from Kemira's IR. I'm here today with Antti Salminen, our President and CEO; as well as Petri Castren, our CFO. As you should have seen, this morning, we published our Q4 and full year results and 2024 was another strong year for Kemira. During today, during the webcast, Antti will cover the main events from the quarter as well as some highlights from 2024. And after that, Petri will go through the financials. After the presentation, we'll move on to the Q&A, and you can submit your questions either on the teleconference line or then submit your questions from the webcast tool and I will moderate the questions then. With these short instructions, Antti, please go ahead.

Thank you. I'm extremely happy to be reporting here on my first full year as the CEO of Kemira on the continued strong performance of the company. In fact, the full year '24 was the second-best year ever in Kemira's history. The margin performance continued strong. Volumes increased in both segments. And quarter-on-quarter, the prices increased during the last quarter of the year. We made a good progress in the strategic front in our growth initiatives. We continued, as we have announced during the year with several smaller investments and one bolt-on acquisition to drive the growth of the company. We published in the Capital Markets Day, the new long-term financial targets, which should indicate very clearly where we aim and head with the business. And we changed the operating model. We have brand new leadership team, which started 1st of January with a really high energy and spirit and commitment to bring along the profitable growth that we aim for. We also progressed on the sustainability front. Our emission reduction targets for Scope 1, 2 and 3 were validated by the SBTi, and we are fully committed and well on track on performing on those targets and delivering on them. And of course, I mean, as the proposal for the AGM has been announced, so we continue on our track record on solid dividend growth. So that's another highlight of the announcement here. So all in all, really, really strong, solid year and going stronger forward to this year. Now if we look at the growth strategy and the main strategic priorities that we have defined expanding in water, setting the target to double the water revenue over the time. Good performance there, 3 percentage organic growth in '24. So on track to reach the targets. Building the leading renewable solutions portfolio, also there, we increased the revenue that we derive from the renewable solutions, and we're well on track to reach our EUR 500 million target on that front. And then unlocking the new growth platforms, new markets, new technologies for us to grow. We basically have announced that we are reviewing an investment opportunity here in Finland for renewable polymers. That project is progressing very well. So we expect some news on that. So all in all, on the growth -- defined growth priorities, there's been a really good progress. This being chemical industry, the growth is not step growth. It's gradual growth, but we're very, very well on the track to reach our targets there. As mentioned, the strategy, even if we renewed it in the spring, it is a continuum of the previous growth strategy. So basically just clarifying and making it more crisp and clear. But we performed the growth-related actions and investments over the past couple of years in a very, very systematic manner. We've introduced the biomass-balanced polymers into the market, and those have been a big success. We expanded the renewables partnership with our partner, IFF, which basically then also the potential investment in Finland is part of this track. So basically, the renewables agenda. We have invested into growth in the water area by expanding the capacity of our existing coagulant plants in several places in Europe. And we have started our journey to capture the growth potential in the micropollutants removal by entering into the activated carbon market. So again, progressing, I would say, exactly as planned. Now one thing that we are extremely proud of and which continues to be on good level is our customer satisfaction, i.e., Net Promoter Score. 59 is the latest measurement, which is all-time high for us, which tells a lot about our capability to serve our customers in good times and bad times and be the most reliable supplier in the industry. And I'm really, really proud about these results. And of course, also the high employee engagement that we have. So we have really committed workforce that is kind of fully behind our strategic plans and ready to deliver. Now if we then look at the '24 financial highlights a bit on a group level. As mentioned, good solid volume growth in both segments. And this in Pulp & Paper, despite the kind of slowish market that we have, I think it's a great achievement. And positive organic growth in the last quarter of the year. Then -- if you look at the oil and gas divestment adjusted revenue, full year, again, solid growth there. So basically, proof case on our point on us being on a growth track and on a profitable growth track. So again, 20% EBITDA reported, I think it's a really strong result, especially in the current European economic environment and the chemical industry. So I'm really proud about the achievement and I'm pleased with what we have achieved there. Good. And Petri will dig deeper into the financials, but I'll cover a bit of perspective on both of the business segments. So basically, if you look at Pulp & Paper, as mentioned and as you've seen from the results announcements of many of our key customers as well, the market was soft last year. The expected recovery didn't really start. And the current outlook is that basically '25, the recovery should really start probably more towards the latter half of the year than the beginning of the year. But the underlying megatrends for the kind of especially the packaging industry to be growing as the economy picks up are there. So I'm confident that this growth, also the kind of market will become more favorable. But I think the result that we have pulled in, in this soft market is extremely good, and I'm very thankful for the Pulp & Paper team for doing this good solid volume growth in '24 and sales prices stabilizing towards the end of the year, which gives us a good start for '25. So basically, starting from this basis, I think it's a good place to start the journey for '25. Now if we look at the Industry & Water, where the markets were more robust. So basically, no headwinds as such in the markets. Demand clearly improved in all regions. And thus, we also reported a very solid organic revenue growth of 6% in quarter 4 and 3% for the full year. I think it's a great achievement and again, exactly on the right path towards our longer-term growth targets. And the operative EBITDA margin, 22.2% is a really good number. And of course, I always like to remind about the extremely high return on capital employed for the Water segment. So this is really efficient business model that we are running there. And good to remember that it's also very robust and predictable business to be serving. So this is the kind of stabilizing factor in our portfolio and gives the solid grounds for kind of committing to this kind of profitability targets whilst we are after the growth. So the water business really creates the backbone for that. Now on the sustainability front, we progressed especially in the water efficiency of our operations and the Scope 1 and 2 emissions according to the SBTi. So the water and climate targets, there was a really good solid progress forward, a bit more kind of a modest development on the safety people and circularity area, but there are also kind of the game plan is very clear, and we are fully committed to this target, so going forward there as well. Then if we turn into the '25 a bit and the strategy execution now going forward. We continue, of course, the announced expansion investments and complete them -- plan to complete them now in '25. But even more so, we have a really strong M&A pipeline to support the water growth, especially, and we are actively working on that. Again, more focused on the more -- small to midsized bolt-on type of acquisitions to build the presence in the activated carbon market to consolidate further the coagulant market to really kind of again this growth in the base water business, which is the solid backbone of the company. So this pipeline is strong, and we are working on it very actively as well as looking for any additional expansion needs in our base capacity as the markets are -- when the markets are asking for that. In Packaging & Hygiene Solutions, of course, we need to continuously have a focus on improving and keeping the profitability high. So that's kind of a task number one, but also strengthening the presence in these newer openings for us like the molded fiber market, which is globally growing much faster than rest of the packaging market and other new growth areas. So there also, we need to find these new growth avenues, and we're well progressing on those. When it comes to the Fiber Essentials business, there -- the role of the business unit going forward will be a strong cash generation. That's the kind of primary role of the business unit. But there are also growth opportunities within this. Those are more step-wise type of growth opportunities kind of following the big pulp mill expansions, especially in Latin America. We are actively observing that and working on those cases. So that's also one potential growth area. But let's remember that the role of the fiber essentials really is to be the strong cash generator for the company. And in New ventures area, we don't report that separately, but there's a lot of activity, and we have invested with the organizational change a lot more into building the 5 years down the road agenda for us, which are the high-growth businesses where we have the right to win in medium to long term and Unit is working very actively on those. Again, this kind of alfa glucan, the bio-based polymers is one of those platform technologies that we are working actively on and hopefully can have some news later on this year. But with these brief comments on the quarter 4 and the full year '24 plus some foresight into '25, I would like to hand it over to Petri to go deeper into the financials.

All right. Thank you, Antti. And I will actually start by, again, repeating in my mind, what are the key 3 takeaways from this report. And Antti was talking about it already, but I really want to emphasize this. One is that this was not an easy year in the chemical industry in general. This was not an easy year for our biggest customer segment. But yet, our very resilient business model is actually demonstrating a very good profitability. And as Antti said, second highest ever for the company. Regarding growth, our volumes grew through the year. And in the fourth quarter, we had 5% growth despite the weakness in the pulp and paper industry. And so the growth is there. And again, we have a long-term target to grow faster than the market. So the growth opportunity is there. And I'll cover the components of growth a bit later. And as Antti said, we can look into the year with very much confidence. We expect that the market volumes will improve in the year. Pricing has stabilized. I'll have some proof points on that one. And generally, I think the inflationary environment is stabilizing or normalizing rather. And of course, that's a good sign, good market to go forward. I wanted to start here with the full year comment first. So let's look at the big picture first. So again, here, very important for our growth strategy, 4% volume growth, again, in quite a challenging year. And this volume growth was pretty much balanced between the 2 segments. I&W slightly higher than Pulp & Paper, but even Pulp & Paper, there was good growth. Organic growth was modestly still negative, and this was because the prices were declining about 5%. But again, if you exclude from this 5% decline, the impact of caustic and the impact of some of the electricity-sensitive components, the sort of electricity impact, the full year price decline was 3%. And I know that throughout the year, many people were much more worried about our ability to hold on to the pricing and about our pricing ability. And the key point is that this price decline, which was there for the -- roughly 3%, excluding those 2 segments, it has stabilized during the year. So second half, very much stable and actually modest improvement in the fourth quarter. Then, of course, during fourth quarter, you see the colors turning blue in terms of growth in pricing. So very modest increases in pricing. There was also a very modest increase in sequential from Q3 to Q4 on pricing and basically -- and the very small increase in Pulp & Paper, offsetting by a small decrease in I&W. So variable costs year-on-year increased again very, very modestly, again, highlighting that we have returned to sort of a normal pricing environment where one should expect modest increases in costs and then, of course, correspondingly modest increases in sales prices. Volumes grew by 1% in Q4. Industry growth well over 5% during the quarter, offsetting the weakness in the Pulp & Paper segment. Sequentially, and this is perhaps something that I need to remind every once in a while, we do have a seasonal pattern in our revenues that we do have some slowness in Q4 in both of our segments. So the decline from Q3 to Q4 in volumes very much according to our normal seasonality. Fixed costs during the quarter included somewhat higher -- a larger share of miscellaneous costs. And then there were some maintenance costs due to longer than anticipated or longer than planned maintenance breaks in 2 of our sites. These were both I&W sites, so the impact was felt on the I&W side and the impact of these fixed costs roughly in the mid-single-digit millions. Last quarter, I was noting that we are trending towards a relatively -- relative price cost stability and now we have pretty much reached it. Year-on-year, both variable costs and sales prices impact individually were almost 0 and then, of course, the net impact practically 0, also consecutive quarter impact very, very small. And in our view, if I sort of put my crystal ball ahead of me, we don't see anything that dramatically would change this relative price stability going into the year other than if the extensive -- if there was an extensive trade war or high tariffs were imposed. But even for that, again, I want to remind that most of our manufacturing and raw material sourcing is done in a country where we sell in the case of U.S.A. or China or within a region where we operate in case of EU. So our material flows across borders are quite limited. There are some between Canada and U.S.A. and there are some between China and U.S.A. But in the scheme of things, relatively modest as we practically operate where we sell. I wanted to take items affecting comparability separately here. So this quarter, we have 2 items that impact comparability. First one is our reorganization program. Antti was talking about the division new reorganization where we will be reporting under 3 segments. As a result of this reorganization, there were some positions that were eliminated. Not a big number. All in all, the number of positions that were eliminated was in the dozens, not in hundreds. And most of these employees affected are now -- most of them are now out of payroll and severance costs for these have been booked into Q4. The other one -- the other item affecting comparability is a single asset energy company or energy asset that we partly own in Finland. This asset is currently underutilized, and we have increased the provision for this underutilization and this period of underprovision actually covers for the next 5 years. There are very advanced plans for industrial activity on that site, and that would be utilizing steam from this facility. So there is a plan for going forward. Balance sheet, we continue to delever ourselves. Net debt now below EUR 300 million, including lease obligations and leverage at 0.5, roughly half turn. And of course, and our return on capital efficiency or capital employed well over 20%. I want to remind again that delevering itself is not a goal itself, but it's an outcome from good profitability and good cash flow. And of course, like Antti said, we continue to actively seek good, right M&A opportunities and organic investment opportunities. Cash flow for the year, very strong, even if not quite at the record level where we were last year or previous year. However, quarter was very strong, exceeding the year-ago fourth quarter at EUR 165 million. There's also a note that we will get a EUR 10 million capital return from our supplementary pension fund Neliapila. So we'll continue to unwind the overfunding that we have in this fund. And those who are not familiar with the fund, a quick reminder. The fund is already -- has been closed since 1991 for new active members. There are about a dozen active employees still in that fund, but it has about 1,500 retirees. And so it's in a runoff phase. The liabilities come down roughly about EUR 10 million a year. And like I said, it's overfunded by approximately EUR 100 million currently. So we expect that we will gradually receive or return this overfunding as the assets and liabilities of this fund wind down. Regarding capital expenditures, significantly below at the level of -- or somewhat below the level of '23 at EUR 167 million. This year, we will expect that the CapEx will be higher, will be more than EUR 200 million, driven largely, but not only by the investment that we are planning to do with our partner, IFF, here in Finland that Antti was talking about investment into the renewable solutions alfa glucan investment. Dividend, dividend proposal. So the Board is proposing for the AGM that we will continue our track record of increasing our dividend. The Board is proposing a dividend of EUR 0.74 per share. That will be an increase of EUR 0.06 from previous year. And as has been our practice in the last few years, this dividend is proposed to be paid in 2 installments in April and in November. Finally, on outlook. It's based on our assumption that our markets will continue to grow modestly in volumes. In water market, we see this growth fairly uniform across all regions. For our Fiber Essentials and for our Packaging and Hygiene solutions, which are successors to our Pulp & Paper business, the markets are expected to recover, but the recovery is expected to be stronger in the second half. Clearly, there is some uncertainty about the timing and about the strength of that recovery. And as you may have seen and heard from some of our customer comments in the recent days and those. But based on these assumptions, we expect that Kemira revenue will be between EUR 2.8 billion and EUR 3.2 billion in '25 and operative EBITDA between EUR 540 million and EUR 640 million. With that, I think we're ready to move to the Q&A session.

Thank you, Petri and Antti. And as mentioned, you can submit your questions on the teleconference line. But before we go there, I'll take a couple of questions that have come to the webcast tool. And the first one is related to Pulp & Paper. So to what extent your Pulp and Paper prices benefit from electricity prices? And do you expect recovering end markets and in Pulp & Paper to also support higher price contribution in 2025?

Well, as mentioned, if I start from the latter end, so we really expect the markets to recover, especially towards latter half of the year. And that's what you heard from many of our customers as well. And I think we are in a really good place there currently with our position in the market, and you've seen the kind of a good pricing performance that we have. So that would kind of -- I expect that to continue to next year. And of course, the positive development in the market would be supporting that further. Now I mean thinking about the electricity impact on our pricing and business portfolio, with the kind of current environment that we kind of foresee and what the forecasts are telling about the electricity market, I don't see that having a drastic impact to this or that direction for our '25 performance. Of course, I mean, again, our bleaching chemistry is very electricity-intensive. And if there would be any kind of more permanent changes up or down in the electricity prices, that would impact also the kind of business that we have in there, and we need to react accordingly. But with the current outlook to the '25, I don't see any drastic impacts from the electricity.

But if I can clarify for the year, slight negative actually in terms of pricing beginning part of the year for the quarter and for the quarter-on-quarter from Q3 to Q4 and also Q4 versus Q4 last year, not much change. So the price increase was not driven by electricity that we have.

Good addition. I'll take one more question from the webcast tool. This is on fixed costs. So could you please give more color on the fixed cost pressure? Do you expect the fixed cost pressure to intensify further in 2025? Or do you expect your own measures to counter this?

Well, if I start and then Petri can kind of put a bit more detail into it. But I think, of course, one of the biggest portions of the fixed cost development is also the salary inflation always. And I think if you look at the world economy and the inflation environment, the worst times are behind us. So we see, as Petri mentioned earlier, kind of stabilizing environment. So we are, of course, paying for those high salary increase from the previous round, and that will continue, but we don't expect that to kind of that development to continue. So that's one part of it. And of course, we constantly fight to win the inflation in terms of fixed cost management and our operating model change now going forward, I mean, creating this one strong operations unit where most of our fixed costs are. One of the drivers behind the change is that we have now one owner for the biggest pool of fixed cost to be managed. And I'm having high expectations on kind of killing the inflation on the operations area going forward.

Maybe the other part is that, of course, as a part of our strategy, we have said that we will continue to sort of invest, build some resources for -- to accelerate our growth, but we will do that very much with sort of profitability in mind. So we will not sacrifice profitability, but we are investing some new resources. The new ventures and services business unit, for example, is clearly an investment area. We are investing also into additional R&D resources for long-term growth. So there will be some of that. But as Antti said, certainly, we will be looking at self-help measures and efficiencies to kill the inflation in terms of ongoing costs.

Good. And let's now go to the teleconference slide to take some questions from there.

The next question comes from Anssi Raussi from SEB.

So first question, just to double check. So basically, your extraordinary items affecting your operative EBITDA relating to maintenance, et cetera, were roughly speaking, mid-single-digit million euros. Am I right?

So let's -- let's make sure that we don't confuse. So we had roughly EUR 18 million items affecting comparability. I was not talking about those. So the normal fixed cost in the quarter included roughly a mid-single-digit type of numbers, which were as a result of longer maintenance breaks and similar miscellaneous, which are nonrecurring by nature.

Yes. That's exactly what I meant. That's clarifying. And then about your favorite topic, your guidance. So you say that the end market volumes expected to grow slightly, and you have implemented some price hikes. You see market recovery in multiple segments. So then if we look at your guidance, it looks like at least at the lower end of the range, what am I missing here? It seems a bit conservative to me.

Well, yes, I mean, the guidance is a range and the environment is something that we can -- Petri has a crystal ball, and I have another one, and we can look at those, but we never know what will happen. And that's why we guide with a relatively wide range so that we know regardless what happens in the marketplace and economy, we are confident that we can hit that range. But I think the guidance is still a clear improvement from the '24 performance.

So Anssi, some of the things that we don't exclude from the guidance is, for example, currencies. So this is not fixed FX rate guidance. So there is some flexibility because of that, too. There's an assumption that they don't change dramatically, but nevertheless. And of course, during periods, if there was something dramatic would to happen and input costs would change dramatically. I mean we have seen that in the last 3 years or so when they have gone first up and then down, it has an impact on top line, although with a lag. So that's -- those are the sort of reasons why we -- you may think that it's a conservative one, but -- and of course, if everything is variable or fixed, then it may sound like a conservative, but that's the way we guide.

Okay. Got it. And lastly, about -- if I continue on this 2025 outlook. So I think it's then clear that you assume modest cost inflation, which should be offset by modest price hikes and the net impact should be relatively insignificant in 2025.

That's your conclusion out of that, and I won't dispute your conclusion, but I don't think we are in a position to confirm your conclusion because that would be something additional in terms of guidance, which we haven't formally given.

The next question comes from Martin Roediger from Kepler Cheuvreux.

This is Martin Roediger from Kepler Cheuvreux. I would like to have 3 questions. I start with the first one, it's on Pulp & Paper. The EBITDA margin in Q4 was a bit better than in Q3. And normally, you mentioned that already that there is some kind of seasonality, but normally lower volumes in Q4 versus Q3. So normally, my understanding would be a bit of a lower margin in Q4 versus Q3. Was there any reason why margin is up sequentially in Q4 versus Q3 in Pulp & Paper?

Well, first of all, the seasonality that Petri mentioned regarding quarter 4 is mostly coming from the water segment. So typically, especially in Industry & Water in our historical segments, the quarter 4 has been the lowest one, whereas in Pulp and Paper, it's maybe the quarter 2 where typically our big customers are having their maintenance breaks, which is the lower segment. So that doesn't kind of apply to Pulp & Paper. Then when we look at the improvement from quarter 3 to quarter 4, I think that's kind of showing the right path for us. So doing the right things and holding on to the margins there towards the year-end is explaining that.

Martin, I think there are you should not read this quarter-to-quarter millimeter changes with too much. I think you should look at rather a little bit of a more bigger picture of how the margins are trending and how they are going rather than taking every little change from quarter-to-quarter. There may be a timing of product mix type of issues, et cetera, which impact the difference or can explain the difference.

That's a good point. There will always be some fluctuation quarter-to-quarter, ups and downs depending on what happens in the environment, what happens in the timing of certain things and so forth. So...

Okay. Coming back to your outlook, you mentioned that one of your assumptions is that FX effects will be, let's say, at current levels, which means obviously 0 effects. But when I look at the currently strong dollar rate versus the euro and taking into consideration that 32% of your sales is in the dollar region, I would assume that based on current exchange rates, if they stay where they are until the year-end, that should be a positive FX effect and therefore, also a positive translation effect. Is that right? Or do I overlook anything because some other regions or other currencies compensate for that positive effect from the dollar?

No, Martin, you are correct. So strong dollar does favor us. So it does help.

Okay. And finally, on this new plant, you want to invest with IFF in Finland on alfa glucan. Is it right to understand that this is a EUR 30 million to EUR 40 million CapEx project and it is fully then done in 2025? Or will there also be some spending for that plant into 2026? And maybe any word on payback time would be also helpful.

No, we can't comment these things, Martin. So once we are finalized with the plans and decision, we will, of course, announce the investment and so forth. But these are the kind of details that we don't give out.

The next question comes from Andres Castanos-Mollor from Berenberg...

I wanted to follow up on the guidance question, please, particularly on the revenue guidance, which is the midpoint, and the midpoint is barely 2% ahead of 2024 actual results; however, you had guided over 4% organic growth in your Capital Markets Day a few months ago, FX as things stand today, should be a positive, a small negative from the consolidation effect from the oil and gas business. The comment on volumes sounded constructive. So I was wondering if pricing was as a most a certain point for 2025. Can you please comment on this, your ability to maintain prices in 2025?

Well, I think the history shows now if you look at the couple of past years, we have been really good at maintaining the prices and mitigating any impact from the raw materials. And there's no reason to say that, that kind of a good basic performance on the pricing front would have changed somehow. So basically, I'm expecting us to hold strong on that front. And then, of course, you referred to our longer-term guidance. So basically, I mean, this 4% annual growth is for the longer time. So there will be some years which are lower and some years which are higher, but that's the average that we expect. And of course, now we have just started to invest for this growth with the kind of announced coagulant expansions and so forth. So those will only be bearing fruit in the forthcoming years.

But [ Martin, ] if I give you a little bit more color on your -- I think we try to give quite a bit of a picture on the environment and sort of the trends in the pricing environment. So first half, we had modest price decline. Second half, pretty much stable. We expect modest, perhaps some very modest price increases, and we'll give words that we are confident -- we feel confident going into the year. So we don't sort of plan any sort of price erosion going into the year.

Okay. Can I please ask another one on cash for housekeeping? So extraordinary receivables and cash inflows you will have in '25, I'm considering this dividend from the pension plan, that's EUR 10 million. And there's also close to EUR 50 million, right, still remaining for the oil and gas disposals. Is there anything else that I should keep an eye on for 2025 ahead?

In terms of cash flow...

I think receivables, I think that was your question, the receivables in the balance sheet. That was your question, right?

Exactly. Sorry, yes, exactly.

So were you referring to the EUR 50 million receivable from -- yes. Yes, that's a short-term receivable, which we expect will be paid in Q1. So that should be a Q1 positive cash flow.

The next question comes from Isha Sharma from Stifel.

And I apologize in advance for talking quarterly. But could you please remind us of the seasonality of Industry & Water now that it is without the oil and gas? My understanding was that Q4 seasonality is not going to be as provident as it was in the past. Is where we are today a good benchmark for going forward because now we also saw probably the last of raw mat cost and spread normalizing a bit. That's on Industry & Water. And then it's a more macro question. Do you anticipate any impact at all from the recent tariff announcement on aluminum in the U.S.? I'm thinking maybe some spillover effect on the scrap prices eventually for coagulant production in the U.S.

Good. So if we first look at the seasonality within the I&W portfolio. So I mean, of course, I mean, a lot of the volatility went away with the oil and gas divestment. But we have -- in the water business, we have -- especially in the North American part of that, we have a kind of a very typical seasonal pattern where the water consumption and then the water treatment chemicals consumption is lower towards the year-end. And typically, the quarter 4 is a bit lower. So if you go back and look at our historical reports, if you look at even kind of -- so yes, the oil and gas is in there, but you always see that the quarter 4 is a bit lower. So I don't think that -- because that's weather related really. So it doesn't really kind of go away with the business portfolio changes. And then if I comment the tariffs a bit, I think Petri commented it very well there already saying that our business model is very much regional and local. We produce and purchase where we sell. So that kind of gives us a good shield. But of course, we are not completely immune. So there are, as Petri mentioned, trade flows across the Canadian border, raw materials, some finished goods. But the impact of those in the end as we have analyzed it, is not material in the big picture. Plus, of course, it's good to understand that for many of these flows, they are not unique for Kemira. So many of the competitors are in the same situation. And I think what in the end matters is if the tariffs impact one company more or less than some other company, and that makes a competitive difference. But as it touches the whole industry, I don't think the impact will be so drastic.

Understood. Maybe just a follow-up. If I look at your top 12 raw materials that you very helpfully always guide us for, they are kind of inching upwards. And I understand that you have already some price increases in Pulp and Paper, which is more spot. Should we assume that it is sort of a similar structure like in the past where Industry and Water takes a bit of time? Or are we at a place where you are already very happy with where the prices are for Industry and Water and it's easier to absorb these raw material costs inching up?

Well, generically, we have no intention in absorb raw material increases. So basically, the idea is to always price them and pass them forward in the value chain. And as Petri again mentioned, I think the outlook for '25 is relatively modest in terms of any changes in the raw material basket. So there will always be some, but nothing drastic. Normalizing pricing environment, as he said. So basically, it will be much more easier to manage the prices in this kind of environment where the raw material changes are not drastic up or down.

And Isha, you mentioned specifically aluminum. We -- in our coagulants in North America, we are relatively larger market share and larger position in iron coagulants and a much smaller position in aluminum coagulants. So -- but there are price pressures on the iron side as well. And of course, those will need to be managed and priced on, as Antti said.

So my assumptions were not so off after all.

The next question comes from Joni Sandvall from Nordea.

Maybe a couple of follow-up questions. As we have gone through quite many times, you are increasing -- slightly increasing input costs. Can you give any split of this between segments, current segments?

Well, maybe the U.S. water business side is where we see the biggest pressure at the moment, and that's kind of related to the whole industrial and economical development in there regarding the steel industry and the chlorine and hydrochloric acid and so forth. So the pressure is biggest in there.

Okay. And then maybe relating to water business, I know that you are now focusing more on growth. So we have been speaking about fixed costs. So are you planning actually to increase this in the water business to support the growth outlook of the business?

I think, again, Patrick kind of covered that already when saying that, yes, we are investing for the growth. The additional resourcing is more for the longer-term growth in the innovation and new ventures area. I mean the beauty of the water business is that you can basically grow it to a certain extent without really adding the resources. And then when we need to add, it's always kind of a proportion to the additional revenues and margins that we produce. So there's -- we can grow the water business without kind of proportionally increasing the fixed cost load to a quite big extent. And that's the beauty of the whole -- it's a very lean business model that is run on the water business.

Okay. That's clear. Lastly, I don't know if you are answering this, but on Fiber Essentials, possible larger investments of, let's say, large pulp mills. Can you give any indication on what kind of return on capital you are seeking if you are entering these kinds of deals?

I think in your question, you got the answer that meaning that we probably don't answer that. It's double hypothetical. It's hypothetical if we enter and it's hypothetical what would be the return. So let's cross that bridge if we ever need to cross that bridge when we at least eliminate one of those hypotheticals.

The next question comes from Tomi Railo from DNB.

It's Tomi from DNB. I have 3 follow-ups, but I take them hopefully clearly. It's -- they are on price increases. Firstly, you expect modest price increases in '25. Would you say that they are first half or second half built it? And secondly, can you comment or give any indication of the level? And thirdly, are they more or less related to Pulp & Paper or Industrial and waters?

Well, to the first question, we are actively and dynamically monitoring the market and how the raw materials develop, how the markets allow us to increase prices. And basically, so I can't really put any quarter or half of the year on that. I can't really comment on any percentages on -- again, it depends on the market environment completely. And thirdly, both businesses need to be able to -- all of our 3 businesses in '25 need to be able to push any potential input cost increases into the sales prices. So there's no kind of differentiation between the business units there.

And if you look at Tomi, our price increase announcement from October, obviously, that gives some indication of the product lines and regions. So those were published in October. And I believe we do not have any more questions on the line, no, neither from the webcast tool. So this concludes the webcast. So thank you very much for participating for the questions as well. If there are any follow-up questions after this, so please reach out to me after this. Thank you very much.

Thank you.