Sylvamo Corporation (SLVM) Earnings Call Transcript & Summary

All right, everybody. Welcome back. I'm George Staphos, BofA's paper and packaging analyst. And next up is our panel on capital allocation. What's the best use of capital for all constituencies and do equity holders lose when everybody else wins? Now obviously, the answer to that question is no, but we're going to find out how everybody wins in terms of capital allocation choices. One of the things that we're really proud of this conference over the years is it's -- obviously, we love the corporate presentation, the firesides, but we have a chance to do panels and expert discussions on key topics from folks who are closest to it and most expert in it. And we are delighted with our panel today. First off, we have Howard Coker, Chief Executive Officer of Sonoco Products, who I think has had every job at Sonoco over the years, having started back in 1985. Howard, welcome.

Thank you, George.

Always an honor to have you here. Same for John Sims, John is Senior Vice President and Chief Financial Officer of Sylvamo, having joined Sylvamo through International Paper and New Red IP only going back to 1994. So -- and also John has had a number of senior leadership positions. And then we have Fredrik Weissenrieder, who is the consultant on capital allocation, in my view, on the paper and paperboard industry. He is -- his company is the company behind [ Wiser ] CapEx, the world's first application integrating CapEx budget management and strategy facility for the industry, but I know Fredrik has worked with these fine gentlemen on their projects and a number of the other companies that are here at the conference. So Fredrik, thank you for coming, especially with all of the travel issues from and now back to Sweden. So thank you.

Thank you.

And good morning again, everybody. So I guess, first off, on the -- and this panel is being webcast, which is unusual. Usually, the panels we don't webcast.

Howard, John, what are your capital allocation priorities for '25 and '26? Broad question, but interesting time given the industry. So capital allocation is going to be a really important way that shareholders get return over the next couple of years. So maybe, John, why don't you start and then we'll go to Howard and then we'll go to Fredrik.

Yes. In terms of our capital allocation priorities for this year, first and foremost, we're always focused on ensuring that we have a balance sheet that allows us -- a strong balance sheet that allows us to invest through the cycle. And Sylvamo right now has a net debt of around $600 million, so 1x EBITDA. So that's not a priority for us this year. But the second use and second priority is ensuring that we're investing to maintain our competitive advantages. And then the third, which is the big focus for this year is reinvesting in really high-return projects in our flagship mills that can give us the potential to grow our earnings and cash flow in the future. And that's what we actually announced after -- when we did our fourth quarter earnings, making $150 million investment in our what we call our flagship mill and Eastover, South Carolina, where we're going to be able to increase our production of uncoated freesheet, reduce costs, increase our efficiencies and generate almost $50 million of additional EBITDA and significant more cash flow going forward. So that's the priority for this year.

And John, that's -- again, that was $150 million of CapEx, you said.

That's right, about $145 million...

Yes. Howard?

So very similar to John in terms of the categories. The difference is that we have leveraged up. So we've done a couple of acquisitions over the last, call it, 3, 4 years. And so a major focus is certainly to get our debt down to more historical levels. So it's very publicly stated that in terms of the multiple we're looking at over the next 2 years. Secondly, and very importantly is our dividend, which this year will be the 100th consecutive year of paying dividends, so returns to the shareholders in the form of dividends. And thirdly, again, as John said, there's capital deployment within the businesses. And frankly, those are somewhat in a priority basis with getting our leverage down, but making sure we're paying our dividend. Really -- and we'll talk about this through the course of this conversation, I'm sure, George, but really excited about the number of growth capital, productivity capital projects. And the challenge for us in '25 and then 26% is to balance all of that.

Yes. Just actually, Howard, just quickly for you. Remind us again, leverage you want to get it to under 3x in a couple of years.

Correct.

And then two, if you look back over time, how much of your overall return to the shareholder and if you have a time frame in mind, comes actually from the dividend because I think it's -- as investors, we always focus on growth. We've always focused on the stock price rightly. But a lot of that return to a shareholder over time comes from the dividend. So if you've looked at it, how much of your return to the shareholders actually come from that 100-year record on dividends?

Well, I mean, if you look at our yield right now, it's around 4.3-or-so percent, which is a reflection of where our share price is right now. Normally, we're around the 3% type. But certainly, while we focus on the dividend, yes, share accretion is extremely important to us. We're in a cycle right now that we will be coming out of. So it will be dividend as well as accretion.

Thanks, Howard. Fredrik, a question for you. As regards projects that you see companies look at, what's the biggest learning that you try to relate to them? What's the biggest pitfall that you see companies as you're allocating capital and particularly to projects tend to be on the watch at or need to be on the watch out for? What would -- how would you edify us there?

It's good return projects because good return projects are usually found in mills or in plants where you're not actually making money. So that's what you should watch out for. And I'm not going to explain why that happens now. But as soon as you see in a manufacturing company, if you see a project with a 2-year payback, high internal rate of return or high net present value, then it's usually where you don't actually want to invest, but you're led to believe that you want to make that investment because it has such a great return, but you're not making enough money from that business. So that's usually what happens, the short answer.

So if you can maybe dig a little bit further into that, Fredrik, I guess my takeaway on this over the years has been that you need to be much more holistic about the investment. If you're getting a good return on the head box that's great. But the winder maybe in deep trouble. You have a 20-year-old car, you fix the tires, but the carburetor may go. And so help me understand what -- if, in fact, we're on to the right in terms of what you're trying to get.

Yes, exactly. So the big mistake the company makes -- and I'm not surprised they make it because they are taught to do this in school and when they get their first job in the industry. And that is to at all, look at CapEx projects. I mean you need to do that. But to answer the question, should we do this investment or not, then you can never find that answer by looking at that CapEx request and that payback and the value that, that brings incrementally. You need to look at the whole company in one calculation instead of a CapEx calculation. You need to look at the whole company and how that looks and then simulate if that CapEx together with everything else that you're going to do if that brings value or not. And then the result is usually that these high-return projects that look so good, especially when you do your budget ranking, they were actually throwing out the window and you do other things instead. And you make more money as a company.

Thanks, Fredrik. Any thoughts on that, gentlemen, in terms of how you've looked at some of your bigger projects? Horizon looks like it's doing very well for you, Howard, even though it's been a maybe tougher macro. John, you've got Eastover coming up. So any thoughts on that to the extent that you can share?

Sure. I'll go first. And I think, Howard, you said you use Region Rider, we use this methodology. It's very systematic approach. You take a very long-term view of your assets. And you're making decisions by looking at various projects and opportunities across the systems that maximize your cash flow. And as Fredrik said, sometimes that means projects or capital that would be high returns on mills or facilities that aren't going to last very long. You'll not do those and you'll focus on -- and that's why we call these mills in our systems, flagship mills. These are mills that are going to be around for a long time because of their competitive positions, because of their technical age, you're going to generate a lot of opportunity to generate a lot of cash, and that's where the engine of your cash comes from. And that's the methodology he talks about is you really want to focus on those investments that are going to generate the most cash for the company long time.

Yes. I think, George, I mean, put it in layman's terms, you laid it up beautifully. I mean, you've got a car that needs repair work. And guess what it's going to run right after you do that repair work or you could go to your main car and invest maybe even less or more, and you're going to get that much more horsepower, that much more longevity that much more performance by making those type of decisions. So in our case, working with Fredrik, going back really 7, 8 years, you mentioned Horizon, but it started way before that. And that's what we ended up with is 2 or 3 really powerful mills while we took out, which we didn't recognize over many, many years, the mills that were demanding capital just to get up the curve and then back and you're investing and investing. So I think your analogy is perfect.

In a world that has been focused on growth, right? And you look at correlation of valuation, it's really, really high. We did a recent presentation to another company that sort of spoke to that as a key driver. How do you balance the growth and the desire to grow and grow top line, which we all focus on relative to, hey, I can generate a lot of cash out of my fleet of mills and putting the money there as opposed to maybe doing a new product line. And similarly, in some ways, what you've just done in terms of the portfolio, TFP, probably most people would say had a maybe a stronger top line growth profile over time than, say, Eviosys. You may disagree with that, but in terms of how we think about cans, tell us how your capital allocation framework worked in terms of, gee, we're going to get more cash and have a stronger position there versus TFP over time?

Well, the first part of your question is, certainly, we focus on both actually, the growth opportunities, the productivity opportunities. But to get to the second side of it, that's really a portfolio question and it's much larger than just capital. What gives you the right to be in a business that you can earn greater returns on than the competitive landscape. And that was part of our analysis with TFP as our market position and where the market was going, growth for growth's sake is not what we're all about. We want to grow and grow profitably. And when you have a position like we have, we see what the majors are doing, we made the shift. And so we shifted into what we felt like was core competency businesses that we understood intimately. And with that gives us the opportunity to make the right investments both from a growth perspective as well as from a productivity perspective. But I just want to repeat that. I've had this conversation a lot selling our flexibles business. If flexibles is growing 3% to 4%, does not mean the world's flexibles leaders or companies are all earning the same type of returns and growing at the same rates. And -- do we have the right to do so.

Sorry, if I may?

No, you may, actually.

What Howard said now, I think it's so important. There is some confusion here usually regarding growth industries and businesses that grow versus making money. You don't make more money as a company on a growing market than you do if it's a flat market. That's not what determines it. We see often companies wanting to migrate from doing something that isn't growing much to do something else on a market that is growing. They think they're going to be making more money when they do that. But that's not true. Absolutely not true. And so there's a misunderstanding that people think that growth means that you can make more money. That's simply not true.

So -- but there has to be sort of a break point, I mean, oversimplifying it. So where have you found -- and certainly, John, one could say that the growth outlook for uncoated freesheet is perhaps mature. So there has to be a breakpoint where, okay, plus or minus a couple of percent, you can make a lot of money investing in those businesses versus, hey, look, the PET business 20 years ago, was an arms race. Everyone put a lot of money into presses and blow molding equipment. No one ever made any money in it. But it's really hard to make money when you're declining 5%. So when you all have analyzed it, kind of where is that break point to the outside analyst who's asking a question? Whoever wants to start. You started off, Fredrik, so you go first, then we'll go to John and Howard.

That question, I can say that can't be answered really because it -- reality is more difficult than that, but again, I repeat myself, I know. But on a growing market, it doesn't mean at all that you can be making more money. I mean [indiscernible] because more -- that will attract more companies to invest in that segment and then everybody will lose money. So that happens there. On a declining market, if you take uncoated freesheet or newsprint or something, you can make -- as a company, you can make just as much money that you can on a packaging market that is growing if you make the right decisions because making money is not about if the pricing is good on the market, if it's up or down, if costs are going up or not, if demand is down or up, it's not about that. It's about how you make your decisions. And to make sure that you -- I don't want to jump ahead now, but to make sure that you make decisions -- the right decisions in the right locations when you should be making it. That's how we make money. And I -- however, I do understand, I don't want to be a fool here. I do understand that in a way, it is simpler if the market is growing a bit. It is easier than in a sense because it's more predictable. And you -- it's -- it looks like at least from looking at from the outside that spending money when you're growing -- when the market is growing, that is going to be a bit easier, while in fact, it's not. So I don't think there is a breaking point really because it's not really about that even.

Yes, I'll just add to that, Fredrik. And I think is how we view it is whether you're going to make money in a growth market or a declining market is really driven by simplistically 2 factors. One, do you have a competitive advantage? And two, is it industry hospitable to allowing companies within that industry to earn greater than cost of capital returns? So -- and really, when you talk about investing in growth, it's all about earnings growth. I mean that's what you're striving for. But you can do that also in a declining industry. And that's what you're talking about, making right decisions. And in fact, we find -- and this is why Sylvamo is focused on uncoated freesheet because the markets are hospitable. We have a cost, we have a competitive advantage. And we believe that there are higher returns, lower risk projects to grow earnings by reinvesting in our own capabilities, which absolutely lowers the risk because we know this. We're not trying to get into markets that we don't know, don't have a competitive advantage. It's higher risk. When we seek those type of growth opportunities, we think there's more opportunity. So to the extent you were talking about is, George, is where is the trade-off? Well, until we run out of opportunities to continue to grow our earnings within the uncoated free sheet, we don't see a real need to go for a higher risk growth opportunities in other areas because you can still grow within -- grow your earnings and grow your cash flow even in a declining industry, providing the industry is hospitable and you've got a competitive advantage.

I mean one of the things that you both implied is that it's growing industries bring capital and bring new competitors. So...

Correct.

Yes. Exactly. And Howard, you...

Yes. I just wanted Howard to...

I mean, perfect answers on both sides of me. And I would say we are a poster child of exactly what we're talking about here. And that 20 years ago, we felt like our core franchises weren't growing and we had to grow. So we started entering markets that we probably didn't have a right to enter to begin with, very crowded. They were growing, highly capital intensive. I can think of one that for every new dollar of sales, we had to put $1 of capital in, literally. And...

Which company -- which business was that?

There's...

No worries.

And it has to do with -- if you're -- anyway, I won't get into all that. But -- so here we are. We've decided to -- that we need to focus on what has made us successful. And frankly, if you go back over that 20 years and you look at and graph out, it was those that when my predecessors 20 years ago were probably sitting at conferences very similar to this saying, you're not growing what the hell are you going to do? They jumped in. Those are the businesses, the core franchises, the ones that we have leading market positions in that have paved the way for the success of the company over the last 20-plus years.

Yes. It's remarkable how the portfolio has kind of done a $180 million or $360 million. I mean a lot of...

[ Not $360 million. ]

You know where I was going. You did Engraph, you did the display business, you did [ Core Flex. ]

Just thermoforming flexibles.

Yes. So -- and the businesses that we're generating the value are the ones that are generating the value now and giving you the platform to do metal. What's been the biggest learnings, I guess, piggybacking off of that from M&A.? And Fredrik, again, where would you say companies perhaps trip up on M&A over time? So John, Howard first and then Fredrik, in terms of M&A, learnings, watchouts.

Well, I think a couple of learnings we have from M&A., large transformational M&A is highly risky, more difficult to do. We found that smaller bolt-on M&A, less risky, easier to do, and the company can build a knowledge base and a skill set if you're doing multiple of those. We found -- and we're talking about declining in growth industries. If you're acquiring in a growth industry, you're going to buy at a premium. Sellers are generally going to lock in gains and there will be the winners. The buyers have to either get that growth, get the synergies and it's more difficult. In a declining industry, sellers sell at a discount. And the discount increases over time. The longer you wait to sell in a declining industry, the greater the discount is going to be. And in that case, the buyer typically wins and the seller is going to lose going forward. And I think the other thing I would point...

Any parallels with that and say, Nymölla and how that -- if you could comment?

Yes. I mean, Nymölla, we were able to buy that at 2.5x. So that's a good example. If you look at even the spin of Sylvamo and the value that the parent company got from that in terms of what our market value is today, that was a discount they said.

So the record we launched on a buy [ at you ] on the spin. So there you got anyway.

So I mean these are -- and I think M&A can be very good in terms of a strategic move. But also, we've learned in declining industries, and I think even Howard talked about this and that. You got to be really careful about investing in companies that are moving into markets that they don't know, markets that in geographies and they're paying premiums for that. Those are typically much more difficult to get that's when you're trying to acquire just for growth's sake.

Thanks, John. So Howard, help us understand that in terms of how you've now reconfigured the portfolio, you've grown metal, which wasn't something in theory, most investors would say Sonoco did or knew very well. Obviously, the reality of it was you were in metal for many, many years and were in the can business. But Help us understand how you navigated those potential challenges as you got -- you built Sonoco Metal Pack and then did Eviosys?

Yes, sure. And it started with an earlier part of this discussion of where we were trying to -- we're looking, as I said in my early days as CEO is that we're spending too much time looking out the window at the neighbors and the fund and doing all in their growth and I got a lot of parallels here. But looking internally and saying, what is -- what are our core competencies, what are our core values, what makes our company successful. And there's a whole host of items that you can put on a whiteboard and define who you are and what's made you successful. So that's when we said all these disparate businesses, another parallel as I used to say, if we cannot take a 747 full of Sonoco employees, legacy Sonoco employees and fly them into this acquisition in a dark time and be able to run it, then there's a problem. If we have to depend on the acquisition and their leadership to explain to us how to best be successful in this business, it's a problem. And so that led us down the path and you said you've been in metal and out of metal. No, we've been in metal for 60, 70 years. We bought Eviosys. Eviosys has been a customer of ours for I don't know how long, for 30 years, buying easy open ends, et cetera. You mentioned the can business, making a paper can and a metal can, the only difference is the substrate and the end-use market. And one is processed food, one is not. It fit all those categories. And frankly, we've been looking at it for years and years, but the world didn't need another metal can producer. Then the strategic said, hey, obviously, in my opinion, many people believe they -- we've perfected the market, we're going to move on. That's not been what we found. In fact, we talked about the ball metal pack in our conference call that 10% -- well, I mean, well over double the EBITDA when it was spun off of a strategic under our watch. And so that's kind of where all of that is coming from.

Thanks, Howard. Fredrik, how would you advise us and advise companies in terms of pitfalls, learnings of M&A and anything else that you think would be relevant to this particular part of the discussion?

Yes. So we have for -- like 3 decades now, seeing the result of acquisitions. So when we do the work we do, we see the mills that the company had before the acquisition, the legacy mills and then we see what they acquired, and we can sometimes relate to how much is the company paid for that and so on. And I would say 9 out of 10 acquisitions go wrong. And I think John put the words well when he said that, well, if it's on a growing or flat market, you will overpay. And that's what we see because to be able to buy something, you must offer more money than it's worth for the current owner to want to sell it. And just that simple math makes it unprofitable to acquire. It's so simple. So to make an acquisition good, you must bring something that is truly unique because you will not be able to run that business better than the current owner does. I mean 9 out of 10 male drivers think they're better than the average male driver. And you see that also in business. You see the same in acquisitions. But that you must assume that you can't do that. So there must be something unique. And we see that sometimes, but it is really unusual. So I think that the mindset is so important. Why are we doing this? Can we really be better? What is it actually we bring if we acquire this that the current owner cannot to do, something really specific and truly valuable.

And recognizing it's a small part of the response, it's 1 out of the 10 deals that you've seen, whether that's true. What's the common denominator when, in fact, the company has that value add, where they can pay more than it's worth to the owner currently and be successful on a go forward basis?

So I don't know -- so what we see is the timing sometimes. But that's just luck usually, that you see suddenly, for instance, pulp prices go up, you acquire pulp mill and pulp prices go up by 50%, then [indiscernible] that's fine.

A lot of times, it goes the other way.

Yes. I know. I know, usually what happens. So -- but another is if you, for instance, if you're short on paper, if you own converting and you're short on paper and you always have to buy 500,000 tonnes on the market and you acquire a mill that makes those 500,000 tonnes, that's often a good acquisition. But I don't see much of a pattern really. But then I would add one more thing, and that is that when companies make the evaluation, the math behind what they want to acquire, they don't think much about how much capital they need to spend in this acquisition target every year just to maintain the EBITDA that they're buying. That capital is usually so much more than they believe. So that's another thing, but that's...

And that was a big factor for you, Howard, in terms of, I think, from what I heard, whether you stayed in TFP or not kind of the capital intensity probably in the new businesses is less than the old businesses. Would that be...

That is correct.

Fredrik, I'm sorry, you were saying something else there. I just wanted to...

I already forgot. No problem.

Yes. What do you think -- and I know there's no such thing as the right number, but I'm going to ask the question anyway or what the methodology should be. When companies are establishing threshold rates, cost of capital, how would you approach it, Fredrik?

You mean the percentage, the weighted cost...

Yes.

Well, we usually just ask the client what they use because from the work we do, that number is not very important if it's up or down 1%. And then we just complain if we don't believe it's within the range. But I mean we just wanted to be mathematically calculated. So it's not an opinion because sometimes companies have opinions about capital cost. And that's the wrong approach. They need to calculate because capital cost for a company, if you're a listed company, that is given to you from the market. It's not something you can have an opinion on. So just as long as you...

But I've heard 2 things there. So you kind of get it from the company, but you want to mathematically calculate. So if I'm your client, and I say, Fredrik, my cost of capital is 4%, trust me on that. What do you want -- if it was up to you, what would you have people use as the right methodology to establish that numeric?

Well, I would just go to the textbook and just say, what's your weight of debt, what's your weight of equity and it should be market based. And then I'd look at what is the cost of debt. And how do you -- and then sort of try to calculate the cost of equity for that type of company and make some appropriate tax adjustments possibly and then you get it. So it's not going to be 4%. And it's not going to be 20% just because somebody wants that return. It doesn't work like that. If you have a high capital cost just because you want projects to have high capital cost, you're going to get to the opposite. You're going to get lower returns instead. You might lose money. So you don't want to do that either. You need to find sort of the right -- but you don't need an exact number. So it's not that sensitive to that.

John, Howard, how would you answer that question, recognizing it's not going to be a single answer. And then one last question, somewhat unrelatedly, how important will buybacks be for Sonoco and Sylvamo over the next couple of years, recognizing they've been important over time? So cost of capital and buybacks. Howard, maybe you start and then...

Yes. First off, agree with, obviously, with what Fredrik is saying, but certainly, we look at it as well as from a geographic perspective. So if we're looking at the capital project in Eastern Europe or you name it, to look at your weighted average total corporate capital cost, I don't know, and Fredrik, you may disagree with me, but we look at it from the currency and the market that we're investing that capital. So that would be the only thing I'd add to that side of it. Buybacks, I think we -- your opening question and question was the right question. We're focused on debt dividend and the internal capital deployment right now. So hang on for a period of time until we get our debt levels at the right ratios and...

I would add the same thing. We look at it on a geographic basis, we calculate the weighted average cost of capital using textbook methods. But in reality, like Fredrik said, whether it's 10% or 12%, it's not going to really change because we target for high-return projects. We target 20%, 22%. And the way we also think about it is, as we said, we use a very systematic approach. So we want to make sure that we're doing the investments that have the longest term, longest probability of getting -- generate the most cash going forward. But we also think if investments -- if there wasn't any uncertainty in the markets, right, the investments would be easy, but there is uncertainty. So the one thing that we really think about is we try to develop probabilistic views of different outcomes, right? And we try to make decisions on our capital, and this even gets into our share buybacks in terms of we look at what the range of possible outcomes and make a decision that puts us -- that has the highest probability of getting those 20% returns. So that's what really what's driving us is not so much whether it's the cost of capital or not because we target very high returns, but we're also looking at a probabilistic view of different outcomes out in the future. In terms of buybacks, when we think about in terms of our capital priorities, it's debt, but our balance sheet is strong. It's the dividend, sustaining a dividend that doesn't strategically hamper us, but that returns cash back to the shareholders, reinvesting back in our business to make sure we maintain our competitive advantages. And then it's investing in these high-return projects and grow our earnings, but we have a limited capability to do that. I mean we have a significant number of projects that we can do, but we only have the capability to execute debt. So we're a cash flow story that leaves a lot of cash. So what are you going to do with that cash? And it's either hold it in cash. It's pay down debt that also then allows us -- flexibility to return -- buy shares or do things like acquisitions or things like that or it's buy back shares. And we're looking at that any time that the value of the market is below our intrinsic value, and we have a range, we calculate the various ranges of our intrinsic value based on the probabilistic views of outcomes. We take the lower of that range. Any time the share price is below that, we'll look at opportunities to buy back shares because we're generating more cash and we can reinvest back in the business. I think share repurchases will continue to be part of our ongoing return to cash provided that the intrinsic -- the market price is below the intrinsic value.

And John, the ability to reinvest that cash -- your inability to reinvest all the cash you've got into project, is that more a function of the product or more a function of the bandwidth in terms of...

Just the bandwidth. We want to make sure that we execute those well. And importantly, we're limited somewhat by our own internal capabilities.

Fredrik, maybe a quick one to wind up as we're at the end here. Are there any regions or any product lines that you really would say, guys, think twice before you invest there. And what do you think the spread between different regions is in terms of cost of capital now? Is it North America is still the least risky, and so it should be 0.5% below Europe, which would be 1% below South America. Any thoughts on that?

Well, I'll begin with the last one, then you maybe have to remind me what the first one was. Anyways...

Sure.

Usually, the differences between regions is inflation driven. So you'll have one in Brazil that's going to be higher because that has a higher inflation, then it could be also risk-driven and you may want to consider that in the weighted average cost of capital or you do it in sensitivity analysis. I would do it in sensitivity analysis typically, but I don't think it matters much because that's usually a small correction. The large correction is going to be the inflation factor. And what was the first one -- regions. Well, if you -- I shouldn't mention due to recent projects, but if you have -- if you're in a declining market, but you have price discipline in the sense that the large producers in that industry is good at taking out capacity when they need to do to keep up prices, then it's okay to invest there, then I think it's a good company, good projects and so on. But if you have the same situation, but you have lots of small players or the large players, they don't take responsibility with their capacity and take out capacity when they need to, then that's going to lead to a crash in the sales prices. And there, you should never ever invest. That's sort of the -- that's -- and I think it's kind of easy. It's not rocket science really. And regions, I don't know. I've always preferred myself to invest my own time in democracies. And I think that's a good -- I remember, we talked about that once like a couple of years ago when it comes to [ central ]. Anyways, it to investment democracies, that's what you should be doing.

Good deal. Well, we're out of time, fantastic, fascinating dialogue. Fredrik, Howard, John, thank you very much. Everybody, please join me in thanking our capital allocation panel.

Thank you.