Mondi plc (KYC0.F) Earnings Call Transcript & Summary

Good day, and thank you for joining us Mondi, a leader in sustainable Packaging and Paper Solutions results for the 6 months ended 30th of June 2025, presented by Andrew King and Mike Powell. [Operator Instructions] I'll now hand over to host today, Andrew King. Andrew, over to you, please.

Good morning all, and welcome to Mondi's results presentation. I'm Andrew King, our Group CEO; and I'm joined by Mike Powell, our CFO. I'll be providing some highlights before I pass on to Mike for an overview of the financial performance. I'll then finish with a progress update on some of the important strategic initiatives we are taking to drive sustainable value creation. After that, Mike and I look forward to taking your questions. In summary, I think we believe we delivered a solid performance in the period in what are and will continue to be, in our view, challenging market conditions. Ongoing geopolitical and macroeconomic uncertainties continue to undermine consumer and business confidence, impact trade flows and effect relative competitiveness. In this context, it was pleasing to see that we could achieve volume gains in key categories, supported by our recent investment program and some modest price gains in our packaging paper grades over the course of the first half. Our focus on margin management, cost containment and productivity gains helped to mitigate ongoing labor cost pressures and currency headwinds, largely related to U.S. dollar weakness. Pleasingly, cash generation was strong, a reflection of the inherent resilience of the business and our focus on tight cash flow management. We will continue to prioritize these initiatives in the second half in the face of the anticipated continuation of challenging trading conditions. Importantly, while ensuring we focus on the near-term controllables, we remain intent on positioning the business for long-term value accretive growth. In this regard, I'm very happy with the progress we have made on our key strategic initiatives. All our major capacity expansion projects are operational. [indiscernible] recycled containerboard mill being the most recent start-up in April as planned. The focus is now very much on ramping up and optimizing production and sales to ensure we deliver the promised performance. The acquisition of Schumacher completed in March, and we were pleased to welcome our new colleagues from sites across Germany, the Netherlands and the U.K. While early in the process, integration is well on track. The trading environment is currently dominated by cyclical headwinds. However, I remain very excited by the long-term structural growth drivers in the packaging markets that we serve with our great market positions, long-standing customer relationships, and high-quality integrated and well-invested asset base, we remain very well placed to deliver value-accretive growth for our stakeholders. I'll now hand over to Michael who will provide more color on the 2025 financial performance to date.

Thanks, Andrew. Good morning, everybody, and let me take you through the group's financial results. Our Half 1 2025 results reflect a solid performance in a challenging macroeconomic environment. Underlying EBITDA of EUR 564 million was in line with Half 1 2024, but with increased cash generation supported by good cash flow management. The group's ROCE was impacted by the startup of our major capacity expansion projects, with a larger capital employed base and higher depreciation, more than offsetting the earnings generated from these projects as they are in ramp-up phase. Basic underlying earnings per share were also lower than the last year due to the associated higher depreciation charges, along with higher net finance costs. The Board has declared an interim dividend per share of EUR 23.33. This is in line with last year's interim dividend and equates to our usual practice being 1/3 of last year's total ordinary dividend. Underlying EBITDA was comparable with that prior year. Sales volume and sales prices were both up compared to Half 1 2024. However, the movement seen across each business unit do vary, and I'll come on to that on the next slide. But before I do so, just on costs and other items, they were a touch higher, shown by the GBP 11 million that you see on the chart. This includes some expected start-up costs with the commissioning of the paper machine at our [indiscernible] mill in Italy, which we were pleased to successfully start up in April this year. On fixed costs, we demonstrated really good cost control to drive operating expenses lower, which offset the impact of labor cost inflation. Input costs were broadly stable overall compared to the prior year, supported by our cost-saving initiatives. And as we enter the second half of the year, I would expect some modest input cost relief as we continue to drive efficient procurement practices across the group. From a currency perspective, you'll recall that we had a one-off loss in Half 1 2024 from the devaluation of the Egyptian pound. The nonrecurrence of this in 2025 was partially offset by currency headwinds. Our largest non-euro currency exposure is the U.S. dollar, and that weakened during the second quarter and into the third. And lastly, the forestry fair value gain was lower this year, the absolute and half of EUR 18 million compared to the EUR 49 million of last year, giving you the delta that you see on the chart of EUR 31 million. Adding all that up, results in an underlying EBITDA of EUR 564 million for Half 1 2025. If I now look at each of the business performances in turn, Corrugated Packaging delivered an improved performance underlying EBITDA up 42% to EUR 203 million. This included a small contribution from Schumacher in the second quarter. In containerboard, the business delivered strong volume growth, supported by the ramp-up of capacity from recently completed projects. This includes the debottlenecking project at Swiecie in Poland, the modernization project at Kuopio in Finland and most recently, as I mentioned, Duino in Italy. On pricing, containerboard selling prices were higher than Half 1 2024 average pricing following the implementation of price increases during the period. These increases largely reversed the price erosion that we saw at the back end of 2024 and were partly driven by top support from increasing paper for recycling prices in the period. Since June, we have started to see some pricing pressure on our recycled grades with cost support diminishing as paper for recycling prices reduce. In Corrugated Solutions, box volumes, excluding Schumacher, were up on the prior year, driven by our customer relationships and improved demand for sustainable packaging solutions for consumer and e-commerce end-use applications. Turning to flexibles. Flexible Packaging business delivered an EBITDA of EUR 302 million, which was in line with Half 1 2024 after you take account the prior periods, one-off loss from the devaluation of the Egyptian pound recorded last year. Kraft paper sales volumes were lower year-on-year as the volumes produced at our new paper machine at Steti did not fully replace the previously produced volumes at the Stamboliyski mill, which we closed in the second half of 2024. On pricing, kraft paper prices were higher on average compared to the prior year. The year started with reduced prices following some erosion at the back end of 2024. This was followed by the implementation of price increases during the half year in Europe, while pricing in other regions was relatively stable. In paper bags, we achieved good sales volume growth across all regions, supported by the growing demand for traditional building material and cement applications as well as increasing demand for e-commerce solutions. And in uncoated fine paper on the right-hand side, although market conditions remain muted, we do continue to gain market share supported by our strong customer offering, delivering stable sales volumes in the period compared to the prior year. Uncoated fine paper selling prices were lower compared to the prior period due to a combination of entering the year at reduced levels following price erosion over the second half of 2024, coupled with further price reductions in Half 1 2025. These reductions were due to softer market demand and weakened cost support from pulp price movements which increased modestly during the period before reducing towards the end of the half year period. And lastly, as previously mentioned and separated out here, the business recorded a lower forestry fair value gain compared to Half 1 2024. Let me now take you through the movements in net debt. We started the year with net debt of EUR 1,732 million. Cash generated from ops is made up of the an extra items you see. That's the EBITDA contribution I've just taken you through of GBP 564 million together with GBP 130 million investment into working capital, which was mainly a result of higher trade receivable balances at 30th of June following those price increases achieved during the period. I'd expect working capital inflow in the second half of the year, supported by our tight working capital management. We continue to invest through the cycle, nearly EUR 350 million of capital expenditure in the period. This includes the investment into our major expansionary capacity projects alongside investing to enhance the competitive advantage of our operations, and Andrew will touch on this a little later. Interest, tax and ordinary dividend payments, GBP 167 million and GBP 202 million, respectively, as you see on the slide. And lastly, we completed the acquisition of Schumacher on 31st March 2025. Really excited by this opportunity it brings to the group. And although we've only owned the business for a few months now, we already see the benefits of being able to offer our customers a broader product portfolio as well as increased integration across the value chain. So to conclude, all of this leaves the group with a net debt balance at the end of the half year of around GBP 2.6 billion, leverage at 2.5x. The expected business performance and cash generation in the second half should lead us to a lower leverage by the end of this financial year. On capital allocation, framework has not changed. Discipline has not changed. We maintain a strong and flexible balance sheet. We continue to generate cash, enabling the group to invest in the business alongside paying ordinary dividends to shareholders. And as evidenced by the recent acquisition of Schumacher, we always evaluate M&A. Our focus now is very much on delivery from our current asset base. And my last slide on technical guidance. Where relevant, we've updated the technical guidance of 2025, reflecting the inclusion of Schumacher. As you'll recall, our previous guidance published in February excluded that effect as we had not acquired the Schumacher business at the time. Our capital expenditure expectation for 2025 remains at EUR 750 million to EUR 850 million as we can cope with any Schumacher spend within the previously guided range. The depreciation and amortization range has increased by EUR 25 million to EUR 475 million to EUR 500 million, and our effective tax rate is unchanged at around 23%. Net finance costs expected to be higher due to higher debt levels post the debt-funded M&A. We previously guided to the incremental EBITDA contribution from major capacity expansion projects to be in the range of EUR 50 million to EUR 100 million in 2025 with the upper end of the range representing mid-cycle pricing levels. Based on current prevailing prices and the fact that we're halfway through the year already, I would now guide to EUR 50 million to EUR 75 million for the year. About 1/3 of that has already been delivered in the first half year numbers. There is clearly no change in our confidence that these major expansion capacity projects when fully ramped, will deliver mid-teen returns on capital through cycle. With that, let me hand you back to Andrew. Thank you.

Very good. Thanks, Mike. I'd like to just now quickly update you on the progress we're making on certain of our key strategic initiatives. As Mike has already mentioned, when we look at our free cash flow priorities, investing in our business has and always will remain a priority. We are firm believers in the merits of investing on a through-cycle basis with the objective of providing a great value proposition to our customers and ensuring long-term competitive advantage. As you all know, we have made a number of significant investments over the last few years in expanding production capacity with expenditure totaling around EUR 1.2 billion. The phasing of the cash out for this program, you can see is reflected in blue in the chart on the slide. Similarly, the recent Schumacher acquisition for over EUR 600 million, both extends our geographic reach and add significant capacity in our Corrugated Solutions business. Our attention now turns to delivering the expected returns from these investments through optimizing the commercial and operational ramp-up. While we acknowledge this is not easy in the current trading environment, we are nonetheless very confident that we have invested our shareholders' money in the right assets serving the right markets. Given this well-invested asset base with sufficient capacity to support the next phase of growth, we are now able to pull back capital expenditure over the coming years without prejudicing the upside we expect to come as markets recover. We will do this while ensuring our business remains highly cost competitive by continuing to invest appropriately in driving cost advantage. The focus of our capital expenditure in the short term has very much turns to enhancing cost competitiveness, resilience and environmental performance. This next slide provides more detail on what our recently completed expansion in capital expenditure program does bring to us. The first thing to note is that the combined EUR 1.8 billion of expansionary CapEx and acquisition spend is all in our growing corrugated and flexibles markets, which are supported by the ongoing growth in e-commerce and sustainable packaging solutions. As I mentioned in my opening remarks, while growth has been impacted in the short term by current macroeconomic events. We remain convinced that the long-term growth drivers are very much intact. This is supported by the ongoing dialogue we are having with our customers where the drive for sustainable packaging solutions remains front of mind. As you can see on this page from these investments, we've also strengthened our geographic footprint, most notably, as already mentioned, with the Schumacher acquisition, which has extended our reach in corrugated solutions across Northern Europe, complementing our existing strengths in Central and Eastern Europe. We've increased our levels of integration, notably with the new paper machines in [indiscernible] and Steti, which ensure security of supply to our growing converting operations and allows us to reduce costs through supply chain optimization. Similarly, the expansion of capacity for the production of virgin paper grades, at our flagship operations in the Czech Republic and Poland, together with the expansion of a new semichemical grade at Kuopio, Finland bring both highly cost competitive capacity and a broadening of our product offering. Importantly, we've also invested in expanding our innovation capabilities. We now have dedicated innovation hubs for our packaging offerings in the Czech Republic and Germany, with a third site currently in development in Poland. On the topic of innovation, we are very excited by the ongoing potential we see to innovate with our customers. By bringing pilot lines, testing capabilities and co-creation spaces together under 1 roof in our innovation hubs, we can reduce time to market for new packaging and paper solutions. On this slide, you can see a picture of the newly opened innovation and customer experience center in [indiscernible], Germany, which complements the corrugated special focused center in Bupak in Czech Republic. We have a unique capability to be truly material agnostic when it comes to providing advice on packaging solutions to our customers. As you'll see on the slide there, we use this capability together with our expertise in sustainability and the relative relevant legislative frameworks to support our customers in developing packaging concepts that are right for them. Importantly, these ideas they need to be brought to life through rigorous product development and commercialization where we have proven capabilities to support our customers. As always, an important objective of our through-cycle investment program has and will remain to ensure we've maintained cost advantaged assets in our upstream pulp and paper mill. These ensure we remain strongly cash generative through cycle, provide security of supply to our customers and allows us to plan for the long term with further investments that provide both growth opportunities and further cost optimization, something that more marginal producers simply do not have. Of course, judicious investment in the right assets is not enough in itself. They also need to be run well. Here, our culture of continuous improvement is critical. We are always looking at ways to improve and drive operational excellence. As you would expect in the current downturn, we are redoubling efforts around productivity and cost optimization. To summarize then, we fully acknowledge the ongoing challenges posed by a very uncertain macroeconomic environment. In this context, we delivered a solid performance in the period. And going into the second half of the year, we are very focused on our near-term deliverables, which include the successful ramp-up and optimization of our expansion projects and the Schumacher acquisition integration, ongoing proactive margin management, an intense focus on cost control and productivity and cash flow optimization, which includes tight working capital management, working capital management and focusing our capital investment program on essential [indiscernible] CapEx and high-return cost optimization opportunities. But similarly, we remain very confident in the long-term value creation potential of the business. We have a unique platform, offering a broad range of sustainable paper and packaging solutions with leading positions in structurally growing markets. We have a well-invested cost advantaged asset base putting us in the ideal position to support growing customer demand. With our strong balance sheet and proven track record of execution we believe we are well positioned for sustainable, long-term value accretive growth. With that, I thank you for your attention, and I'll hand back to the host for the Q&A.

[Operator Instructions] Cole Hathorn, can you please unmute and ask your question.

We can't hear you if you are talking. Can you unmute?

Just took a little time to join there. Can I start off with the cost dynamics, Mike, you mentioned that input costs are broadly stable with some relief into the second half driven by procurement initiatives. Just like some more context of what are the key input cost buckets doing here? And what gives you confidence in the relief into the second half? And then, Andrew, I'm hoping you can give some context on how we've seen order books or the business change over July because a lot of your peers talked about kind of a softer June and in the U.S., in particular, we saw some recovery in July. So I'm just wondering if you're seeing any changes from customers and order books kind of weaker June and then stabilization into July? And then finally, a question on your CapEx slide or your major CapEx slide. You talked about the EUR 1.2 billion of major CapEx, but the underlying maintenance CapEx, we should still think about that as in line with depreciation because on the chart, you do have -- I assume the Ruzomberok and Richards Bay recovery boiler kind of cost-focused investment. So just thinking about the underlying level of CapEx per annum should be broadly in line with depreciation?

Cole, thank you. Let me start. I've never been so pleased to hear your voice, Cole, because you always worry about technical glitches on days like this. So very pleased to hear you come through. Just on procurement, in terms of the big buckets, what are we seeing? I think first, it is self-help. So there's some really good initiatives going on with our suppliers that the team have been working through in partnership to drive efficiencies and share wins. So the sort of the internal help because then the economy is still pretty flat, as Andrew has talked about, and that allows some price downs on procurement. That's not necessarily good overall for all of us or the economy. But we are seeing some price weakness still in some of the major categories. If I think of energy, that's coming down [indiscernible] is coming down. There's obviously a counter to that, which we can come on to in the RCB prices. And we're seeing some softness across other categories as I say, that we're working hard. So it's a little bit everywhere, Cole, in terms of the initiatives. But when numbers are weak, these numbers start to add up a little bit, and they're very useful when certainly you're looking at half-on-half bridges. Andrew?

Yes. I think just to add to that, I know wood is always a big topic. But Mike rightly didn't raise it simply because it's pretty benign. I mean, if we look wood costs are generally fairly flattish. There's a little bit of rolling over in our Scandinavian mills, I think, but otherwise pretty flattish, which -- so in some ways, remarkably unremarkable. Just on the order book situation, I think it's always dangerous to sort of quote literally one month to the next. I think it is fair to say that not so much reflected in order books per se, but clearly, Q2 was a bit weaker in the corrugated industry more broadly than Q1. If you look at the European delivery stats and the like. So we definitely saw a bit of a slowdown, probably most profound in kind of April, May, June was a little bit better. And certainly, when we look at our order situation, it's decent. I would hesitate to say it's strong, but it's also certainly not weak or anything like that. So I think it's wrong to call it from literally one month to the next but it's not bad at all. It's not -- but at the same time, we're not seeing a very strong upward momentum that one would hope in a kind of recovery phase. Similarly on the -- in the Bags business, which is obviously a nice forward lead indicator for that value chain. As you saw from our numbers, roughly 5% volume growth in H1, which is a decent number. And I think it's also reflective -- I think we're a bit ahead of the industry as a total. But within Europe, you saw the industry numbers also up quite nicely. Again, when we'd have to say the first quarter was stronger and then it slowed down a bit in the second quarter. But having said that, the June numbers were a bit better again, and certainly, again, our order books are decent on that side as well as they are on the kraft paper deliveries which are more global in nature. And I think finally, the U.S. there is a bit flatter year-on-year, but certainly not weak. But I think it does mask some volatility that we've seen through the period. Undoubtedly, everyone alludes to the various trade discussions and the tariff discussions that go back and forth. Undoubtedly, for example, during the half, we saw a rapid drop-off in orders out of China for obvious reasons when there was at the height of the tensions around the trade tariffs, that came back again. So -- but it's obviously affected, for example, the pulp deliveries out of our Hinton mill, which -- a lot of which goes into Asia. Similarly, I think the global pulp prices have also been impacted in the short term by those disruptions. Hopefully, as being stabilized and everyone understands the rules of the game, and they settle down, some confidence can come back into those markets and we can see those develop. And maybe if I -- Mike can give you the detail CapEx, but in short, yes, I think we agree that depreciation is the best guide for [indiscernible] business. You mentioned those boilers, there's always a combination of factors in there. There is an element of stay in business in those boilers, obviously, because we are replacing old boilers. But of course, there is an expansionary element as well, not in terms of new capacity, but in terms of cost optimization because we are effectively, for example, in South Africa, replacing a coal-fired boiler with a much more efficient biomass boiler, which brings huge environmental benefits, but also cost benefits to us likewise in Slovakia, where we're increasing the biomass energy capacity and efficiencies. So that brings us margin enhancement in addition to the [indiscernible] business element. And clearly, we're always looking at those sort of opportunities. But in short, same business CapEx, we still guide to roughly depreciation [indiscernible].

And you've seen, Cole, we've added in some early guidance for next year. That really reflects exactly what Andrew just said about [indiscernible] business being around depreciation plus the boilers, plus the balance of the spend of the GBP 1.2 billion. So hopefully, that's useful for early views on next year, too.

And next raised hand is from Charlie Muir-Sands.

Can you hear me okay?

We can, Charlie.

So obviously, you alluded to some softening in recycled containerboard prices towards the end of H1 and looking into H2. I just wondered, obviously, all the new supply coming into the European market is on the recycled side. You've got quite a lot of exposure on the [indiscernible] side and within that into niche premium grades. I just wondered what your view was in terms of the chances that there can be quite good resilience on the kraftliner side, given that there isn't really any capacity coming in there? Secondly, just on the kraft paper volumes, I think you said down in the first half, but you obviously alluded to some good leading indicators around the actual paper bags. Was that just the phasing of the ramp-up of the steady capacity not yet meeting the retired capacity from Stamboliyski? Or is that a reflection of where demand was for your external customers? And then the last question also on the flexibles business. I just wondered if you could give a bit of color around the performance of Cflex versus the paper value chain?

No, very good. I think there's a few there. So firstly, in terms of, call it, the containerboard pricing dynamics, as you say, and Mike mentioned it clearly, the recycled containerboard is where all the new suppliers, as you rightly say, that is where the market is in oversupply. And as a consequence, pricing right now is frankly being driven by the cost curve. So we saw PFR prices go up and recycled containerboard prices followed that. Simply, there's no margin for the higher-cost producers. But likewise, as soon as the PFR price started to come off that gave relief to the higher end of the cost curve, and that was properly passed on because of the intense competition in that market. It is clearly a somewhat different dynamic on the virgin grades, as you rightly say, and even more so in those niche virgin grades where we have a big exposure. The supply side is much more constrained. There's a little bit of new capacity coming on, particularly in the sort of unbleached kraftliner but it's really clearly limited, and it is a more consolidated market more generally. And I think that is reflected in the pricing dynamics. So we did see some modest price increases on the virgin side particularly in unbleached kraft space, less so on the white top, and that is often the case because the white top products, typically, if you look in the long term, the pricing is typically a bit more stable. And those that's held into the second half in spite of, as you rightly say, the recycled prices coming off. And there's good reason for that, as I said, because of the supply side dynamics being so totally different. So can one see the virgin to recycle spread widening and staying wider? I think there's every reason to believe that, that can be the case. Will it ever totally decouple? As I always say, that's not likely to happen because, of course, you will drive aggressive substitution, you would use heavier and heavier basis weight of the recycled side, for example, to substitute for the stronger version if the pricing got too far out of kilter. But a lot of the easy wins there have already taken place. So yes, I mean, the [indiscernible] is holding up well in that context. And clearly, is more resilient with a much better supply side dynamic. To your second question on the kraft paper and the volumes down and what it does it relate to you. Clearly, in our world, it is partly related to, as Mike said, we were down and -- we had a full first half contribution from Stamboliyski last year, which is clearly out of our business now. and we were just ramping up that PM10 through the half. But it's safe to say, it wasn't all that because of that, there's also a market dynamic at place in place, as you rightly say, the underlying bag demand was decent, but there seem to be something of decoupling between bag demand and craft paper deliveries in the half. I say [indiscernible] because we can't fully explain it ourselves. But if you look at the industry delivery stats on the kraft paper market, it was down year-on-year into Europe. I'm saying, well, the bags were growing. And funny enough, this was an exact reverse of what happened in the first half of last year [indiscernible] in some ways, you couldn't explain the reverse situation where kraft paper deliveries are much stronger than the underlying bags. In some ways, I'd much rather have it this way around because the underlying bag demand is what really is the true underlying demand picture, and it's encouraging that is going off of the lowest pace that we saw from the previous couple of years. But nonetheless, I'm showing solid growth. I think there's always the sort of destocking effect that takes place in this sort of dynamic and no doubt that has contributed somewhat to the slight discrepancy. But we are confident that we continue to see a good underlying bag demand. More importantly -- as importantly, on a global basis, the demand picture is pretty decent clearly in our export business in kraft paper. A lot of it is exposed to the cement industry and cement in emerging markets, which is a big exposure there seems to be reasonable, but still not rampant. Again, I don't like to keep coming back to it. But if we start to see a settling in terms of the rules of the game around the trade dynamics, I think that could be very helpful. And maybe another point to mention in this business, obviously, it is also one where we have some dollar exposure because we are exporting into countries which are effectively either dollar priced or certainly, we're competing gas dollar-based competitors and this is where the recent dollar weakness is a headwind into those markets. And then sorry, last point on the CFlex performance, solid. It is -- it is -- as we keep saying, very defensive in nature -- by nature of this business, it's mainly food, beverage, other consumer [indiscernible]. It is evident that in the current world, the European consumer is still anxious about life and probably trading down a bit still they still buy their pet food, but maybe not quite as exclusive of [indiscernible] food as they used to. In better times, and that does have some implications, but nonetheless, very robust earnings out of that business. So I hope that answers your question, Charlie.

Yes. One more, if I could just dive in. Just on your outlook for 2026 and the lower CapEx and the focus on delivering on the returns of the investments you've already made. Should we read anything into that around the engineering assessment on Hinton or is that just because Hinton would not be a project that would really start to cost money until 2027 plus?

Yes, it's more of the latter. I mean, we are -- I think, as we've been saying, we're working on the feasibility right now, which is more the technical the permitting and everything else like that. I think as we've said before, realistically, the first call won't be able to make on that as early next year. And even if we push the button, then the actual cash out in the year 2026 would be fairly minimal. So you can say it's wrapped up in there. But clearly, in the current [indiscernible], we also will be looking closely at how those markets develop and of course, how the trade situation develops as well because [indiscernible] might be a deal with the EU. As you well know, there's a lot of other uncertainties that still exist around the trade impacts of dealing with the U.S. in particular.

And the next raised hand is from Brian Morgan.

Two questions from my side. There are a couple of moving parts this period in terms of operations. So you've had [indiscernible] coming in, you've got [indiscernible] volumes coming in. You've lost Stamboliyski, as you said. So just trying to get a sense of maybe like a like-for-like volumes evolution for corrugated and for flexibles. Are you able to provide that?

I mean, CapEx, we don't think -- I mean when you think like-for-like, you think M&A activities, and we can say, if we exclude the Schumacher volumes, which only affects our Corrugated Solutions business, we were up I think, [indiscernible] in volumes. So I call it organic growth in corrugated would be about 1% to 2%, I think. Otherwise, everything else as the numbers show, so they're not affected. But I don't think it's right to sort of start doing like-for-like comps on CapEx. CapEx is part of your organic growth, I believe.

Okay. Cool. And then, Mike, maybe a question for you. Are you able to provide us with FX headwind by division during the half?

Gosh. Off the top of my head, I think you're on about translation FX. As Andrew said, the dollar weakening affects our business quite a lot in terms of pricing in export markets and certainly for pulp markets. But if you just talk in translation FX, probably more in kraft earnings than in corrugated. And it's probably not the biggest element. The bigger element is probably the trade flows and the effect of the dollar. I mean, in fact, Q2, Q1 was pretty stark because, of course, you had a very strong dollar in Q1 and a very weak dollar in Q2. So the shift between Q1, Q2 was probably about EUR 15 million just because of the dollar. But again, as we sit here going forward, better currency headwinds, the dollar is strengthening a little bit, having weakened now but it's still weaker than the first half.

The important thing is the relative competitiveness. And of course, if you have a euro and/or Polish zloty, Czech krona type of dollar production base, and you -- some of your businesses into export markets or imports can be attracted into your market because of the relative strength of the euro, and then that's the bigger effect. So if you look at on the margin, you do a bit of export business and it becomes less attractive if you're selling it to, call it, a weaker dollar markets. So I think as Mike says, that's the bigger effect of the, call it, weaker dollar environment than the direct impact the direct impact, probably, frankly, most profound in our flexibles business because we do have a U.S. business there, which on translation means less euro profits but also we sell some kraft paper on a global basis. And even when you're selling into Egypt, for example, it's de facto a dollar market.

The next raised hand is from Lars Kjellberg.

A couple from me left. So looking at the flexible business, we're quite a lot weaker than I had expected for various reasons, you mentioned some of them. But you didn't mention any start-up related costs to Steti, which I would assume would not be insignificant. So if you can clarify a bit on that. The other point there, I suppose, you talked about in about 1/3 of the contribution expected for the current year was realized in H1. And I think in the last time we spoke around the Q1 trading statement, you said the 50 to 100 at the time was a net number, net of start-up costs. So -- but that doesn't necessarily make a great deal of sense to me. But -- so if you can clarify start-up costs versus -- is this sort of 1/3 of the 50 to 75 now? Is that a net number, net cost start-ups? So that's really -- I just wanted to get some clarity on that. Schumacher, you did mention a small contribution. And of course, it's kind of an interesting and good acquisition for you. But can you help us understand what sort of run rate you are and what sort of contribution we should expect in H2 from Schumacher? Of course, we know the '23 numbers and '24, you haven't been able to share in the past, that would be helpful. Final question from me. And I should know this, but I don't, your share of kraft paper and the export share of your total output would be helpful.

Okay. Should I start and we'll dip in. Steti was positive so we don't start up costs are part of the process and Steti was making money and contributing into that 50 to 75 in the first half. So I don't know how you define start-up costs, but it wasn't negative if that's your question. The one that did carry some costs, which I called out was Duino. That's because it started up in April and you have those start-up costs. That was probably the order of 10 in the quarter. So if you sort of fuss about sort of start-up costs, I mean, we tend to look at the whole year and that whole year contribution is net of everything. That's the 50 to 75. But if you said what was the Duino's startup cost, it's about 10 in the quarter. Obviously, as the year goes on, that will turn into profitability, and that forms part of the 50 to 75. So hopefully, that wraps up your sort of first and second point. Schumacher, we've said the guidance for this year is about EUR 30 million for this year, there's probably about 1/4 of that delivered in quarter 2. So therefore, obviously, 3 quarters to come in the second half of the year. We've clearly only just got the business, the synergies within that, probably a net nil this year. That's in line with our expectations. So we've got some synergies, but we've got some costs to deliver those. We remain very confident of the EUR 22 million of synergies. As we move forward, those will obviously come in '26 and '27. And clearly, the run rate, the synergy is only one part of the story. And Andrew, you might want to touch on the integration. The second part, of course, is the volume ramp-up to increase the run rate of the EBITDA and the volume through the factories.

Yes. I think just quickly on Schumacher. I mean, clearly, it is [indiscernible] there are 3 parts. There's the, call it, base business as it is, then there's the synergies, the cost synergies, which we referred to, which we extremely confident on. And clearly, we're looking to beat that number if we can find the opportunities, and I feel we should be able to, but we're not yet confident enough to be talking about that. And then there's the, call it, capacity optimization opportunities, which we're working hard to achieve. And as I said in my opening remarks, clearly difficult in the current environments, I mean, box volumes in Germany, if you take the industry numbers were kind of flat year-on-year. So it shows the market still struggling, albeit there are some signs of life if we're looking to see some bigger government expenditure, which has obviously been promised and hopefully now with some clarity around tariffs and that can also drive some more confidence in both amongst local consumers, but also amongst local businesses. And I think that can all go to contribute to getting Germany back on the front foot in terms of growth. And of course, we are well positioned to benefit from that. Just on the kraft paper, I'm not going to give you specifics on export positions in kraft paper itself that is clearly, as you can imagine, quite commercially sensitive. But in broad terms, if you take our kraft paper and bags, value chain, probably these days around -- it's around 50% Europe, 50%, call it, non-European business, which obviously includes both the bags, operations on a global basis where they are located in the markets that they serve, but also obviously, the paper that we export largely a lot into our own bag production. And of course, we also sell into the open market on the export business.

If I can just squeeze in one more.

[indiscernible] you got anything else.