Mayr-Melnhof Karton AG (MMK) Earnings Call Transcript & Summary

Dear, ladies and gentlemen, welcome to the Mayr-Melnhof Karton AG conference call. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Stephan Sweerts-Sporck, the speaker of Mayr-Melnhof Group. Please go ahead, sir.

Hello, and welcome on the part of Mayr-Melnhof from sunny winterly morning in Vienna. My name is Stephan Sweerts-Sporck heading Investor Relations and Corporate Communications at MM. It's a great pleasure to have you joining this conference call on our latest news from this morning, Mayr-Melnhof Karton to acquire Kwidzyn in Poland from International Paper. Peter Oswald, our CEO; and Franz Hiesinger, our CFO, will be sharing with you now the highlights of this transaction and its impact on the MM Group. This will be based on the presentation, which has been made available on the front page, the home page of our corporate website, mayr-melnhof.com. It's the download on the second square with the mill photo. After the presentation, we will enter into a Q&A session in which Peter and Franz will be happy to answer your questions. Since this call is directed to an international audience, we should be very happy to and appreciate your questions to be asked in English. Peter, may I ask you to start with your comments on the Kwidzyn acquisition, please.

Thank you, Stephan. Also from my side, welcome to everyone. Good morning. And thank you for taking the time to join us. Only a few hours ago, Mayr-Melnhof has signed an agreement to acquire Kwidzyn. We are very pleased that Kwidzyn is one of the best mills in Europe. So please take a notice of the disclaimer on Page 2, and I would like to move to Page 3. And we've acquired the company for a price -- enterprise value of EUR 670 million. And in addition, we are assuming EUR 33 million in usufruct and operating lease liabilities. This is all funded from existing credit lines, and the ongoing issue of a Schuldschein. The transaction will be immediately accretive to MM Group earnings. What we are attracted by is the enormous development potential in the synergies, which are under our control. And the transaction is subject to customary closing conditions and closing is expected to be in Q3 of this year. If we move on to Page 4, with here are 5 strategic rationales. Now the most important is that we are strengthening our competitiveness, our competitive positions in FBB. So in folding boxboard, that's a virgin-based cartonboard. Because we can now offer more innovation, we can do more in terms of sustainability and with a broader service offering. But most important, we have a backup, especially also with regards to Kotka because our big customers won't backup solutions, and we have now 2 sizable mills with big machines, first-class machines, which can be a backup to each other. Secondly, we enter a very adjacent business, which is flexible fiber packaging with a product, IPack, and that will be important for plastic substitutions. So many of our customers want not just carton solutions with ideally with Barrier Solutions without plastic, but they also want paper. Think about fast food service where you have some of the products in carton, but you also have some paper. Thirdly, we enter the uncoated fine paper segment via an established low-cost producer, and that's very important. Uncoated fine paper is a declining business. We are aware about this, but being the low-cost producer gives us opportunities. And that's the important thing is if the market further declined, we can use the excellent cost position of the mill being in the first cost quartile with all 4 carton/paper machines to grow in other packaging grades. And of course, we have substantial synergies. It will take some time to be realized. We think about 3 years, but they will be very important. So let me say a few words coming now to Page 5 about the company description. So the important thing is that it is an integrated mill. So it has a chemical pulp mill with a capacity of about 400,000 and also production of about 400,000 tons, which is staying forward integrated into these 4 paper and cartonboard machines. Now this business is a business about location. So it's really location, location, location. And Poland has the advantage of low wood costs, low personnel costs, low transport cost to the customers. So as someone said to me, it's in the middle of 2 forests and amongst in the middle of its customers. It produces 3 products. One is consumer board, which constitutes 2/3 of EBITDA. And this is obviously what is at the core of our business, an FBB board machine with a capacity and the production of 260,000 tons, which can be expanded, requiring CapEx to 300,000 tons; then 1 machine, which is producing kraft paper. This is still in the ramp-up phase. So they are currently producing only about 1/3 of the capacity of 75,000 tons, and there's a profit potential improvement. And then there are 2 uncoated fine paper machines producing copy and printing paper, and here, we are attracted by 2 things. As I said, first, it is -- these machines are in the first cost quartile. So they are very competitive. And second, we have extensively started options to convert 1 machine into different grades as an option if the market declines further. So this is nothing we will do over the next 2 years or so, but it is very important that we have this long-term outlook. On Page 6, you get a photo from of the company, and you can see that it was very well-defined in the 70s, 80s. So it's a big size. It has a number of opportunities. So with the holes we can -- if we change machines, we can even build in bigger machines. And obviously, there is enough space to further expand. And as you can see, it's virtually in the middle of the forest, but still in the middle of Europe, close to its customers, which means lower transport cost and lower CO2 costs. And so I hand over now to my colleague, Franz Hiesinger, our CFO, about the financials.

Thank you, Peter. Good morning, also from my side. On Page 7, I continue with the key combined pro forma financial overviews of the Mayr-Melnhof Karton post acquisition of Kwidzyn mill. So from a turnover of EUR 2.5 billion, excluding 2 acquisitions, Kotkamills and Kwidzyn, we would have on a pro forma 2020 basis, EUR 3.4 billion in revenue. About EUR 550 million in adjusted EBITDA on a pro forma basis 2020. And the revenue per segment would be very balanced between the 2 divisions. MM Karton contributing about 53% of sales and MM Packaging, 47%, which is a change in the current structure where Karton only contributes for about 40%, excluding the 2 acquisitions. On in fiber-based source. In future, we would be balanced between recycled and virgin fiber board in the future. If you go to the next page, #8. The key takeaways financially Kwidzyn mill contributed EUR 510 million on revenue in 2020. And an adjusted EBITDA of about EUR 92 million. Of that, 46% of the revenues is folding boxboard, 47% are uncoated fine paper and about 7% kraft paper. Most importantly for us, about 2/3 of the EBITDA is generated out of folding boxboard, our core business. Yes. To summarize, on an enterprise value, we pay about EUR 700 million, including EUR 33 million leasing obligation, including [ separate ] usufruct and we paid around 7.6x EBITDA pre synergies and hope, of course, to realize a number of synergies out of that. The funding and the financing of the transaction will come from committed credit line and the issue of a Schuldschein, which we have announced earlier this year. And we expect to close the Schuldschein transaction by end of February. Thank you, and I hand back to Peter.

Yes. Thank you, Franz. So to summarize the strategic rationale, this is perfectly in line with our long-term strategy to grow within our core business through integration of high-quality virgin fiber assets, which are cost advantaged. We add a European high-class asset with a good positioning in the markets, well-known brands in the market and a favorable cost position close to its customers. And we have the option via conversions or also expansions to grow the business over time. What will be the impact on our group? It is immediately accretive to group earnings. We have multiple sources of synergies, which will be under management control. And most important for us, we want to have a solid, strong balance sheet, and we will have this solid strong balance sheet. And just to remind everyone, our philosophy is to stay below 2 points -- or go to a maximum of 2.5x EBITDA and medium terms to be at around -- or to stay below 2x. But after an acquisition, so to say, it can go for a certain period of time to 2.5 and with this acquisition, you can do the numbers. We will just touch above 2x. In this way, we are very excited. We've worked long and hard for this acquisition, and we're very happy that in the morning hours of today, we could finally agree on this. It's a major step for the group, and it's fully in line with our strategy, and we are now looking forward to your questions. Thank you.

[Operator Instructions] And the first question we received is from Markus Remis of Raiffeisen International.

Congrats on the deal, a couple of questions, please. Firstly, on the occasion of Kotkamill, you said this would be no-brainer from a strategic point of view. Just also -- would you consider Kwidzyn to be in the same category?

Yes.

Okay. Very clear. On the synergies, because I guess this is very crucial for future value generation. Is it fair to assume that it's mostly cost centered and maybe you can provide some granularity on the extent of synergies? So how much of cost can you actually take out, say, over the next 3 years?

We will be between EUR 15 million and EUR 20 million per annum, which we will achieve in year 3.

And the main areas of efficiency gains, where would you see that? Is that procurement, presumably?

Yes. Yes. It is procurement. It is also in production. And also in sales in terms of -- so our distribution costs and sales costs and logistics.

Okay. Is there any noteworthy investment needs associated after the -- or in the wake of the integration, any kind of bottlenecks you see where you need to step up CapEx?

Yes. The good news is there is no need now for bigger CapEx in terms of the obviously ongoing CapEx, which we need for the size of such a company, of such a mill. But the good news is that we have a number of projects of potential CapEx, which have a decent payback, but we are not forced to do them. We would first fully understand the mill, see that the carve-out from IP works well. And once we have things under control and processes and organization established, we will look into value-enhancing CapEx. But it's not like needed that something breaks down, and we have to spend money.

Okay. So when I look at capital or investment intensity of your cartonboard segment, pre Kotka and since then you've been somewhere between 6% and 7% of revenues on a long-term basis. Is that kind of the capital spending we should look for this division then also going forward? Or is there any reason to assume a change in the capital intensity?

The capital intensity will be somewhat lower. So we calculate about 4% of sales without expansionary CapEx. I think when you look also to the numbers there were some minor also expansionary CapEx involved. And generally speaking, the quality of the asset is, let's say, it's a somewhat more modern mill than our typical mill is today.

Okay. That's very good to hear. A final question for now before I step back into the line. I mean, you said you will be just a notch above this 2x net debt EBITDA after the 2 transaction. Now does that mean something like [ EUR 1.2 billion ] net debt at the end of '21, when both targets has been consolidated?

That might be a quite good estimate, yes. Approximately.

The next question received is from Johannes Grunselius from Kepler Cheuvreux.

It's Johannes Grunselius here. I have a couple of questions for you. And Peter, you're indicating that this mill, and it's completely integrated, is in good shape. But just to clarify or there are no investment needs in the refurbishment of a recovery boiler, for example, or how do you see that?

Yes, Johannes, it's an excellent question because the recovery boiler is the most expensive part. The recovery boiler was well maintained. So we will need ongoing maintenance work to be done, but it is in such a shape that we don't need to rebuild it.

Okay. Okay. Good to know. Then I was wondering if you could give us a little bit more history on the profits from this mill. I mean, the numbers for the last year or so is clearly attractive. What -- could you perhaps say something about the last 3 years or something like that?

Yes. So there is -- there was an onward trend, mainly driven by uncoated woodfree. So the profits in 2019 was higher, and 2018 was again higher than 2019. So historically, it is a more profitable mill. And our view is simply that not immediately, but over time, we will go back to these levels. Because we are, first of all, right now, in the down cycle, especially with regards to [ pulp ] prices and uncoated woodfree prices. And if things do not improve, then obviously, we have to think moving the machines into other fields. I mean it's -- as Franz shares with you, 2/3 of the profits are produced by 1 machine, but there's no reason why the other machines shouldn't reach a much higher level, and that would be our management challenge to make sure that this happens.

Yes. Because if I look at Mayr-Melnhof Karton, I think you are at about 18% or slightly more on EBITDA margin for the last 3 quarters. And this unit is in Poland has an 18% EBIT margin as well. But you are indicating that if we would strip out the uncoated fine paper here, actually, the EBITDA margin on the folding boxboard, the product is higher?

Yes, yes. It's significantly higher. It is in the first -- in the first quarter of the cost curve given the -- all the factors, which I've mentioned, mainly wood costs and transport costs.

Yes. And a final question for me. I'm not an expert on mills in Poland, but I know for sure that Poland uses a lot of coal power for -- as a sort of energy. Is there any issue whatsoever for this mill? Are you sort of using more coal power now in the group of Mayr-Melnhof? Or what's your thinking there? Or is this -- is this question relevant whatsoever?

Yes. It's right spot on, Johannes. So far, we are not using any coal and quitting issues in coal, and it will be one of our topics to solve how to reduce that. But we are, let's say, fairly relaxed in this respect because we believe that making the whole energy system there more efficient, will mean that any CapEx also have a decent payback. But it will be an issue to be addressed because they use coal, not just coal, it's a lot of biomass as well, but we have to increase the share of biomass.

Yes. What's the energy sales efficiency at the moment from your own recovery boiler at the site?

The overall energy efficiency is, I think, 90% about or even a bit higher.

So that's electricity.

Sorry. So basically, they are self-sufficient. Yes.

Okay. So the mill is virtually self-sufficient on energy.

On electricity, sorry. Not only on electricity, sorry. And on energy, the biomass boiler plus the recovery boiler, and they supply more than 50% of the overall energy demand.

Okay. Got you. Got you. So you're not worried about this thing whatsoever. I mean, is it part of -- I mean, you have obviously thought about it before?

Yes, it was a big consideration. So we are not worried in terms of we know it is not an issue to solve over the next years. But given the savings we see with alternative solutions, energy savings because it's also not very efficient today. We see the opportunity, so to say, to get the payback via lower energy costs.

Okay. Got you. Okay. I actually have 1 very final question, and that is on potential remedies and what you're thinking about the authorities? Is this a deal that should just go through or are there any risks that authorities will have any objections on this deal from a competitive perspective?

Yes. I understand your question. So I mean, we will with this deal, we will stay substantially smaller in FBB than the market leader, Metsä. Secondly, we will be on a similar level like [ Stora ], if you only look at FBB, but if one looks a bit broader with liquid packaging board and also other grades then would still be much smaller. And overall, we think that competition will increase because for -- especially for a lot of customers, there are now 2 market leaders who can satisfy a number of their needs amongst them backups. And in the future, it will be 3. And so from this perspective, it should be seen favorably. But of course, it's always difficult exactly to predict how the commission will see it. But I would be very confident.

The next question is from Matthias Pfeifenberger of Deutsche Bank.

Matthias Pfeifenberger from Deutsche. A couple of questions. So and congrats on the deal, by the way. So IP invested in this about $800 million in 2014. And now in the press release, you're talking about, they didn't want to sell it because they're spinning off the paper business, but this is a way to generate premium value. I mean, how is that -- how can you understand that it's -- you're basically paying for the modernization investments and they are saying they are generating premium value? And also did you face any competition in the disposal?

Yes. I mean, Matthias, on the first question, I cannot say very much because it's actually a question to be addressed to IP. On the second question, it started as a bilateral discussion, which was initiated by us, but there was then another party in the process. So we were not alone.

But this number is correct, the $800 million, the detail on the website in terms of investments that were all done in 2014?

That seems now -- I mean, we've started the CapEx over the last years. I'm not sure if we went back to 2014. So I'm a bit surprised now about the magnitude. But as a matter of fact, they invested time and again expanded the capacity of the paper machines invested in the pulp mill. So I can't confirm this number that looks to be a bit too high, but I'm not sure.

As of 2014, so it's probably the years before that until 2014, okay, that's fair.

Yes. It must be like this. I mean one can exclude that they invested in this 1 year so much. We looked at even 15-year track record, which, unfortunately, now I don't have on top of my head, but yes, it must be like an accumulated figure, something like that. And as a matter of fact, IP presented it always, and I follow this a bit in my previous job. It was -- it had always been a very successful and a very profitable mill and has [ peaked ] over the last 2 years due to some market development.

Yes. So it seems like you had it on the radar for quite some time. And that brings me to the next question. When you're basically in your previous position, you were the master of uncoated woodfrees. And I mean when I look at this, it's like 50% of the revenues, but the margin is substantially lower. So what's the utilization in these 2 machines and what grades are you envisaging for a conversion?

So on the first question, the capacity utilization is about 350,000 out of 410,000 tons.

88%.

88%, yes. Thank you. And so there was some [ slack ] last year also, but also in connection with outages. They have a system of 5-year outages, which happened last year. On your second question, we do not want to speculate on that. I mean one option is very clear that we could rebuild one of the machines into a FBB machine. That would be technically and economically feasible. But I'm not saying we will do it because that depends on the overall market development. And then there are other packaging grades, which we've invested -- investigated in great detail, what could be done but to start now a speculation on what we will do is much too early because it's for sure, not something which is on the tender in this year or next year, we will take our time to properly understand all the implications. It is an integrated mill, and therefore, it needs an integrated type paper and energy concept. And we have to develop that and optimize it. But what was important also for acquiring is that we could convince ourselves that these options exist both in a technically possible, but also economically feasible way. And that's [ the case. ] And the reason is very simple. If you have a low-cost -- I mean, all 4 machines are, their respective markets in the first cost quartile. And why? Because the pulp mill is extremely competitive, given the wood costs, transport costs, et cetera, as I said therefore, very simplified, you can say whatever you convert to or build new will have a cost advantage, and this is what attracted us.

Okay. On the uncoated woodfree, is that mainly cut size like the Mondi type of product? But -- or is it more -- is it also like bulk material?

Yes, it is even more cut size but also folio and leaves to a smaller degree.

Okay. On the flexible packaging now. We talked about this a lot in the past. Is this position you want to keep? I mean, it's obviously an upstream business, right? So it's [ flexiboard ] papers that you sell to convert us potentially? Is that a selling candidate? Or you really want to keep a very marginal effects of the packaging position?

No, it is absolutely core. So here we are -- so we are talking here about kraft paper in this way. It's MF, machine finished paper in very low grammages like typically [ multi ] gram, which is used for bread bags, fast food service bags, et cetera. And I think that's a growing market because of the plastic substitution. This machine was formally a newsprint machine. And they, so to say, only gradually have changed, and it is only a fully committed MF kraft paper machine since, I think, April last year. And therefore, it is still in the ramp-up phase. And we see that as -- so we are very excited that we can add this because some of our customers in food services who buy carton from us today can use it, and we will investigate options also to add barriers. So the same topics, which we have from the carton side to have plastic-free barriers is obviously also an issue on the paper side, and that offers new opportunities. So this is absolutely -- will be core and fits well.

Great. 2 remaining ones. Are you happy with your pulp integration at this stage, considering Kotka and Kwidzyn? And I mean, there's no pulp mills lying around for purchase in Europe, but is there some scope for capacity creep or something like that?

So we would be happy because so far, we haven't been backward integrated in market pulp. We've been backward integrated with CP&P. Now we get backwards integrated with pulp. And so overall, this will stabilize our results because if pulp prices go up, we will -- yes, have negative effects on our nonbackward integrated mills, but have here a net positive effect indirectly also, obviously, for the other grades. And so in this way, it stabilizes our results and therefore, we like it. In terms of creep, there is little creep with the existing equipment, especially with regards to the recovery boiler.

Yes. And the last one, I see these adjustments on the EBITDA. And then I see, okay, there's a U.S. headquarter cost, something they will not have to pay for at Mayr, but also there is a backward adjustment on CO2 costs. Can you elaborate a bit?

Yes. So the main adaptations we made is simply the difference between U.S. GAAP and IFRS. And under U.S. GAAP, you can capitalize CO2 cost [ understood, ] whereas we take it into our costs. And therefore, this was, so to say, a negative adjustment in terms of it lowers our EBITDA. Equally, we -- the leasing costs, especially the usufruct, which is a 70-year rent, which is paid to the state for using the mill or the plot of the mill is fully capitalized. And as we've included that into our enterprise value, logically, also the costs, which are, however, fairly small, have to be added back. And on the overhead office costs, all head office costs, obviously, all service costs are fully included. We've not restated it for the profit margin, which is made, which we could have done, improving the results, but we didn't do that. We take all the supervision costs from Brussels. But yes, it's a very small number for Memphis. This we took out because they have no equivalent under [ IFRS ]. But it is a very small number.

So okay. Is this saying that you will focus on an adjusted operating profit figure going forward? Or is this just for the presentation of this deal?

It's just for a presentation of this deal because we had to adjust it from U.S. GAAP to actually, the adjustments were -- therefore, we called it also adjustments, simply moving from U.S. GAAP to IFRS with this one exception of the head office cost, which, by the way, were never charged, really, but just were on group level in IP on their managerial accounts.

The next question we received from [ Paul Hofer ] of Jefferies.

I've got 2 here, and I'll just take them in turn. Firstly, Peter, just building on your first cost quartile and the low virgin fiber cost advantage and the wood sourcing in Poland. Could you give a little bit of color to why not only just being close to the forest, but the wood sourcing relationships that you've got in Poland and why this mill is well placed there, I believe it's yourselves and Mondi's [ DC ] mill that have got really strong wood sourcing relationships. Could you just give a little bit more color on those wood sourcing, please?

Yes. Pleasure. So on the one hand side, you have the state as a major owner, and this is done partly by auctions and partly [ contribute ] fixed. But equally, there is a meaningful part of procurement from private owners, which I think is very important and also some imports, which are fairly minor. So it's a balanced portfolio. Especially on the softwood side, it's very favorable. On the hardwood side, it's a bit more mixed because Poland doesn't have so much hardwood. And therefore, we have also ideas how to change it. Overall, wood is a factor of the availability of forests, plus the cost to cut them. And as labor costs in Poland are lower than in, let's call it, Germany or Austria or wherever, that is simply reflected also in somewhat lower wood costs.

And then just following up on the uncoated woodfree segment. I mean, the machines are well into the first cost quartile, and you talk about the optionality to convert them medium term. Could you give kind of a time line of when you're thinking about that because they must be generating still good cash now. What's the offset of giving up that cash generation for the conversion? How are you kind of thinking about that time line?

Yes. I fully agree, they are generating cash. And I mean, we'll be fairly transparent on the split. So if 2/3 is done by the 1 machine, it's obviously 1/3 left for the other 3 machines. So they are generating cash, but not to the extent -- at the moment, at least, not to the extent one would expect such big machines to generate cash. There is to be very clear, no thinking yet about converting both machines. So we see uncoated fine paper as a core business, we want to stay in. What I was referring, and we will, at the beginning, not change anything to that. Over time, which might be 2 or 3 years, obviously, we will look into the profitability and then say, what could we earn with alternative products, minus what we earn now. And if this delta is big enough to justify a CapEx. And if this delta delivers a sufficient return, then we will make an investment, but it's not planned for '22 or '23.

Very clear. And then just 1 last follow-up on -- you talked about the folding boxboard machines now that you've got this second machine, you offer good stability to your customers by having a backup machine. If you think about the synergies going forward into the converting side of your business, could you give a little bit of the optionality you see there? And what does this open up? Do you see further expansions to integrate further into the packaging side?

Yes. I think we -- so strategically speaking, we had a master plan developed mid of last year about what our options are. And there are a number of options, and that includes -- so -- I mean, basically, that were on this list, 2 targets in carton. And by chance, they happen to materialize both. But yes, we are also on the packaging side options. But typically, this would be smaller steps. So buying out private companies, et cetera, and we will see if this materializes. Now for sure, the focus is on integration and on driving the value out, what we have invested. So we will be very hesitant to do anything, which is a bit more meaningful, smaller things you can always do. And -- but the good news is that downstream market is not as integrated as in other segments, like you take, for instance, saying in corrugated packaging. And therefore, there are necessarily or logically more possibilities for acquisitions as well.

And the next question we received is from [ Marshal Beczyiak ] of [indiscernible].

I have 1 question regarding the financials of the company. Would there be any available data for the company itself for the last 3 to 5 years, at least some key financials?

You mean key financials on Kwidzyn?

Yes.

To my knowledge, they are not available. And I think the seller International Paper will also be reluctant to provide them. So I gave you some information, but I couldn't -- I wouldn't be allowed to share more, let's put it this way.

So all the info we have is from this?

I said, I think actually a lot or as much as I could say that historically, the EBITDA was higher. And because of the -- also -- I mean, the uncoated fine paper market was heavily hit by the COVID crisis. So for that over the last 3 years, at least, there was a decline in profits, and it's anyone's guess how and when this can be reversed.

Okay. And then just a last question about the final debt structure you plan to have. One of the questions was whether the final debt structure -- final debt amount will be around EUR 1.2 billion. Is that including also the committed lines you have? Will there be any noncommitted lines still left after this acquisition?

So Franz will answer this.

No. The [ EUR 1.2 million ] was an estimate on the net -- on the future net debt end of '21, which we somehow confirm if no further acquisitions or disposals would take place. And we have seen a high number of uncommitted lines, which we can draw in any case, which are not utilized.

Around -- because now you have somewhere around EUR 400 million of uncommitted lines. What do you expect in the end of 2021, the amount of the uncommitted lines to be?

To be unchanged. We will still keep these open for future opportunities.

So this is a risk buffer. So they are committed but undrawn, and we do not want to draw them. They should be available if something unexpected bad happens. We always want to be on the safe side.

Understand. So around EUR 1.2 billion will be of used lines?

Yes, it will be mainly Schuldschein loan and other facilities, which are already in place.

And the next question is from [ Martine Stockmeier ].

Who are or where will be the main customers located you want to supply with the mill? And do you expect to explore in new markets or customers? If you could share a little bit of light on that.

Yes. The location of customers is overwhelmingly in Europe. And obviously, taking advantage of transport costs. There is a very strong position in Poland and Central Eastern Europe and also Central Europe in terms of Germany. That's the optimization of simply of transport costs, but it's, I'd say, overall very local.

[Operator Instructions] And the next question is from Markus Remis of Raiffeisen International.

Two follow-ups, please. Given that you've now enlarged your production footprint, is there any idea in terms of relocation of production, anything that would make sense economically? And if so, has that already been built into the synergies you gave us both in terms of Kotka and Kwidzyn? And then the second question would be related to the balance sheet. I mean, is there -- or can you share the asset value with us and what would be like the goodwill position at the end of in Q1? I'm sure you don't have the final purchase price allocation, but some kind of brackets the whole answer would be appreciated.

Yes. So on the first question, there will be no closure of an existing mill, if that was your question, to move products. Obviously, there will be relocations in terms of concentration of products to produce -- to avoid having the same equipment everywhere. But -- so individual orders will be relocated, but there will be no closure of another mill. And on the balance sheet, I hand over to Franz.

Yes, on your question regarding asset value. It's too early to say because eventually during the acquisition accounting, we will revalue the existing assets to market value, what we have to do. And we will see where we come up but still under investigation.

Yes, there will, for sure, be some goodwill.

Okay. And any one-offs on the P&L to be expected? Or will that be around book value?

There might be some smaller one-off items, but it will not be a substantial figure.

[Operator Instructions] And the next question received is from [ Sebastian Ratterman ] of Volksbank.

Several questions have just been answered on the balance sheet and the synergies. Could you give some more light on the plus on innovation you see with this acquisition, especially probably a glimpse to the future of plastic substitution? Is it just the IPack stuff or even more?

Yes, it's definitely more. I mean I still obviously be careful in the call because we don't want to be completely open also to our competitors, but we have basically 2 big subjects. One is the IPack which is making good progress, I think, to replace plastic, and we will consider other features to make it even more attractive. And the other is in FBB in cartonboard. And we've talked about it with regards to Kotka, that the big topic of the industry is plastic-free barrier solutions in order to replace plastic, what you did, for instance, for use in cereals, you don't want to have your cereals in the morning in a plastic bag, which is then in a carton board, box because with cartonboard, you can coat it in a way that it's also grease proof, by example, the things are vapor proof, et cetera. And we will -- we have, so to say, that machines are construct or a machine is constructed in such a way that we can build in this more than carton coaters and 2 similar things like it's done in Kotka. And the idea would then be to have backup solutions, but at the same time, also to concentrate on individual products. But it's the -- and then obviously, we had the opportunity for expansion with the potentially new machine or conversion of machines, and there are multiple options then to increase innovation. But again, the first step is now to bring what there is under control and to optimize it and to generate cash. And then only in the second step, we will look more into what other products could we make and how can we drive more innovation. But sustainability is at the core of what we do. And with many options here in this mill to drive innovation. I hope this was complete enough.

Yes. It's okay. One more question. So you have now 2 major acquisitions in really short-term of time. Those acquisitions were mostly in things like innovation and build out the virgin fiber market. So do you still see further acquisitions? And what will probably they look like more geographical diversification or even more strategic in products like this?

Yes. I would like to say very bluntly, if you could ask me this question in 2 years because right now, I think the focus has to be absolutely on execution. Again, we do not want to rule out anything, but we have the confidence of our shareholders and our Board to make this step. And now we have to deliver. And have to pay 100% of our focus on delivering. If -- in packaging, smaller things come up. I think we have because of the divisional structure, the management capacity to do smaller things for sure on the carton side. I don't think that this -- so this is not a question at the moment, let's say. But at a certain point in time, yes, we can look at things, but we don't want to -- I mean, again, it's about stable management, and it's about a solid balance sheet. And that excludes an early next step.

There are no further questions at the moment. So I would like turn back to you.

Yes. Thank you very much. So we appreciate that you took the time to ask many interesting questions, and I hope we could answer them in a satisfactory way. I'm not going to repeat what we've said, but we think this was an acquisition, which was in full line with our strategy. It's an excellent asset, which gives us growth opportunities over many years. But you can also be assured that for the next 2 to 3 years, we will focus on delivering and hopefully over-delivering on synergies and other measures. And we thank you for your support. And we promise you to work hard to make -- to put these potentials into reality. I wish you all a very good day. Thank you.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.