Q4 2020 Cascades Inc Earnings Call
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Good morning, My name is Simon and I will be your conference operator today.
At this time I would like to welcome everyone to the Cascades fourth quarter 2020 financial results Conference call.
All lines 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 Aitken director of Investor Relations for cash Scott Mitch.
MS. Aitken you may begin your conference.
Thank you operator.
Everyone and thank you for joining our fourth quarter of 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 masking, the appeal, president and CEO and Allan Hogg CFO.
Also joining us on the call are the presidents of Cascades business segment, namely Shout value President and COO of the containerboard packaging group the challenge Tang President and COO of the specialty products group and Jumbo Jets, the president and CEO of all of the tissue papers credit.
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 went up the Medicis interim report released on February 16th can be viewed on Reynolds' website. I would also note that certain statements made during this call will discuss historical and forward looking matters. The accuracy of these statements is subject to risk factors that can have a material impact.
On the 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 S. R. S. Please refer to our Q4 2020 investor presentation for details.
This presentation, along with our fourth quarter parts of these can be found in the investors section of our website.
If you have any questions. Please feel free to call me. After the session I will now turn the call over to our CEO Matthew.
Thank you Jennifer and good morning, everyone.
I would like to begin our call. This morning by acknowledging our appreciation for the dedication and resilience of our employees throughout the past year.
We resolved the providing an improvement of adjusted EBITDA margin of 10.
10, 5%.
We did in the context of continued away from home products demand pressure due to the pandemic.
Adjusted EBITDA of 166 million was 2% above Q3, and 9% above the same period last year.
On the kinds of David basis, our adjusted EBITDA margin was 12, 9% in Q4 slide.
Slide four of five provide details for each of our business segment.
On the raw material side I like to the on slide six the Q4 average index price for OCC more than double year over year and increased 12% compared to Q3 the.
This is largely a reflection of value of domestic demand levels for.
For this fiber as containerboard production levels of responded to Penn they make buying pattern come.
Combined with strong export activity to South Asian country.
Average prices for white recycled paper grades decreased 15% year over year in Q4 and were down 26% from Q3 levels on.
On the verge of bauxite arguably the softwood pulp prices were essentially stable both year over year and sequentially in Q4.
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 a slight 1% decrease in sales sequentially shipment decreased 3% from Q3 reflects the reflecting usual seasonality of sales mix.
The jumbo roll shipment decreased 6%, reflecting a 1% decrease in capacity utilization rate and a 2% increase in integration rate.
On the converting side shipment increased by 1% sequentially in millions of square feet in line with the Canadian market, but below the 4% increase registered in the U S market for the period.
These were offset by a 2% increase in the average selling price.
Q4, adjusted EBITDA of $110 million or 22% on the margin basis increased 10% from Q3 levels. This was driven by lower raw material and operational cost and a more favorable sales mix and early benefit from the number of with November one price increase.
The.
These were partially offset by lower volume and all your labor and freight costs. As a reminder, Q3 result also included an approximate 3 million of dollar impact related to aggression on stop at the award and you'll get a false complex due to maintenance and of disruption from the mills.
Outside of the steam supplier.
Manufacturing downtime related to planned maintenance and capital investment of 9200 short tons were taken in Q4.
Below the 11400 short term thinking in the third quarter.
Our tissue business fourth quarter sales decreased 5% sequentially.
This was largely driven by a higher volume of late two year end fulfillment of contract true annual volume.
Shipment level up 5% from Q3.
The average selling price and the more favorable mix of products sold were also positive contributor while the 2% appreciation of the Canadian dollar was a net negative to sales levels.
Adjusted Q4, EBITDA increased $4 million sequentially, reflecting lower raw material costs, and higher average selling price and volume.
These were partially offset by a more elevated production costs and transportation and energy costs.
We are pleased with the improvement in tissue, which despite continued demand impact related to COVID-19 generated an impressive 510 basis point margin improvement this year when compared to 2019.
European box board operation at a good quarter Q4 sales decreased 3% sequentially, reflecting the usual all of the season in shipments adjusted EBITDA decreased 2 million from Q3 levels, reflecting a lower average selling price and volume the.
The effect of which was partially offset by lower production costs.
Specialty products segment generated solid Q4 results sequentially and year over year, when compared to the prior quarter.
Q4 sales increased by $6 million driven by stronger volume in molded pulp fiber based packaging and more favorable pricing and sales mix. These were partially offset by lower sales in the plastic packaging and less favorable exchange rate.
Adjusted EBITDA levels decreased by $1 million sequentially.
I'll now pass the call to <unk>, who will discuss the mainline light of our financial performance.
Thank you of Mahela and good morning, So I will begin with turnover you are keep your eyes on slide 13, So our fourth quarter shipments decreased by 9000 short tons of 1% for.
From Q3.
The driven by a decrease of 3% of containerboard and a slight one per cent decrease in Europe.
These were partially offset by a 5% of increasing tissue chip shipments in the per year.
The third quarter capacity utilization rate of 92% increased 2% compared to the prior year and 1% from the third quarter levels.
The average working capital came in at nine 6% of sales down from $9 eight in Q3, while consolidated return on assets stood at $13 one.
The percent up from 12, 8% in Q3.
Moving now to sales as detailed on slide 14, and 15 year over year Q4 sales increased by 57 million of 5% driven largely by volume increases in containerboard and specialty products segments favorable pricing and mix in tissue and the beneficial foreign exchange rates for the European box of bulk segment.
These were offset by lower volumes in tissue less favorable pricing and sales mix in box Board Europe and negative foreign exchange rates for both containerboard and tissue.
On a sequential basis fourth quarter sales increased by $90 million of 1% largely.
<unk> better pricing and sales mix in all of North American operations.
And higher volumes in tissue and specialty products, partially offset by less favorable for an exchange for all of North American segment.
Moving now to operating income and adjusted EBITDA as highlighted on slide 16, Q4, adjusted EBITDA of 166 million increased $14 million from the prior year level.
All business segments generated stronger year over year results with the exception of corporate activities.
<unk> Q4, adjusted EBITDA increased by $4 million or 2%.
As shown on slide 17.
This was driven by stronger performances in containerboard and tissue.
Partially offset by slightly weaker contribution from corporate activities.
Yeah.
Adjusted EBITDA for the year reached $675 million, an increase of $71 million or 12% from 2019 levels. This improvement reflects the good performance of European box Board specialty products and in particular, our tissue segment.
The combination of which offset the decline in containerboard.
Our adjusted EBITDA margin came in the 13, 1% in 2020 compared to $12 one in 2019.
Moving now to slide 19 of the presentation.
In the first quarter of 2020, we initiated an important profit margin improvement program for our North American operations focused on improving competitiveness efficiency and productivity day.
Thereby limiting the potential negative effects related to economic downturns or adverse market conditions. A similar program was already underway in the European operations.
The program is built on five strategic pillars net.
Net revenue management products and efficiency optimization of sales and operations planning supply chain efficiency and organizational effectiveness.
The objective of this program is to improve our adjusted EBITDA margin by 1% annually in 2020, 'twenty 'twenty, one and 2022.
With these improvements calculated from the levels of 2019, our baseline year.
Although the pandemic delayed the implementation of some initiatives.
We were able to exceed our target for 2020 of by achieving approximately $75 million of adjusted EBITDA net of related cost to implement these initiatives.
These benefits offset some negative impacts related to COVID-19 increased raw material costs and reduced selling prices for certain products.
On slide 20, and 21 illustrate the specific items recorded during the quarter. The main items worth mentioning are of $40 million gain from the sale of of building and land of of clothes containerboard facility in Ontario.
$14 million of the impairment charges following the reevaluation of certain assets in tissue embarks for Europe in light of current market conditions.
And at $8 million of restructuring charges associated with profitability and restructuring initiatives.
Slide 22, and 23 illustrate the year over year and sequential variance of our Q4 adjusted earnings per share and a reconciliation with the specific items that affected our quarterly results.
As reported earnings per share were <unk> 72 cents in the fourth quarter. This compared to a net loss per share of <unk> 27 last year. Both periods included specific items.
On an adjusted basis EPS increased by 12 sales compared to last year results higher operating results and lower depreciation expense were offset by higher financing expenses.
On an adjusted basis sequential fourth quarter earnings per share the decrease by <unk> <unk> per share from Q3 levels due to a positive impact of tax assets reassessment of prior years' losses recorded in Q3.
As highlighted on slide 20 for fourth quarter adjusted cash flow farm operations increased 45 million year over year to $152 million.
This reflected higher operating results lower income tax and net financing expenses paid.
Adjusted free cash flow levels increased by a strong 69 million year over year.
Moving now to our net debt reconciliation as detailed on slide 25, and 26, our net debt decreased by $303 million in the quarter. This reflects strong cash flow from operations.
$20 million of net proceeds from the equity offering concluded on October 22nd.
Positive foreign exchange impact of $71 million, and a favorable 60 million positive volume and working capital.
Partially offset by dividends and Capex payments.
For the full year net debt went down by $284 million or 14% cash.
Capital investments the purchase.
The city of PQ as equity and Green pack and our dividend dividends payments were more than offset by strong cash flow from operations and the issuance of common shares.
We reached our stated leverage ratio target, which stood at two five times at the end of 2020 down from three times at the end of Q3 and 325 times at the end of last year.
This along with other financial ratios and information about maturities are detailed on slide 27.
On slide 28, we provide details about our capital investment plans for the full year.
We expect to invest approximately.
450 to 475 millions in 2021, which includes $250 million of investments associated with our bear Island conversion project.
We will continue to prudently manage our cash flow and our debt profile with the objective of keeping our leverage ratio within a range of two five to three times, while we execute our bound on the project.
At year end 2020, we had cash and revolver has the ability of approximately $1 billion.
The heel will wrap up the call with a brief conclusion before we begin the question period Mario.
Thank you.
We provide details regarding our near term outlook on slide 30 of the presentations.
As a reminder of this outlook is based on what.
We are seeing today and may change in the coming months, given the dynamic nature and the ongoing unusual circumstance senses differ.
A difficult weather conditions in the U S may also impact the supply chain efficiency in some of our U S plants.
Our near term outlook for containerboard segment is positive. This is based on the very strong continued demand in both the manufacturing and converting side and rollout of the announced price increases. The first price increase is expected to be fully implemented in the second quarter of 2021.
And the second price increase will start to be implemented in Q2 and is expected to be fully in place by the end of the fourth quarter the.
These factors are expected to offset the impact of OCC price increase since the third quarter of 2020.
We are expecting steady sequential result from specialty products segment. This reflects stable volume and.
Average selling price and molded pulp and fiber based packaging.
Near term performance in the European Box Board is also expected to be stable sequentially with stronger volume and stable pricing of the raw material costs.
Our near term outlook for the tissue segment is less favorable on the sequential basis.
This is largely a function of seasonality sequentially comparison of.
A solid finish to 2020 as customer field contracted annual order level and.
The expected cost creep in raw material.
We foresee demand for away from home product remaining under pressure given continue business shutdown in North America, while demand for the retail tissue products is expected to remain stable.
Pricing improvement will support the results going forward as well benefits being realized from the ongoing restructuring and modernization investment.
Added to this we remain focused on optimizing the production and cost structure of this business platform the benefit of which we are beginning to see flow to result to.
For this and we close our two paper machine total leased 55000 tons of capacity in Pennsylvania in early December the.
Kurt converting plant was subsequently closed at the end of January 2021, we also announced the closure of our level of converting plant schedule for the end of June 2021.
These closure are part of our network optimization plan and the volume is being transferred to other facilities.
Moving now to raw material. The recovered paper market saw increased activity in the fourth quarter OCC generation was robust as was demand for the fiber with solid domestic demand levels and strong export activity to South Asian country.
We finished the year 2020 with good inventory levels, and we have net add difficulty securing needed fiber.
We expect similar OCC dynamic to persist for the coming months with domestic demand remaining robust slightly lower seasonal generation and persistent export activity and lower shipping container availability, resulting in a tighter market.
Condition for the white grades were stable helped by lower demands in the OE for a moment tissue products material as as remains readily available and we continue to maintain good inventory level.
Looking ahead, the recent uptick in Virgin pulp price will likely put and then direct upward pressure on costs.
The Virgin pulp markets.
And the unmatched.
Unexpected and rapid surge in pricing at year end of.
This was driven by strong and likely underestimate the domestic demand extended planned and unplanned downtime at the bulk mail and rapidly growing Chinese demand there.
For the coming months, we'll provide greater clarity as to how much of these market dynamics are being driven by fundamental versus short term condition and speculation.
Currently our meals are supply and will continue to be supported by our long term supplier relationship and good inventory management.
Let me conclude by saying that we are pleased with our performance in Q4 and very proud to have achieved a record of annual EBITDA level for the third year in a room.
In addition, we reduced our leverage ratio within an unpredictable and challenging business environment.
We're also very proud to have been ranked 17 in the top 100, most sustainable company in the world, placing first in our sector and the corporate Knights 2020 annual survey of more than 8000 company worldwide. This highlighted our commitment to sustainability.
And our belief that it will create long term value for cash CAD and our stakeholder.
These results highlighted the importance growing.
The growing operational and financial traction being generated by our modernization and margin improvement initiatives and strategic investment over the recent years.
None of this would've been possible with other our employee their commitment to these initiatives and their dedication and resilience during the challenging time is truly inspiring.
As always there are health and safety remain our top priority and we applaud their diligence to the safety measures in place in all of our facility.
With that we will now be happy to answer your question operator.
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Thank you if you would like to ask the question simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press the pound key again, if you have a question. Please press Star then one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of <unk> Patel. Your line is open.
Hi, good morning.
Mario.
<unk> seen a fair bit of M&A in the European box Board markets in recent months.
Multiples of a fair bit of higher than where we're Reno trades.
Has that changed how you think about potentially monetizing that.
That business.
That's the nut really we maintain the same approach with Europe.
Probably are aware that we are participating in the <unk> in the game in Europe as well, we just the and.
One of the.
The acquisition of the trends, though and we think this will generate.
The good synergies and value for the group. So no we have not changed our position.
Okay Fair.
Fair enough then just turning to the containerboard side I'm not sure if we have the Charles on the line but.
How much of the $60 per ton.
Assuming it's fully reflected in that in the.
Trade publication, how much of that is going to be offset by some of the higher freight costs.
The commodity inflation that you've been seeing.
So yes.
Some of your initiatives.
If the child's just maybe one point to mention.
We have announced at.
Of course Scott.
The dollars on the liner but we.
We are pushing the price increase further on the median so we're going to.
To implement of $70 on debt on the medium as you know.
The medium is important then.
And our portfolio and the increased cost in.
The margin that we're generating with the with the medium and the demand. So we are working on implementing $70. So I just wanted to mention debt part.
On the the cost of the impact of the.
The OCC and the other costs.
It's the.
You mentioned, it's too early to.
To say about the full impact.
In the course of the year, so right now theres probably about $30.
Negative impact.
But the next few months will tell us if this is going to be for the rest of the year or just in Q1. So.
Great. Thanks, Charles that's helpful and could you give us an update on the offtake.
Status there.
Bear Island.
Have you signed any new long term agreements there yet.
At this point, we don't have any firm.
Take as.
As we mentioned there's a few.
Initiatives that we are working on the two.
Secure or build up the volume first of all of our converting operations are continuing to <unk>.
Generally the good growth.
So which is a part of of the.
The volume that we will need when we start the new then you pay per mill.
We're also continuing to negotiate with the some of our current customers.
We're in discussion with them, so, but nothing has been signed as we speak of.
Our starting date.
Is the December.
The Q4 'twenty 'twenty two.
So we are working diligently on securing some more volume for the start up and will keep you inform on debt.
Great. Thanks Charles.
I have for now I'll get back in the queue.
Thank you.
Your next question comes from the line of Sean Stewart Your line is open.
Thank you good morning.
Couple of questions first on tissue.
It looks like the mix this quarter was the larger support to the overall results in.
Expected would be the case can you comment to the extent that the favorable mix trends you saw in Q4 continuing into early 2021.
Good morning, Sean John at the.
Yes, we saw better sales on the retail side for sure at the end of the year. So that the alphabet, but we also have to mention.
Alan said, we've put a lot of emphasis from the net revenue management exercise of the from the margin improvement program that we have so.
We've worked a lot to get the right customer mix and the right portfolio.
With our customers.
It was mainly the the <unk>.
Factor explained in Q4 results.
But we also said that December was stronger than expected, which is having and they get to the impact from January so.
We don't see.
The center with both the trend on that site for.
Q1.
That would be pretty much stable as the money also said.
Sales on the away from home side.
We saw a slight difference from month to month again December was stronger for January and February were in line with the last few months all of central.
It's too early to see of pickup on the pool on the Oh.
Went from one side of it.
So it shouldn't it makes them pretty much stable.
Thanks, Sean Thanks for that.
Alan the.
Corporate costs climbed in the fourth quarter and there was reference to I.
I guess, the nonrecurring incident charge.
How should we expect that to trend is it fair to forecast that falling back towards more standard quarterly levels into the early part of this year.
Yes sure.
And if so when theres been shut in and it's below our.
The amount of who can claim it's it's always recorded in the in corporate and also the.
There were more employees.
Insurance claim then let's see in the.
Last few months of the year compared to the previous months.
But overall, yes, it should revert back.
True to normalize yes.
Okay.
And one last one for me Alan.
Can you go through the company's NOL position in Canada, and the U S.
Just trying to get a sense of your ability debt.
The shield cash taxes going forward.
Yes exactly.
With the stronger performance over the last few of your certain lead that.
<unk>.
We've utilized.
Utilize some of these Nols.
At the.
At current level, we expect to be good for the next two to three years, but certainly debt if we continue to improve.
It will offset more rapidly these nols, but we still have a few.
A few years in front of us.
Okay.
That's all I had thank you very much.
Your next question comes from the line of Mark Wilde. Your line is open.
Good morning, My other morning, Alan and congratulations on both the good quarter and the.
So the bill on the balance sheet.
Couple of questions from me first of all any initial read on the impact of these storms and power issues of the southern U S kind of across your portfolio.
Not so far xiaomi.
Shanghai, you're probably the one of our engine of the value of probably the one that's been the most affected but the.
I level right now I would see no impact right now, but the Xiaomi Mi you want to add something or none of that is because of that.
My level of haven't seen in the huge impact.
Well, maybe just I can clarify.
I'll, let you sneak after for us the.
Most of it we don't have the.
Hum.
The operation on the containerboard on that side.
On the supply is the.
So of tight right now that's our customers kind.
And you would request you to read the material so.
There were some delays but.
No major impact, where we were a bit more concerned at one point was because of what makes them trades on the Kraft linerboard side.
And as we speak the impact would be minimal so.
We don't see any major impact the as we speak Mark.
Okay and anything over the tissue.
And our slate the Oklahoma site there was affected so.
Machine are still down or so.
Probably 2000 tons I would say about 10 days.
Of production.
The converting the site because of the employee.
Travel et cetera, et cetera, it's probably.
For a good thousand cases that we're gonna lose but overall net.
Net loss, because we're moving product around so we're bringing jumbo rolls from the other sites where reported moving cases from other sites.
So.
That's huge.
The.
It's not material, but it's still an impact.
When freight costs and other.
Okay.
Mario kind of looking through kind of 'twenty, one and maybe even into 'twenty. Two let me thoughts on just sort of further portfolio of moats.
Well right now we're really focused on finalizing what we have part of the deck.
As you know we've launched the Bear Island project, which is a substantial project for us and it has started now we have all of the approval commitment we're negotiating with the different supplier and contractor so.
A lot of our focus will be dedicated to debt at the same time.
As you noticed we've made many changes in the restructuring of tissue and investing in many different plan moving tons around now we need to ramp up the standard and captured the synergy of the benefit of those investments. So this year most of all of our focus will be to finalize the diesel.
Estimate in tissue and ramping up and the focusing on bear island.
Okay, and then just broadly kind of also looking ahead of a little bit I'm. Just curious historically, you've been very focused on the use of of recycled fibers and particularly in tissue, but baby and containerboard as well any thoughts just given what's going on in the market about.
Perhaps toggling over two or the Virgin fiber.
In either of those businesses.
We are more focused doing so in our tissue segment of the because you know at the portfolio of products. We have in tissue allows us to use more virgin fiber.
As for containerboard, we still remains really focus being on recycled grades.
It's our fourth day and decision all of our focus so right now no. We're not looking at the end the Virgin move on the containerboard side, but the <unk>.
The market is moving in terms of tissue quality demands and so we are using more virgin fiber in tissue is as we speak.
Okay, and I guess the last.
One we've had.
Last several weeks.
<unk> in the sector hit by cyber attacks on on both sides of the border.
I wanted to perhaps of Alan can you just talk about.
The the <unk>.
Things that you've done at Cascades to find yourselves from these types of attacks.
Yes, well.
We've been added for a few years now we have a dedicated team.
That is in charge of.
The monitoring this of year.
The sleep that the recent events.
The us media accelerate or maybe push on <unk>.
New things to do or to be more rigorous and so on but.
I think.
Well serve organize we can obviously continue to improve.
To reduce the risk.
We have and of where.
The key is true.
If it ever happens is that we can run a rotation on the manual mode and this is maybe something that we must be really read the if it happens so that's the key.
For us debt, we see right now in the within the group so.
Okay, I'll turn it over thanks guys.
Thank you.
Your next question comes from the line of Zachary <unk>. Your line is open.
Morning, everyone. Congrats on the great quarter.
Thank you.
Hoping you can give us some more color on the continued margin improvement initiatives and what represents the biggest opportunity in 2021.
Well no.
You saw the five pillars.
You must understand that after all these years of implementing of CP and <unk>.
The redesigning our business processes.
It was time now to really get the most of all of these new platforms. So I would say debt.
For the first year of the program.
Net revenue management was something that was really.
The strong contributor to this exercise, but all of these are the five pillars have of different.
Objective of our teams that we're looking at so but to answer of your question what prices Lee of first day. It wasn't a net revenue management.
Thank you that's helpful.
And in terms of the away from home trends that you're seeing in tissue you mentioned.
Quality improvements across the market segment.
What are you hearing from customers as they look to maybe restock at the restaurants hotel level.
Right now.
It's true.
Too early.
The their inventories on the ice side from our perspective and their focus is is much more on other products than on paper.
So we haven't seen much of the.
The increase for that pick up at this moment of the ecommerce is doing really good and so more and more work.
Partnering with the distributor on the debt channels.
Channels for like thing this is something we underestimate the over the last few years, but this is definitely growing.
On that side of the market.
Sorry, no way too early to say.
Got you thanks.
Last one for me a little bit more far reaching and speculate is that with the shake up in supply and demand that we saw due to COVID-19, and Chinese import ban.
Where do you foresee recycled fiber prices stabilizing over the medium term.
This is the courageous as look at Australia, we will.
For your question.
For the momentum we are in a typical low Jenna.
The generation season on top of that in Canada recently, there has been the confinement in both Quebec, and Ontario, which are parked in the.
Locations for us for fiber generation and despite these conditions I mean, we have a regular supply at this moment.
We observe is the <unk>.
Rest of the markets some.
Stronger pricing from explore but besides the stronger pricing there is limited volume considering the difficulty of bookings of contenders.
It has the not such a huge impact on the domestic market.
In the future months, you know, we're going to get back to a year generations.
And.
I would say now the market is still tight at this period of the year like it is normally in the February.
And we expect that the situations going to become the more favorable for buyers the law.
Likely in April and May likely not only do but our inventories are good.
And we have regular supply at this moment.
Thank you very much I'll turn it over.
Yes.
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your next question comes from the line of Paul Quinn Your line is open.
Yes, thanks, very much solid solid Q4 results.
I guess I'll start in and containerboard just debt.
Right I understand what you announced in terms of the price hike.
Okay.
For November and as well as for March.
All of the this is this is Charles so what we have announced.
In November, which we said will be.
<unk> implemented a fully implemented by.
By Q2.
So we did implement an ounce of $50 price increase on the.
The containerboard and for the second price increase.
Which is effective March 1st.
We have announced of $60 on the linerboard and $70 on the medium.
And if the full impact.
We kind of consider that it's going to be implemented by Q4.
Okay. That's.
Great to clarify.
And then just maybe a day.
And to understand the merchant improvement of the baseline for 2019, that's supposed to be of 1%.
The improvement.
Basically you got that percent is.
Is it off your EBITDA in 2019 as the base.
Well the program every metrics.
We have in the program is based on the cost or TPI.
When will continue this year of next year, we will always measured <unk> compared to our 2019 basis to make sure that we capture the object sales that were set at the beginning so.
It will flow true results.
The net of related Rick.
Current cost that will occur.
It will be netted against that so the objective, yes, it remains too for us.
Some of the 1% per year, that's how we set the objective of at the beginning.
Okay. So maybe in the day.
Where did that.
Poorly but.
At $75 million debt that you achieved did that did that.
I get the 1% of off the baseline.
Yes, yes.
And more so it's not it's a.
It's part of the $71 million.
The dollar.
Improvement in EBITDA, but.
Independent of is there some that are going through cost and some are going to the top line. So.
All true the P&L, but at the end of the day, yes, it's contributing to EBITDA in the.
Helping us to face headwinds.
Net debt, we have from market conditions.
Okay then.
Just on the Capex spend there.
The net 200 of $2 25 that youre going to spend outside of bear island, but what portion of that is maintenance what portion of the strategic and any important strategic programs in there.
The the the.
The maintenance is.
Still around $75 million per year on all of the other assets in the rest of the envelope is split quite the equally between the three groups.
The expert except the bear Island project, which has been.
Bigger envelope.
Alright, that's all I had the select thanks. Thank you. Thank you Paul.
Your next question comes from the line of Mark Wilde. Your line is open.
I wonder if the Charles.
Since we're kind of flying blind here with this the.
Change in FBA reporting can you give us some sense of what youre seeing in box volumes.
Through the through the end of February the been some talk in the trade press about maybe volume being a little slower growth Tonight I, just wondered what you're seeing in the market through the first two months of the year.
Yeah, you're a day.
Right.
It's the the comments right now what we're seeing are I'm going to speak for for cask out because oh, yeah. Yeah. Yeah. That's all of you want to.
Yeah, So it's and and as you know, we're we're very present in Canada, but also in the northeast mid and South.
South east of of the United States. So I mean in my comments are going to be more related to that.
So we're saying that the that the the beginning of the year of Q1 was the was still very strong.
On the February or mid mid month. The as you know is the smaller or shorter month, but still the per day, when we look at our our the man and our output.
We cant say there is very strong.
I think we'd have to be careful also of the the Q4 of the Q3 Q4 was so strong.
That are just a bit the lower demand for a few weeks and people are starting to say that that may be of slowdown we don't see this at all.
So we consider that the we're going to see a very strong of Q1 in the markets, where we are still.
And that's that's what we see of at this point.
Okay, Alright, that's helpful. And then does it also of possible over on the tissue side can you just recap for us what kind of.
Price moves might be out in the market right now.
Again, I think it's it's sort of linked to our cause.
Sales for sure we're seeing a major of icon.
Virgin pulp price.
This weekend.
The <unk>.
For gas for.
For for higher pricing short term, so we'll see all of the markets evolve.
No there's no there's nothing announced officially.
As I said earlier, where we're working.
Working hard on the portfolio and the.
The customer mix.
Get over it.
Get advantage of isn't the but no we haven't heard anything or we haven't seen anything on share count adjustment or pricing announcements.
And given the fact, the most of the big players on the consumer side.
Our non integrated.
How long would you typically expect they can afford the weight.
Before they they try to pass on these higher costs do you of any sense of that I mean do they kind.
Kind of three months six months protection there.
On the fiber cost.
Such that they can they can wait a little while the simplest thing of sustained or do they need the move fairly quickly in order to protect their margins.
That's a good question, it's usually too long but.
We haven't.
We haven't seen any price increase in the retail in the west.
For quite some time, so we got one.
Two years ago, maybe a little bit more and we have been many many years before that so.
I think we're going to I mean, we may see you shouldn't count them for.
On the.
The products.
Right.
Okay.
If I may add market. Its net he was speaking it really depends on the speed of the increase in book right now what we see is a rapid increase it's tough to tolerate such increasing cost in our business. So you know if it keeps on going at that speed. Obviously, you know I think people might react net no doubt.
<unk>.
It would seem like of Mario I mean, I think we've all been kind of caught off.
Off guard by the kind of the speed of the tightening of the fact that it seems to be kind of continuing late in the first quarter growth.
That's certainly true.
Yes.
Thank you.
Thank you there are no further questions at this time the shipyard please continue.
Thank you everyone for being on the call. This morning and were looking forward to talk to you for our Q1 result of a good day everyone be safe.
Thank you. Thank you.
Net <unk>, Mr MSA and the coffeehouse the women nowakowski. Thank you ladies and gentlemen. This concludes today's conference call you may now disconnect.
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