May I now hand you over to Stephan Sweerts-Sporck of Mayr-Melnhof. Please go ahead. Hello, welcome on the part of MM Group. My name is Stephan Sweerts-Sporck, heading Investor Relations and Corporate Communications. It's a great pleasure to have you joining this Q&A conference call on our 2021 first half-year results, which we released just this morning. Besides the press release and the report, a CEO video statement has been published on our website, which is a new website, www.mm.group. In this call, we want to provide you now with the possibility to direct questions on today's communication to Peter Oswald, our CEO, who's sitting next to me. Since this call addresses an international audience, we shall very much appreciate your questions to be asked in English in the following Q&A session. Before we go for that, Peter, may I ask you to start with a short summary of our key messages? Thank you, Stephan. Welcome, everyone. Most importantly, we as management are really excited about our two acquisitions. Our post-merger integration manager and two technical consulting companies have for several months worked on a clean team basis to prepare the closing, and our due diligence assumptions were confirmed or even surpassed. This is a transformation for MM and will put us on a growth path for the next decade. Operationally, input costs rise extremely strongly, even though this has slowed down since July. Given that we have quarterly, half year, or in some cases yearly fixed prices, this hurts our margin, and this is the main reason why operating profit is down by a quarter. The good news, however, is that we can increase prices so the customers understand and accept the price increase whenever it is necessary. Unfortunately, with this delay. I think this is the main message, and I am looking forward now to your questions. Thank you. We will now begin the question and answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before the chance to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment please, for the first question. We've received the first question. It is from Johannes Grunselius, Kepler Cheuvreux. Your line is now open. Please go ahead. Hi, good morning. It's Johannes Grunselius here calling from Stockholm, Kepler Cheuvreux. I have two initial questions, but one is on the packaging division because there is a comment in the report about higher cost for packaging when carton price, cartonboard and paper board prices are moving up. Can you elaborate a little bit on what you're talking about there and perhaps some magnitude? Thank you. Yes, thank you. The packaging division has typically long-term contracts of, in many cases, three years with typically half-year price adjustments clauses. These clauses were triggered in July because prices in, and it's mainly based on April, had moved up at this point in time. The good news is that we could increase prices beginning of Q3. However, bad news is that this was based on cartonboard prices in April and prices have since increased further. This will mean that there will be a certain squeeze in margins in the second half-year, which, because cartonboard prices have increased in July and they will increase again in October, and this is then not fully covered. On top of that, these price clauses typically include only cartonboard, whereas we have also seen strong price inflation for chemicals, inks, packaging, you name it, and these price increases are also not covered. There is also some business, let's say 20%, 30%, which is negotiated on a short-term basis, and there we could increase prices. It's a mixed picture. Okay. When thinking about margin compression, I mean, we're talking about relatively mild margin compression, I can assume, for the second half and then we're back to normal. How should we think about the decompression here in the second half? Yes. It will be, let's say, much less than it was in cartonboard. Yeah. Got you. Yeah. For next year, obviously the target is to fully recover the margin. We also have to be very thoughtful about secondary inflation effects. These input cost price increases may lead to a generally higher inflation, especially with regards to salaries and wages. Therefore we have to be very vigilant how we address this issue, especially if we conclude new contracts. Okay. When you now will report the second half, you're saying in the report that the positive M&A effects from the big acquisition is coming 2022. I understand that. You will report volumes for these divisions. That's my first question. I was also wondering, because you previously highlighted a pretty sizable synergy potential of 5% on the incremental sales. Is this still valid? What can you say about these assets now when you're a little bit more familiar with them in terms of synergies? I'm sorry, I cannot remember that we said 5%, because that sounds a bit high. I think we said in the case of Kotka, it's a low double-digit number in million euros. In Kwidzyn we said something, it is also the same. It's obviously a bit higher because it's a bigger company. 5% would seem too high. Yeah. I think you mentioned maybe it was the industry standard, 5%, and then I thought it's an indication, but okay, it's slightly less than 5% then. Yeah, it is less. I think we should think about in the range of 2.5%-3% and there we feel so far, we still have very limited insight, obviously, because all the work streams only start now, but we feel from what we see so far, very confident about it and hopefully we can be more precise than in our full year statement and move in the direction of your 5%. I think 5% won't be reached. It always depends also how you calculate these things, and we do it on a very conservative basis. Right. In P&L effects, not much positive effects, I assume, for the second half, but you will report the new volumes. I'm guessing we should see a mathematical effect of sort of lower EBITDA, EBIT per ton, et cetera, but that's just accounting. Yes. We will be fairly detailed on all the acquisition effects. Mainly in the full year report when we have all the effects clarified. Okay. Thank you very much. Thank you. Thank you. The next question is from Ernst, free journalist. The line is now open. Please go ahead. Yeah. [Non-English content] The start was that the most important that we as a management are excited about our two acquisitions and that we have had the chance via a clean team to do some pre-work, and this has confirmed our assumptions or even be more positive, and that we see these two acquisitions as really transformational for MM, and we see especially Kwidzyn, but also Kotka as a platform for the next several years. You are speaking from the last two acquisitions? Yeah. Acquisitions of Kwidzyn and Kotkamills. I do not have the names. Could you repeat it, the names of the companies? Yeah. The companies are Kwidzyn in Poland and Kotkamills. How to spell it? Yeah, I would kindly ask you to go to our homepage where you have the full text. Well, I can't go back to this, because on my computer I have your invitation and my pin code and all the numbers you want to know. Okay. I spell it in German. [Non-English content]. [Non-English content]? Yeah. It's about a volume of EUR 1 billion. Sales will be close to EUR 1 billion. Together, the value. Together. Together. Yeah, together. Yeah. If further acquisitions are planned. No, for the time being, we are prepared to do small acquisitions in packaging, but obviously our task is now to make these two big acquisitions work for us. That is the absolute priority. Okay. Thank you. Thank you. The next question is from Markus Remis, RBI. Your line is now open. Please go ahead. Yeah, good morning, gents. two questions, please. Firstly, staying with packaging, can you quantify the capacity additions you're mentioning in your video statement, maybe also with some granularity on the sites where you're modeling plans and what would be the net effect versus the closure of Bielefeld? Yeah. Do you refer now to our statement where we said it's a capital gain of EUR 45 million-EUR 55 million? From a volume perspective. Apparently, the shutdown of Bielefeld, kind of stands against capacity decisions elsewhere. I would be interested in the net effect and at which plants you're modeling expansions. Okay. We will transfer these volumes of the plant in Bielefeld to other plants in Germany, Russia, and Ukraine. The production loss should be absolutely marginal because we deal with international customers and basically they do not care where we produce. The capacity reduction is now a difficult question, depending if it's paid for all our packaging, it's something like 2%. The important thing is because we are specialized there mainly on rotogravure packaging, and for our rotogravure packaging, it's probably in the range of 10%. I think Markus addressed also your statement in the video where you said, well, we have these CapEx projects on the way. Exactly. Okay. They benefit overall MM Packaging capacity looking forward. Okay. These expansions will expand our capacity, so our CapEx by around 10%-12%. This is offset by the cut, if you want, so by about 2%. All right. In rough terms. You need to now have different printing technologies, so to say, into one number. Okay. These new capacities should be available as of next year already? A part of it is available. Let's say half of this increase is available as of Q1 next year, and part will be only available a year later. Starting 2023. Okay. On the general pricing environment, you mentioned price hikes on both packaging and on cartonboard. Where would you see yourself against your competitors? Would you say you are among the price leaders? Can you maybe shed some light on the general pricing discipline in the market? Yes. As we've just acquired two competitors, we've seen that it's a pretty similar picture with. The issue today is, or the topic is, it's easy to increase prices when it is contractually possible. Equally, we have taken the decision, which is a bit of deviation from the past, to stick to our contracts which we have. If someone has a fixed price for the full year, then we will not change that and only increase in January, for example. This is a significant burden for our profitability in the short run, but we think it's the right way long term. Okay, what would be the benefit? I guess you have long-term relations with your customers anyway, and if the industry overall is disciplined, so you might give in some profits, I would argue. Am I missing something? Yes. Obviously, our target is to use a strong market also to reestablish a decent profit margin with customers where this was not the case in the past, to say it in careful words. Overall, you're right. We want to marginally expand our margin w ith this pricing. Would you say that in cartonboard, Q2 was the trough in terms of operating profitability? Yes A bit of a? Yes. It's a clear yes, unless there is tomorrow a huge increase in recycled paper or pulp, which we do not foresee. One always has to use this caveat because if tomorrow recycled paper goes from EUR 170- EUR 240, they've moved so far from EUR 40- EUR 170. This was not expected. Maybe they move to EUR 220 tomorrow, then my statement would not be correct. If one excludes these rather unlikely events, then we will w e have seen the drop in Q2. Okay. Clear. Then final question. It's maybe a bit of crystal ball, but on the price development for wastepaper, we all know that the drivers for the increase. Do you see any of those issues like Asian demand or lower collecting volumes kind of abating on a more sustainable basis? Or what would be your working assumption for wastepaper prices? Is the leveling off or plateauing at current levels or any hope that it kind of comes down in the next months again? Yeah. The position we have also towards our customers is that we do not believe in a reduction in wastepaper prices. Is it a possibility? Yes, of course, it could be. You see, I think the structural issues speak against it. These are, first of all, there is less consumption of graphic paper, and this means there's less waste. Those grades which are made out of virgin fiber are declining, and this means that there is a shortage of wastepaper in the system. The second effect is probably that more historically containerboard, which is the main driver of demand for wastepaper, the recycling rates of containerboard go down, because B2C grows more than B2B. B2B, so if containerboard is delivered to retail, the re-collection is extremely high because they have all professional systems in place. If you get your Amazon delivered to your home in the B2C market, some of the cartonboard ends in the general collection and therefore is not recovered. We see a trend that re-collection goes a bit down because B2C rows more than B2B. These structural effects speak against a structural big decline in wastepaper. However, you have effects of the business cycle and of the Chinese and at the end. Of course, it can go down tomorrow as well. It's like predicting where the dollar will be in half a year. It's impossible. Yeah. That's why I said crystal ball. I think we should, as an industry, not fall into the wrong belief that these high prices will anyhow come back, and therefore we don't need full price increases. I think the working assumption has to be that these high prices are going to stay, that there will be even secondary inflationary effects with salaries. This has to be the basis for any price negotiations for the next year. Okay. There is no structural reason why you shouldn't kind of reclaim the, maybe historical margin levels between 7%-8%? We've seen extraordinary years recently. I fully agree. We have to restore our 10% plus EBIT margin. Okay. All right. Thank you very much. Thank you. Thank you. At the moment, there are no further questions. As a reminder, to ask the question, you would have to press zero and one on your telephone keypad. The next question we have received is from Michael Marschallinger of Erste Group. The line is open. Please go ahead. Yes. Good morning, gentlemen. Thanks for taking my question. I have two. The first one, a clarification on the Board & Paper division. A follow-up to Markus' question. Given there are no major raw material price changes for recycled paper, do you believe in the fourth quarter you will return to fourth quarter margins or still below the 7.30%? Yeah, that's a difficult question. I think we should. By 7% first quarter. 7%. Yes, it's achievable, but it's not clear whether we will achieve it. It really depends on what our product mix success, et cetera, will be, also with regards to overseas and if recycled paper prices, we are now mid of August, so there are six weeks left in this quarter. They can move EUR 10 up or EUR 20 down, and that will influence it at the end of the day. Okay, understood. Second question, can you give us some indication of the integration costs for the two acquisition, Kotkamills and Kwidzyn, and just for understanding, when will this majority of these costs really be booked, in the first quarter or also some of these costs next year? Yeah, I think we have two sorts of costs. One are the acquisition costs, so investment bank, lawyers, et cetera, and especially transaction taxes, which are fairly high in Poland, especially. This will be booked in the third quarter. Either in the third quarter or in the annual statement, we will also be explicit about these costs. Then we have integration costs in terms of one-off costs, like setting up, changing computer systems, et cetera. That's too early to give precise data because we have to look at the cost-benefit analysis. If things make sense, because returns are very good, then we will change things and have more upfront costs, but higher returns going forward. Obviously, some of these benefits will depend on capital expenditures. These can be quite significant numbers, but then we also get significant returns. We can't give one figure which would include everything. Okay, understood. Thank you. Thank you. The next question is from Sven Bucher, Zürcher Kantonalbank. The line is open. Please go ahead. Yes, good morning. I have two questions, if I may. The first one, what was the average price increase you had in the first and the second quarter, and what is it in the third and fourth quarter? The next question is, you mentioned that you have some input costs which you cannot pass on contractually to your customers. Could you share the amount of these costs which you cannot pass on? These are fairly detailed questions. For competition reasons, we are not allowed to give you precise numbers here because a competitor might listen in and would then know how much we've increased prices. The commission might see that as an implicit collusion. Recycled paper has increased roughly, let's say, from the start of, or over a one-year period, by about EUR 120. With the price increases we have done and have already implemented October 1st, this is, so to say, reflected plus a bit more because other prices have increased. On your second question on what are, so to say, other costs, I think they are in the range of 10%-15% of our overall cost structure. It's inks and glues and various others. [crosstalk]. Which are also inflated and are typically not reflected in any index mechanisms with customers. Meaning that you cannot pass them over to your customer then? No. Sorry, that's not what I meant. In Board & Paper, we really negotiate prices on a whatever quarterly, half-year, yearly basis, and therefore we can pass on everything. It's a free negotiation, so we can also increase our margins if we can do so. In the cases where we have three-year contracts for folding cartons and have fixed mechanisms, there we can't pass it on because it's typically not included in the contracts. What I was referring to is that going forward, when we sign new, for instance, three-year contracts with customers, we will build in more clauses which do not just reflect the fiber input, but other costs as well, like potentially salary increases, et cetera. I think that 10 years ago, it was very usual in the multi-year contracts to include general inflation clauses. This went, because inflation became so low, that customers typically said you have to improve your cost structure at least in the same amount as inflation. Therefore, typically fixed prices meant they were fixed for three years. Going forward, this looks very dangerous to me because we do not know how inflation will develop over the next three years. Okay. Thank you very much. Thank you. We now receive the follow-up question of Johannes Grunselius of Kepler Cheuvreux. The line is now open. It's Johannes again. I just have a question on the two divestments that you announced during the summer. They are, of course, highlighted in the 1st half report. How should we think about the earnings impact from the divestment from a modeling technical perspective? You're giving us the volume. Is it about the same profit in this unit as in cartonboard as overall, for example? Could you give us some help how to think about the negative effect from it? Yeah. Can we say this? Roughly. Roughly. Yeah. We talk typically about, let's say, an EBITDA in this case of EUR 25 million-EUR 30 million. Okay. That's helpful. Thank you. Thank you. There are no further questions, so I would like to come back to you. Yeah. Thank you very much for attending this Q&A session. Again, if you look at our numbers, it looks a bit frustrating at the moment. However, we are convinced that this is a temporary effect, because we are confident, and we see it actually that we can pass on these prices. If I look at my daily pricing report, I can see that the order intake prices are significantly higher than the prices which we charge to our customers for what we sell. Overall, yes, as I said, we are very excited. We think that these two transformational acquisitions Will be a lot of work, but will give us a lot of benefit going forward. Our offering to our customers in terms of sustainability, of innovation, is something which will be shown over the next years. Probably more short term, we will see some positive cost effects, because they're both two very competitive deals. In this way, thank you very much for your participation. Ladies and gentlemen, thank you for your attendance. This call has been concluded. 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