Q3 2020 Cascades Inc Earnings Call
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This time I would like to welcome everyone to the kind of gets booked what poultry between financial results conference call.
Our minds are currently in listen only mode.
After the speakers remarks, there will be a question and answer session.
I will now pass the call to Jennifer Kim Director of Investor Relations for Cascading is a team you may begin your conference.
Thank you operator.
Good morning, everyone and thank you for joining our third quarter 2020 conference call. We will begin with an overview of our operational and financial results followed by some concluding remarks, after which we will begin the question period.
The speakers on today's call will be Matthew fueled president and CEO and Allan.
[laughter] CFO.
Also joining us on today's call are the presidents of Cascade business segments, namely shout value President and COO of the containerboard packaging group acknowledged bank President and COO of the specialty products group and jump back in town, President and COO of the tissue paper script.
They will all be available for the question and answer period at the end of the call.
Before I turn the call over to my colleagues I would like to highlight that render doomy de cheese interim report released on November 4th can be viewed on rentals web site.
I would also note that certain statements made during this call well discuss historical and forward looking.
Others.
The accuracy of these statements are subject to risk factors that can have a material impact on actual results.
These risks are listed in our public filings.
These statements the Investor presentation and the press release also include data that are not measures of performance under I FRS.
Referred to our Q3 2020 investor presentation for detailed.
This presentation, along with our third quarter press release can be found in the investors section of our website.
If you have any questions. Please feel free to call us after the session I will now turn the call over to our CEO Matthew.
Thank you did it.
Brendan.
Overall, we are pleased with our third quarter results and the reason the essence flexibilities our employees and our operations demonstrate true what are.
Best describes the ever changing business conditions.
Within this context demand level for containerboard specialty.
He is changing and retail tissue products all remain robust in the quarter. In contrast, we promote tissue business I see demand, notably impacted as credit related closure as reduced tissue needs for businesses restaurant and office building.
In Europe.
Quarterly result, primarily reflects the usual seasonal volume decrease related to the annual August production stops.
Net earnings were $49 million or 51 cents per share.
This compared to earnings of 45 cents per share last year and 57.
Seven cents per share in Q2.
On an adjusted basis, we generated 50 cents per share in Q3. This was a notable increase from the 30 cents per share generated in the same period last year, but is below the 61 cents per share recorded in Q2.
Moving to adjusted basis EBITDA of $162 million was 13% below the quarterly record level generated in Q2, but was stable with the 161 million generated in the same period last year.
This speaks to the benefits being.
Being realized from our improvement initiative across our platforms on a consolidated basis, our adjusted EBITDA margin reached 12.7% in Q3 so.
Slide four and five provide details for each of our business segment.
On.
On the raw materials side I highlighted on slide six the Qt average index price for RCC was up significantly year over year.
The price was down notably compared to Q2 during which ULCC pricing level temporarily jump and wet we have previously noted.
Note watt and unwarranted responds to covet.
White recycled paper grade remained stable year over year in Q3 and decreased boat, 30% compared to Q2.
On the Virgin pulp side Ardmore than softwood pulp prices decreased both year over year.
And sequentially in Q2.
Moving now to some brief comments on the performance of each of our business segments highlighted on page eight through 11 of the presentation.
The containerboard segment generated an 11% increase in sales sequentially.
This was driven by.
A 14% increase in manufacturing shipments, partially offset by a less favorable exchange rate Q.
Q3, adjusted EBITDA of 100 million or 20% on a margin basis increased 6% from Q2 levels.
This was driven by higher volumes and.
An additional R&D credit tax credit, partially offset by a less favorable exchange rate and higher energy raw materials and production costs in the current period.
Our quarterly EBITDA margin was impacted by the Destocking effects that occur in Q3 after inventory.
The rebuild up at the end of Q2, resulting in higher costs of production sold due to the rapid increase in ULCC cost at the end of the second quarter.
Note that the Q3 results also included an approximate trillion dollar impact related to the upper.
Operational stop anti war knee I got a follow complex due to maintenance and the disruption from the mill Offsite team supplier.
Additional manufacturing downtime related to planned maintenance and capital investment of 11400 shortened were also taken.
In the quarter.
Year over year containerboard sales increased 7%.
This was driven by a 9% increase in shipment that reflect grow up 12% in manufacturing side and 6% on the converting side.
Q3, adjusted EBITDA the tree.
Creased, 50% from the prior year levels. This reflects higher raw material costs and less favorable selling price and sales mix the effect of which were only partially offset by higher volume and R&D tax credit recorded in the quarter.
The third quarter result. In addition papers segment are a direct reflection of the impact thats covered related closer of businesses office building restaurants in school is adding on demand for away from home products.
It is important to highlight that sales of retail tissue product remain.
Is solid and we have taken important steps to reduce our operational costs and adjust capacity to meet the changing demand patterns with the temporary closure of two facilities.
Third quarter sales decreased 14% sequentially, reflecting demand contraction.
That resulted in converted product shipments decreased 11% in manufacturing shipments decreased 23%.
Following a limited Q2 levels retails volume were down 11% sequentially, while away from home volume were down 8%.
Adjusted Q3, EBITDA decreased $18 million sequentially due largely to lower shipments in addition to our year transportation and maintenance costs and less favorable favorable exchange rate.
Despite these challenging market condition tissue Q3.
Adjusted EBITDA of 36 million dollar represents a margin of 10%.
Tissue sales were down 6% year over year, reflecting 11% decrease in shipment levels retail shipments increased 4%, while I wish for a moment shipments were down 27.
Percent compared to the prior year period.
The effect of which were partially offset by a higher average selling price and favorable exchange rate.
Conversely, Q3, adjusted EBITDA levels increased $12 million or 6% compared to the prior year levels.
This is a testament to the steps we have taken to reduce expense level and control costs, which include the plant close in Q1 of this year.
Lower raw material energy and transportation costs R&D tax credit recorded in the current period and improved selling price.
And customer and product mix Similarly contributed to the strong results year over year.
The year front end Bucks Board operation generated solid Q3 results in line with expectations sales decreased 2% sequentially, reflecting lower shipments in western.
Two in Europe, and the usual seasonal production stops in August.
Adjusted EBITDA decreased $14 million for Q2 levels due to the same factor and higher maintenance costs year over year sales levels increased by 2% or five.
Million as the benefit of more favorable exchange rate offset slightly lower volume and average selling price in the current period.
Q3, adjusted EBITDA increased 16% over the prior year levels. The result of lower energy raw material and production costs the Vin.
Sit of which more than offset the impact of a lower average selling price.
The Q2 results for the specialty product segment were stable sequentially and year over year, when compared to the prior year quarter sales decreased by $3 million as stronger volume in consumer and.
They didn't atrial packaging were offset by the sales mix impact and in deed segment and less favorable exchange rate.
Year over year sales decreased $6 million or a 5% are reflection of the combined impact of the divestiture of European activity and cool.
Those are of the mill in the second half of 2019.
Sales volume increased in all sub segment year over year.
I'd just add adjusted EBITDA level decreased by $1 million sequentially, but were stable year over year compare.
Compared to the prior quarter.
Q3 results reflect higher sales and industrial and consumer food packaging.
The benefit of which were offset by a less favorable sales mix and exchange rate and slightly higher raw material costs.
Year over year stable result benefited from higher volume and been beneficial.
Raw material costs. These benefits were offset by a less favorable sales mix and selling price and the previously mentioned business divestiture in tools or I will now pass the call to alone will discuss the main highlights of our financial performance.
Cuma he'll win.
Good morning, everyone. So I will begin with an overview of our key KPI is on slide 13, our third quarter shipments increased by 18000 short tons or 2% from Q2, driven mainly by an increase of 14% in consumable.
The third quarter capacity utilization rate of 91%.
Decreased 2% compare to the prior year and 1% from the second quarter levels working capital came in at 9.8% of sales Wired consolidated return on assets stood at 12.8%.
Moving now to sales as detailed on slides 14, and 15 yield.
Gary year, Q3 sales increased by 11 million or 1% driven largely by volume increases in containerboard and specialty product segments and a beneficial foreign exchange rate for all of our business segments let.
The less favorable pricing and sales mix impacted sales level in all segments except.
Sep 14.
Sales performance in the specialty product segment was impacted year over year, following a mill closure and investment divestiture completed in 2019 on.
On a sequential basis third quarter sales decreased by 10 million or 1% largely driven by less favorable effects in all segments.
Apart from European markets.
Moving now to operating income and adjusted EBITDA as highlighted on slide 16, Q3, adjusted EBITDA of 162 million increased 1 million from the prior year level stronger results in the tissue paper into our box Board Europe segments, coupled with favorable.
Rig corporate activities results offset the lower come to in a more performance sequentially.
Q3, adjusted EBITDA decreased by $24 million or 13%.
As shown on slide 17 this.
This was driven by weaker performance in tissue and European bogs boards.
Slide eight.
You mean in 19 illustrate the specific items recorded during the quarter the.
The main items worth mentioning are $13 million of impairment charges recorded in tissue related to the revaluation of certain assets in light of the current hour from all market conditions.
7 million $7 million.
Gains recorded in containerboard and tissue related to the sale of previously close assets and $3 million on restructuring charges that were recorded in the containerboard segment. Following the announced closure of our facility in Ontario by August of next year.
Slide 20 and 20.
To illustrate the year over year and sequential variance of our Q3 adjusted earnings per share and a reconciliation with that specific items that affected our quarterly results.
As reported earnings per share were 51 cents in the third quarter.
Yes, compared to earnings per share of 45 cents last year both periods.
Included specific guidance.
On an adjusted basis earnings per share increased by 20 cents compared to last year's results slightly higher operating results lower financing expenses and lower income tax were offset by higher depreciation expenses, reflecting business acquisition that operation.
And while capital projects.
On an adjusted basis sequential third quarter earnings per share decreased 11 cents per share from Q2, 2020 levels largely reflection on lower rig operating results.
As highlighted on slide 22 third quarter adjusted Cashel.
So from operation increased by 7 million year over year $215 million.
This reflected slightly higher cash flows from operation due to improved operating results and lower income tax paid offset by higher net net financing expenses paid in the third quarter reflected.
I think the impact of the refinancing at the end of 2019.
Adjusted free cash flow levels increased by $6 million year over year.
Moving now to our net debt reconciliation on slide 23, our net debt decreased by 95 million in the quarter. This reefer.
Strong cash flow from operations.
Was it different and exchange impact of 32 million and a favorable $30 million benefit in change in noncash working capital.
Partially offset by dividends and Capex payments, our net debt leverage ratio stood at three times a day.
The end of the third quarter down from 2.1 at the end of the second quarter and three point 25 times at the end of 2019.
The equity offering concluded on October 22nd will further improve our debt profile in Q4.
This along with other financial ratios and information about maturities are deeply.
Slide on slide 24.
On slide 25, we provide details about our capital investment plans for the full year.
We expect to invest approximately $240 million in 2020.
Which includes estimated investments associated with our bail in project.
We remain focused.
On prudently managing cash flow and managing our debt profile currently including our recently completed equity offering we have cash and revolver and with the of approximately 1 billion dollar.
Mario will give you more details and we'll wrap up the call with a brief conclusion before we begin the question period.
Okay.
Thank you Alan we have provided details regarding our near term operational outlook on slide 27 of the presentation. Please.
Please note that this outlook is based on where we are seeing today and given the current unusual circumstances may change in the coming months.
The demand side, we remain optimistic for our retail tissue and packaging solution in North America.
Demand for consumer food packaging and corrugated product used in the food and personal care industry remained solid similar.
Similarly demands for at own tissue products also remained good as people are spending.
More time and all that.
That said predicting what the potential impact that the ongoing pandemic will have on both demand levels and demand pattern remain challenging.
Given this caution and usual software seasonal demand in the fourth quarter, we are expecting the containment.
Onboard and specialty products segment to generate stable results sequential.
In the near term performance in the European Boxboard is expected to reflect continued uncertainty regarding the economic impact of cadnineteen with volumes and pricing expected to remain under pressure.
That said, we remain cautiously optimistic in terms of outlook based on the essential nature of the products steady volume performance year to date and the good operational execution and management throughout what has been an unpredictable environment.
And the tissue segment.
Within alethia newer demands for our wafer mone products are expected to largely offset the benefit from stable demand in the retail tissue price.
Pricing improvement in our ongoing improvement initiative in the fourth quarter.
We are focused on optimizing production and our cost structure.
Which include the closure of two tissue facility in Pennsylvania in December and January These closer will act will not impact our capacity as these tons will be moved to other asset where production capacity as been optimized with our investment in modern equipment.
Moving now to raw material the recovered paper market remains stable in the third quarter with robust generation, providing ample material to meet demand level.
We expect that we'll see dynamic to continue providing a solid tailwind for our paper mills with material remaining abandon and actual.
Ice is anticipated to continue.
Were maintaining relatively high inventory levels as a precaution, giving the less predictable market dynamic caused by defend them.
That said, we expect market conditions to remain relatively stable for the remainder of the year.
Condition for the wide rate were also favorable for our mills. The Es will be published index lost another 60 dollar use per short term in the last three months availability of material and reduced demand for both contributed to this variation material remained readily.
Available and we continue to maintain solid inventory level.
Started clean Usten sorted residential paper, both saw a tighter market condition in Q3, which impacted pricing in average quality of material for our molded pulp mills filed.
Finally condition.
Second were stable in the Virgin pulp market, we will continue to monitor global dynamic planned downtime announced by pulp mills and the evolving demands in printing and writing industrial we expect no significant variations from this market for the rest of the year.
Before opening the call.
The question, let me finish by saying that we are pleased with our performance in Q3 within the context of the challenging environment I would like to thank everyone of our employees for their continued artwork and resilience. During these unusual times as always there are health and safety remain our top priority.
And we applaud their diligence to the safety measures that have been put in place in all of our facility.
Looking ahead, we expect our ongoing modernization initiative investments completed over the recent year to continue to benefit performance added to this we began a.
Our churn improvement initiative across our North American operation earlier, this year targeted area, such as revenue enhancement production and supply chain efficiency in our organizational structure.
These initiatives are expected to generate a 1% annual increase.
Among our consolidated EBITDA margin.
Each of the next two year. Similarly, we expect to begin realizing benefits from the $50 us per short ton increase and now it's in the containerboard at the end of Q4.
With that we will now be happy to answer.
To your question operator.
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People, who believe they can label to conceal compensated coffee. Thank you if you'd like to ask a question. Please press.
At this time.
Then the number one on your telephone keypad.
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Again, if you have a question. Please press the Star then the one on your telephone keypad.
We'll pause for just a moment to compile the Q on Eros Star.
Your first question comes from Hamir Patel Your line is open.
Hi, good morning Mario.
Mario could you speak to what.
You know what sort of maybe EBITDA margins on a consolidated basis you'd be expecting for Cascade next year, given some of the initiatives you.
It is.
Well the.
Yes, we are looking at right now would be around that would see 14%.
No we're trending at close to 13% now with the initiative. We just talked about we are looking to increase the but at least at the level of 40% next year.
Remember that our stated target is at 15% so.
We're trending towards that.
Okay, great. Thanks, Thanks for that and.
Could you speak to for Capex next year other than barrier Island, what are the larger.
Projects in the envelope.
Well, we have not completed.
Yes, our budget process, but what we can say right now there is a few lines that are still to be installing tissue as we stated before or during the course of the first quarter, so that would be.
One of the major the.
Major project for this year.
And also in Ontario in that come to no more than that.
May be shock and expand on this there is a.
Following the.
Reorganization in Ontario, we will transfer some.
Some capacity to.
To the other facilities and so.
And last one will be a.
It will be needed, but that's that's nothing major compare to be out in our history.
Okay. Thanks, Thanks, Ellen and that Charles and other question I had for you was since.
Since you announced bear island, there's been some additional capacity announcements from Atlantic packaging and.
Looks like Domtar's now looking at a potential second project.
So as those developments change how you prioritize.
The internal integration plans for for Bear Island can you just remind us what it what are you targeting.
Kind of the first year production.
How much of that is going to be.
Hi source that sold internally and how much is already committed with.
Offtake agreements.
Okay. So I mean, just maybe to complete on on Alan's first yeah.
Yes, we do have a project in Ontario that will be in line.
We're talking about.
We announced the closure of one of our facility, which is based in tobacco and we're going to do about what we did with the.
With our project in.
Piscataway is we are going to be selling the building, which we are.
And we're investing to create an.
And install better aligns better equipment and give us.
More capacity that will come in towards the end of Q4 next.
Next year.
And and also when in the year after.
Which will be in line also would that be.
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Did the goal that we have in our strat plan to continue to increase.
Our converting capacity in.
Yeah.
So this project is well in line and we.
It will be it will be good for for cask add like like the Piscataway regarding the the price.
Object in.
In their island.
You know the addition capacity.
Some of which are happening some of which are probably are not going to happen I don't know, but the ones that have been announced and started.
This is reinforcing the fact that we need.
Need a project like they are going to be better prepared to wear to compete.
Liner product that we have we feel that.
Its niche it will be in.
In the lowest basis weight.
So we are very confident that the demand is there for this product.
Now when we start.
Today, we announced that develops 50000 tons of the the product will be a use internally we are continuing to.
Discussed with our current.
Customers to increase.
The.
The wallet that wallet share with them. So this is going in the right direction.
And the first year.
Production.
This is going to be about 150000 tons that.
We will try to find a way to.
To develop.
And the.
Customer surveys for for that.
Great. Thank.
Thanks, Thanks, Charles that's on Solana I'll turn it over.
Your next question comes from Sean do you want your line open.
Thank you good morning, and thanks for all the detail on the prepared comments.
Couple of questions.
On tissue.
With respect to the retail side, there was clearly some pull forward of demand in the initial.
Wake of the pandemic.
You are guiding to further volume pressure in Q4, which I guess is mostly seasonal.
And Mary you position retail demand trends is solid.
I'm wondering if you can give us some context on your expectations into 2021 as.
Economies, presumably start to reopen and with the vaccine and thoughts on the away from home volume trends as that happens as well.
Well I will let those are they explain the dynamic between.
You know the demands of the two product, but if ever a vaccine would be coming obviously, when we see a shift in demand for our product because the school the restaurants.
Deal with sales will reopen and this is largely wetness is affecting our volume right now it is compensated.
To a certain degree on the retail side, but you know so if I've heard the vaccine will be there I think the normal business will probably take a year or two to get back to where it was prior to commit but obviously there will be a shift because people are looking to go out and and you know come out.
Out of their house. So maybe you know they did you you want to give a little more detail about the volume between the two dynamics that to market.
Yes.
Good morning, So you know you're right.
To your question, Sean the retail volume is really solid right now were booked.
For Centex.
The.
The results of Q3.
We're limited by lower inventory and order capacity now in Q4.
The thing is we were.
Putting our customer on allocation as well because the demand is strong. So it's right now we're trying to.
Rebuilt inventory to get the right or.
Or the appropriate service level to our customers. So we're limiting the retail sales.
On the away from home, a muddy was right, though I think that.
We still have customers that are doing really well. So we have about 40% of our customer that our budget. So there's there's some channels or market segments that are doing.
There's some.
Customer also doing good on E. Commerce, So we believe that by focusing on the right customer we can accept.
The market condition.
Right now, we're doing slightly better than the ASP number on the away from home sites. So.
The problem is what we are over exposed.
Good on the away from home market as opposed to some of our our peers. So.
But we're working really hard to.
Bring more volume toward the retail market and develop new product as well.
For the pro line or deal with from a modeling.
Thanks for that detail.
Second.
Portion is on on recycled fiber.
Specifically it looks like.
Those costs are bumping along the floor.
What point do you expect.
Inflation.
Cc given all the recycled containerboard capacity that can be coming onto the market years years included in the next few years.
Question, how do you expect that to.
Feed endosee see inflation if at all.
Well this is Luke maybe I can.
Try to answer your question.
You know I would be very cautious to predict what the market's going to be in the long term what I can see is that.
Since.
Since late spring.
We've seen quite of stability in the market. This by the strong strong.
Strong domestic demand as you know the containerboard mills now running flat out.
And despite this this hasn't created any.
Specific pressure on the RCC market.
Export outside of.
Upside, though also been has been also presenting the last few weeks.
But on the other side you know generation has been.
Very good so so.
So we don't see a for the moment and needs and the challenge with DCC price. So what's going to be in a few years. So now for me is.
No I wouldn't I wouldn't get there, but what I can say is that if.
Is that the duration and the man.
It seems we don't see I don't see short time with will that have on the radar screen that is going to be significant change in the market conditions.
It's going to be in two years from now I think it would be too.
To get to that or is too to make a statement on that but for the time being market seems very stable.
Okay. Thanks for that detail I'll I'll leave it there. Thank you.
Your next question comes from Mark why are these your line is open.
Good morning.
Good morning.
I have a few questions.
A couple on containerboard first.
Can you just talk with us a little bit about the cadence that you expect on the the roll through of the second kind of word price hike.
Okay, Mark and the.
First I can say that the were still in line with.
We are.
Our.
Price announced price increase.
Our team are working with our customers to to implement that.
We anticipate that the impact.
Impact.
Well started gradually in towards the end of Q4.
But really.
In mid Q1 next year.
Well the about 80%.
In place.
Okay. All right then on the delay and the delay.
Is as you know we have.
Contractual debt.
Takes.
In consideration timing of the price increase and Thats why the spread so we always keep saying that.
To be fully implemented it takes about four to five months to deploy 800% okay.
Okay, all right, thanks, really seemed a little bit shorter than some.
Some of your other kind of publicly traded peer so it's good.
On the containerboard side can you talk with us about pre.
Pre selling some of that incremental capacity at a at fair Island, I mean, I just I think for a lot of us on the outside we have we have bear I wanted them and not too far away at the same time, we have kingsport so in total.
It's a it's a little over a million tons of capacity and we all know that the open market has shrunk. So I'm just curious about what you can do to really try to de risk that project by pre.
Pre selling volume right now.
Okay. So.
Like I said.
The the the type of product that that we have.
Is.
Lightweight high performance.
Lighter weight than most of the the installed capacity and even the ones that are going to be installed.
So we our plan like we did when we started the.
Green back.
He is exactly the same the same thing.
Is we are going to niche our product to.
To be able to develop.
The customer our customer base give you an example.
Everybody talks about the E commerce.
E Commerce requires lighter packaging.
And that can be done in two ways first.
Design of the packaging, but also the weight of the of the paper and we are going to focus on that there is a demand for for this type of product too.
Two.
To respond to that new trend.
Okay. All right then just toggling over to the to the tissue business.
Can you talk with us about any ability to swing capacity from.
Away from home tissue over into right.
To tell oriented tissue.
Maybe just shifting the fiber you're using or or anything else you could do that just pivot a little bit.
Yeah, well the market was on it so we're.
We're working hard to.
There's new product coming at Us. So for example, you.
Or partner with a major retailer to develop a new format, which is something.
Not available on the retail market for now but that will be made on that on the bet tissue. We from online. So that will book deadline, because as I said there is the demand for retail is pretty strong so.
There is a.
Reach all the media.
Good quarter million cases that we will be able to sell for that product on new sites.
It's difficult it's.
Most of the lines are dedicated as you know like multifold singled sold or low double dose our line that you cannot do anything.
Other than we from a product, but definitely there.
Some lines.
Bad line gets rolled out along those lines have been migrate to retail product. So those things are fully booked.
But all in all it's so right now we're up to about 10% of the capacity that was migrate from a week from owned to retail so we're continuing in that matter, but.
There is.
Most of the lines are we from dedicated that listen so.
Okay, and then lastly, I wanted to touch on is just inflation and we've kind of we've already talked about.
Oh C C and it is pretty striking that we've seen this tightening in the containerboard market it and not really seeing any.
Pressure on I know see see at.
At this point, but not as a lack of Chinese imports seemed to have shifted that mark the other issue on a inflation, though at the moment seems to be transportation costs I wondered if you could talk a little bit about.
About your exposure to that kind of higher trucking rates.
<unk>.
And Mark its my view.
Basically right now we see a tightening in the transportation then we see that it's more difficult to get trucks and to service us and we see a little price increase but this dynamic in the market. The logistics is really fluctuating.
So we.
We feel it's temporary right now, it's probably related to the activities in the commerce business. So.
As we are busy in the containerboard people are buying more I take it it's related to that if markets slowed down 18, then we could see.
Reduction in pricing transportation.
Should we do as a center of excellence is managing all our logistic throughout North America, and they're working really hard with the asset owner you know too.
Monitor and you know and manage the pricing that we have and to give them some volume to maintain good luck.
Just the pricing. So we're fighting we're you know we're working hard to reduce disinflation and maybe we can add also Italian speaking that.
To mitigate that to with the acquisition of war kids and all the dumb modernization.
And closer what we're doing in tissue, which house.
So.
Related to this and to optimize our network of product can someone to to reduce these costs given the what is happening on on the open market. So.
Yes, Okay, and Alan just any sense, just kind of across all of care Scott how much.
Your trucking would be on.
On a contractual basis, maybe an annual or multi year contract versus how much is you know just indicative of the spot market prices we see.
Well we.
We've made a lot to ESMO, you mentioned with our center of excellence over the last.
Shoe years Weve.
To put everything together under one team and now I believe we are maybe.
Is it 90% contracted.
It's a little less than that but we were in the high Seventys seventies.
So we still have some.
Hi, good inroad to do but we add them.
A large portion of our trucking that's already contract, yes for some for one year and some for a multi year.
Okay. That's helpful I'll turn it over.
Again, if you would like to ask a question. Please press Star then.
So the number one on your telephone keypad.
Your next question comes from Macquarie ever shit the lines.
Thank you. Good morning, everyone quick follow up for you on the potential to migrate from away from home tissue into consumer.
For those line.
That that could be converted.
What intensity of Capex would that require what's involved in the transition.
Oh, it's limited.
We're talking about a million and then get into Habsburg line for wrapping capacity, usually so when you talk about a few line.
That's that's probably less than 5 million.
We're all so it's not that much.
But the thing is.
We're trying also to limit capex because would shut some facilities as you know so we have some retail.
Bundling or wrapping equipment, we're moving.
Going right now so for example, there are some.
Rappers from Arizona that are now being installed in grad before Greg it used to be a 100% it would from Atlanta and.
And it's going to produce more and more retail plants. So.
I didn't mention as well the fact that we're having less sites is also helping us.
To better manage cost and facilities that are.
Both for retail and away from home because in the past.
Granby or skip proves 100% of wood from on plant.
And now there is more retail and those plans so the west Coast for example.
It's going to be a.
Fish.
50, 50 at retail and were from on next year, So as opposed to hundred percent double from last year. So.
For.
We're trying to to move toward this with limited capex with the existing equipment that we have.
That's really helpful. Thanks, and could you give us a ballpark idea of how many wafers.
Home lines are dedicated and can be converted in the network.
And a number of lines. It's a good question, there's probably a.
I was saying.
Five.
Maybe five plus minus one of four to six.
Maybe but.
Most of them are.
Can be converted what can really limited or.
Effort, because it's already kitchen world travel or single ruled that lines.
No wonder required investment, there's probably two or three lines.
Right.
From a budgeting is light.
Slide the consolidation, we're also stopping smaller or older lines.
By consolidated list, so as you know, which.
We have announced a foreclosure was done foreclosure so far we announced two more for the next two months so.
Theres a lot of effort to.
Consider Dayton.
Focus on the right product with the right margin with the right customers.
That's great. Thanks, I'll turn it over.
Your next question comes from Paul Quinn Your line is open.
Yes, thanks, very much I'm learning it.
I guess, so start starting tissue weeks on David.
You know I think a couple quarters ago, when we talked about migrating some of this wave from home to consumer you thought you could do 10% to 15% so sounds like you're at 10% level now sort of moving up there which is great. What surprised me in the quarter was a drop in capacity.
The utilization from 87 to 73 is that all on the wafer side.
Yes, but also on jumbo.
So there's some fine something we sometimes forget we used to settle a jumbo rolls so.
Down Memphis facility was what which.
Was.
35000 tons sold on the open market.
So go globally, that's why.
Utilization moved to wind down same thing on the west coast or integration level than the West Coast is limited so.
So we had to shut down or curtailed.
Both machines there.
A few weeks.
Okay. So is it fair to say, we're not going to see a big jump up in that capacity utilization until people are back back.
Back working in the office and travel.
Ah, yes overall, but.
We're just shutting down the 50000 tons and Pete.
For the next two months so that will help the total a percentage if I can say.
Also the fact that were installing a new line. So there's four four new line starting in the first quarter of next year, all the big into retail.
So we will be able to restart.
Memphis.
So probably.
First quarter of next year and with the forecast that we have.
Again, like Memphis, although stones will be integrated into we ground, but north Carolina or prior Oklahoma talk.
Toward the mid or end of next year. So.
The focus of increasing integration.
One is.
Yeah.
Didier priority for us as well.
So by having the right machine with the right trends.
To supply the new lines that we're putting into the system. That's I believe its going in the right direction for.
For integration, but also for a more retail product.
Okay, and then maybe just a question for Charles on containerboard I couldn't quite understand.
The tons are going on Barrow island on start up it sounded like you've got 50000 internal and then Youre looking for.
Partners for the other.
Another 150, so in the first year it'll run around 200000 tons.
So to me that's sort of balances out.
About the first 12 months, yes, Oh operation and that's what we that we know today of what we're trying to secure a that's about the split yes.
Okay.
And then I guess Mario just overall.
Paul.
You know I understand seasonality and Bucks for Europe will be down, but it's you know it feels like box where Europe.
It's a different business than it was a year or two years ago is that.
Is that true and what are you looking for 2021.
I would see the same progression phone weve done a lot of work.
Kim managing our accounts and managing our numbers a skews in Europe and mutually has done a fantastic job of meeting a multi milk onset. So now we can swing the products from the different mills. So.
I'd say the progression you see in your off of the last two years, we'll keep on for the next year and.
You probably aware that we just.
Made an acquisition.
In Spain. So this will have even consolidate our position in the south of Europe, and the synergies coming out of this acquisition with the Barcelona facility. So I think that the improvement in EBITDA and markup.
And integration will keep on going so.
Great. That's all at best of luck.
Thank you.
Thank you there are no further questions at this time you couple all please continue.
Thank you everyone for being on the line today looking forward to.
We'll talk to you after Q4 and be safe in the meantime, so thank you everyone have a good day.
Thank you now.
Yes, the modems and Michelle dilemma for our local for whole social tree Hooper women to now Cushing.
Q, ladies and gentlemen, this concludes today's comp.
Conference call you may now disconnect.
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