Q2 2023 Mercer International Inc Earnings Call

[music].

On the call today, Juan Carlos Bueno, Mercer as President and Chief Executive Officer, and Richard short Mercer as Chief Financial Officer, and Secretary I will now hand, the call over to Richard.

Thank you.

Good morning, everyone.

Thanks for joining us today.

I'll begin by touching on the financial and operating highlights for the second quarter before turning the call over to Juan Carlos to provide further color into the markets, our capital plan and our strategic initiatives.

Also for those of you that have joined today's call by telephone there is presentation material that has been attached to the investors section of our website.

Before turning to our results I would like to remind you that we will we will make forward looking statements in this morning's call.

Turning to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Like to call your attention to the risks related to these statements which are more fully described in our press release and in the company's filings with the Securities and Exchange Commission.

Yes.

This quarter, our EBITDA was negative $69 million compared to Q1's positive EBITDA of $27 million.

After adjusting for a $51 million noncash inventory impairment.

EBITDA in Q2 was roughly negative $17 million.

The EBITDA decrease in Q2 from Q1 is primarily due to the significantly weaker pulp prices in all of our markets caused by weak demand created by global economic uncertainty.

We also had more scheduled downtime at our pulp mills compared to Q1 and Q2, we had 60 days of scheduled downtime compared to 10 days in Q1.

Our pulp segment had negative quarterly EBITDA of $56 million, which after adjusting for the $51 million noncash inventory impairment leaves a negative $5 million result.

Our solid wood segment, EBITDA was negative $10 million and was driven by poor lumber prices.

You can find additional segment disclosures in our Form 10-Q, which can be found on our website and that of the SEC.

In addition to the $51 million noncash impairment charge lower pulp prices resulted in a negative EBITDA impact of about $81 million in Q2 compared to Q1.

In Q2 average N V S K and M. P. H K list prices were down in all our markets compared to Q1 as economic uncertainty continued to negatively impact paper demand and was compounded by the impact of new South American hardwood capacity.

In China, the Q2 average M. B S. K net price was $668 per ton down $223 relative to Q1.

European N V S. K list prices averaged $1247 per ton in the current quarter, a decrease of $130 per ton.

The market price gap between M. B S K and M. P H, K and China widened slightly to about $85 per ton this quarter as the market struggled to digest, new eucalyptus hardwood capacity from South America.

In China, the Q2 average N V. H K net price was $483 per ton down 22, sorry, $227 or 32% compared to Q1.

And the North American Q2 price was $1277 per ton.

$246.

As mentioned lower pulp prices resulted in the recording of a $51 million noncash inventory impairment in Q2 about 31 million of which was against hardwood pulp and fiber inventories at the Peace River mill and the remainder was against softwood pulp and fiber inventories at our Canadian pulp Mills.

The large hardware component was a result of the mill, having a significant volume of fiber in front of the mill in preparation for the startup of peace river's new bedroom.

Yeah.

Certain pulp buyers took advantage of the low prices this quarter, resulting in a strong pulp sales volume in Q2.

Sales volumes increased roughly 100000 tons or 23% in Q2 relative to Q1.

All of our mills ran well this quarter, but we had significantly more scheduled downtime in Q2 compared to Q1.

In Q2, we had a total of 60 days of downtime at our mills, which consisted of 25 days of planned maintenance and 35 days for market curtailment.

In Q1, we had only 10 days of planned maintenance downtime.

The increased scheduled maintenance downtime negatively impacted EBITDA by about $17 million in Q2, when compared to Q1 and the market curtailments impact was a negative $21 million.

After adjusting for the planned shut some curtailments pulp production was up almost 19000 tons from the first quarter.

In Q2, the Rosenthal mill recognized almost $17 million to settle the business interruption insurance claim for its 2021 turbine downtime.

This cash was subsequently received in July .

The Stendhal mill received $5 million worth of insurance proceeds related to its fire damaged wood yard insurance claim.

And final repairs are scheduled to be completed in Q3.

And I also pointed out that U S. GAAP requires these insurance proceeds to be recorded in operating results.

For our solid wood segment lumber pricing was modestly up in both the U S and European markets due to steady demand.

The random lengths U S benchmark for Western SPF number two and better was $380 per thousand board feet at the end of Q2 compared to $361 at the end of Q1.

Overall lumber prices positively impacted EBITDA by approximately $2 million compared to the first quarter.

Lumber prices have noticeably improved at the end of the quarter today, the benchmark price for Western SPF number two and better to buy for us in the U S is $427 per thousand board feet, an increase of $47 from the end of the quarter.

Lumber production was 122 million board feet in the quarter down almost 10% from a record first quarter production due to minor production upsets early in Q2.

Lumber sales volumes were also approximately 134 million board feet down 4% from the prior quarter.

Electricity sales totaled 250 gigawatt hours in the quarter, which is up 12 gigawatt hours from Q1 due to strong production in the current quarter.

Pricing in Q2 fell to about $160 per megawatt hour from $130 in Q1 due to reduced energy supply concerns in Europe .

Our mass timber business continues to ramp up operations, resulting in revenue of $14 million in Q2 compared to $6 million in Q1.

This business also has a growing order book that we expect to fulfill over the coming months.

We reported a consolidated net loss of $98 million for the second quarter or $1 48 per share.

Compared to a net loss of $31 million or <unk> 46 per share in Q1.

After removing the impact of the noncash inventory impairment charge. The Q2 net loss is about <unk> 71 per share.

We used about $87 million of cash in Q2 compared to using $53 million in Q1.

Our cash usage in Q2 was primarily due to our acquisition of structural Ams cross laminated timber and glue them assets for about $82 million.

The cash impact of our negative Q2, EBITDA was more than offset by reduced working capital in the form of lower inventory balances that our Canadian mills due to strong pulp sales.

And working capital management activities.

We invested about $39 billion of capital in our mills in Q2 looking ahead, we have reduced our expected capex spend to be about $130 million in 2023.

At the end of the quarter, our liquidity position totaled $446 million comprised of $213 million of cash.

$233 million of Undrawn revolvers.

And as you have noted in our press release, our board has approved a quarterly dividend of $7 five per share for shareholders of record on September 27 for which payment will be made on October four 2023.

That ends my overview of the financial results I'll now turn the call over to Juan Carlos.

Thanks Rich.

Q2 was a disappointing quarter for us as the market pulp prices deteriorated sharply across the world.

And in a very short period of time.

Rich mentioned prices in China fell by more than $200 per ton for both hardwood and softwood.

The rapid decline in pulp prices was led by hardwood pricing in China due to weaker economic recovery than expected with large pulp producer inventories and compounded with the ramp up of the new and large South American Eucalyptus mills.

Software on the other hand, if supply is gradually tightening due to the various curtailments and mill closure announcements around the world.

Several pulp producers are extending their annual maintenance shuts are similar to what we did at peace River. In Q2. In addition to this the recent British Columbia Port strike as well as Canadian Forest fires are also contributing to a tightening supply.

And the demand side European paper producers are still running at reduced capacity rates as the European economy continues to be burdened by the effects of that are creating war.

In China stimulus measures are being implemented economic growth to date has been modest.

Looking forward, we expect pulp prices to continue to be under pressure in Q3 is a traditionally weak summer months take hold.

Hardwood and softwood pulp prices in China appear to have bottomed out in Q2 suffered is currently lagging behind in Europe , and we expect to hit its floor price in Q3.

This weak pulp pricing outlook for Q3 drove us to book the large noncash inventory impairment charge this quarter that rich described earlier.

As a result of the logistical issues created by the recent British Columbia Port strike, we were forced to take a temporary 30 day curtailment at our circle Soucar mill during the month of August .

This is not a decision we made lightly but we are optimistic the mill will clear its pulp.

Tori backlog and be able to run full by the end of this curtailment.

Withstanding the port strike, we are seeing decreasing pricing pressure on freight costs, most notably container rates.

As a result of uncertain market conditions, we have taken proactive actions to reduce our planned capex by roughly 40% as we now expect to land at around $130 million for the full year.

At the same time, we have focused on reducing our inventories aggressively over the second quarter of the year and we will continue to enforce discretionary spending cuts and cost cutting measures across the company.

Our mills ran very well in the quarter, although some planned maintenance downtime negatively impacted production relatively to the first quarter.

In addition, we saw a modest decline in both fiber and chemical costs.

Our remaining 2023 annual mill maintenance schedule includes Rosenthal being down from 14 days in Q3, reducing production by about 14000 tons.

Stendal will have a three a short three day shut and <unk> will have a 26 day major maintenance shut in Q4 or roughly 41000 concept production in total.

Our second quarter lumber results reflected mixed markets, but on average both the U S and European markets were up slightly compared to Q1.

While high interest rates continued to weigh on housing starts we have witnessed a positive partial recovery of lumber prices in the U S with SPF benchmark prices recovering about 30% of lost value since early June through mid July .

Although they have.

Correct at slightly over the last two weeks.

We continue to believe that low lumber channel inventories.

A large number of sawmill curtailments relatively low housing stock recent Canadian forest fires and constructive home owners homeowner demographics will put positive pressure on the supply demand fundamentals of this market in the mid term.

We will continue to match, our mix of lumber products and customers to current market conditions.

As such in Q2, our lumber sales volumes were weighted slightly more towards the U S relative to the European markets.

The integration of <unk> continues to progress well, although shipping pilot markets remain weak prices and demand for heating pellets are growing strong once the European economy show strong signs of recovery, we expect pilot prices to return to normal levels, allowing this asset to deliver significant shareholder value not only backed by <unk>.

Improved business conditions for pellets, but also by increased lumber production capabilities.

As we have previously reported we recently closed on the acquisition of structure that we're very pleased to have added its assets to our mass timber portfolio.

We now have roughly 35% of north American mass timber production capacity and a much larger geographic footprint, which gives us competitive access to the entire north American market. The integration of this business is ongoing.

Since the addition of the structural M assets, we have seen a noticeable escalation of customer interest in our mass timber offerings, we think inquiries doubling over the previous months average including included in these enquiries are some marquee projects and we will have more to say about this in the coming months.

Moving on to pulpwood in.

In Q2, we saw prices decrease overall.

In Germany, we worked through our high inventory high cost inventory, while demand for fiber remains strong for our Canadian mills.

Looking ahead, we expect further modest declines in pulpwood at our German mills, though we are seeing early signs of increased demand from the energy market, which could negatively impact our fiber cost for chips.

Similarly, we are expecting the fiber costs at our Canadian mills to decline modestly in Q3.

During the quarter, we commissioned our new lignin extraction and pilot plant, which is a large step towards being able to begin commercialization of lignin.

We're excited about the future prospects of this product.

Sustainable alternative to fossil fuel based products such as in adhesives, and advanced battery elements to only name a few.

This aligns perfectly with our strategy, which involves expanding into green chemicals and products that are compatible with a circular carbon economy.

As our world becomes more sensitive to reducing carbon emissions, we believe that products like lignin mass timber green energy lumber and pulp are all products that will play an increasingly important role in displacing carbon intensive products products like concrete and steel for construction of our plastics for packaging.

Furthermore, the potential demand for sustainable fossil fuels substitutes is very significant and has the potential to be transformative to the wood products industry.

We're committed to our 2030 carbon reduction targets and believe our products form part of the climate change solutions. In fact, we believe that in the fullness of time demand for our low carbon products will dramatically increase as the world looks for solutions to reduce its carbon emissions, we remain bullish on the long term value of pulp.

But to bring more balance to our business lumber and mass timber will grow more quickly over time.

In closing looking forward to Q3.

We will be laser focused on the continuous reduction of cost capex and working capital while we navigate this period of low pulp prices. We will also work on rebalancing our assets in line with the execution of our strategic plan and we will continue to manage our cash and liquidity prudently. Thanks.

Thanks for listening and now I will turn the call back to the operator for questions.

<unk>.

As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue Press Star one one again.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Sean Stewart of TD Securities.

Thank you and good morning.

Couple of questions.

Start with Capex.

Can you give us a little more detail on the reduction to the budget.

What specific projects are you foregoing or delaying.

And are we right to think about it this is.

Taking measures to preserve.

Liquidity flexibility in the balance sheet. That's that's the main and main driver of this decision is that the right assumption.

Yeah, Shaun Richard So yes to answer your second question, that's correct, where we're just trying to be conservative with our with our cash.

And I guess the way, we're sort of thinking about it as we're sort of taking our capex back to an MLP level.

So some of the strategic initiatives that we had scheduled or are now being deferred to a later year hopefully 2024.

And any specific projects that you are.

Sure.

Kicking in.

Question timber we had a couple of initiatives. There we were going to do this year. So we're going to defer those.

That is this.

In feed.

<unk> around at the beginning at the start of the plant.

Some worked at <unk> as well with the.

The woodyard and installation of a.

Of a cleaner.

Those are the ones that are actually going to hurt the most where we were excited about those projects, but we're going to defer those for another year.

The only thing Sean about those.

As it relates to the one in Spokane and the delay of that one of the considerations that we had was obviously the fact that with structural aren't coming in.

That obviously gives us still a strong push to continue growing so it doesn't hurt necessarily just delays further growth.

But it doesn't hinder us from continue the path of growth such as solar. So those are those are the kind of considerations that we had when we looked at those things.

Yes.

Okay. Thanks for that and then.

Following on that the wood products segment.

We saw some some CLG volume which is encouraging.

The previous indication what do you expect that business to contribute positive EBITDA this year and I want to confirm that's still the expectation and then.

More broadly speaking with products it looks like you've lost relative ground European comps.

Can you give us a sense of how concentrated these losses are at tour Gal.

And is this really just a <unk>.

<unk>.

Pricing issue any other measures you can take.

To bridge the gap with your competitors in that region.

Absolutely when it comes to your first question yes.

<unk> bye bye understanding that we will be positive by the end of the year and in the mass timber business. So that business is growing.

Pretty well we have an order book that has continued to rally up.

And the amount of.

Of interest since we acquired structure now is just incredibly.

Incredibly increase so so we have something it's working pretty pretty well.

I guess, what I'm, what I'm, saying here.

Now as far as <unk>, yes, you're right the pallets.

Prices have come down significantly from where they were.

Last year.

And this is what's basically.

Dragging our results down when you look at the whole lumber business that is probably the most single significant factor of all.

Yes lumber prices were not strong were there was still weak.

Nothing dramatic versus Q1, we.

We see that it's going to be improving in Q3.

But but yes pellet prices to dragging down and even though we're the largest pellet producer in Europe .

Our volumes are still holding but but obviously with price being down it.

It creates.

I hit.

John maybe I can just add to that.

So we haven't been able to achieve the synergies we were targeting when we first acquired <unk> just because the market has been so low so thats part of the part of the equation as well so the $60 million at least of synergies that we're still targeting.

Okay.

Okay. That's all I have for right now.

I'll get back into queue.

Thank you.

Our next question.

Comes from the line of Matthew Mckellar of RBC.

Hi, Thanks. Good morning, just building on that last question I Wonder if you could talk about what kind of improvement in pricing maybe in percentage terms, you would need to see a return to what you consider more normal levels for pallet pricing.

And then.

Just wondering if you are the largest producer palace in Europe , whether you plan to reduce production at all.

To help the market find balance.

Sure.

Well just in terms of the pricing one Matthew probably about 10 or.

Maybe 15% so we're talking about 11.

<unk> 11, or $12 a unit, that's where they're trading today.

They need to probably go up to about 15 to be sort of a breakeven level.

And then I'm sorry, I missed your second question, yes on the on the on the on the volume, yes, we've curtailed a little bit of volume.

Because normally we could produce it.

Roughly 17 million pallets and.

And we're producing shorter from that maybe around $13 million. So yes, we are taking measures to try to reduce the amount of supply in the market as a way to to hold prices at a more reasonable level.

And that is part of our plan to reduce pallet production and increased lumber lumber production. There. So that's consistent with our strategy.

Great. Thanks, that's helpful.

And then just could you talk a bit more about what the structural and acquisition does for you strategically and to the extent you can what kind of capital plans you might have for that business.

The short and medium term I know you talked about the wedding feed I think that was probably in Spokane and then.

Maybe what your expectations are around trajectory for revenue and contribution.

Okay that business for that business over the next year or two.

Absolutely, yes, well structured and what it gives us first and foremost is the opportunity to be able to participate of the south East American market, which we know is it's obviously a very important growth market for us.

And it also gives us the opportunity to.

Add <unk> to our offering so we had already.

Cross laminated timber in Spokane, and now, we're adding more cross laminated timber plus glue them. So.

So that is that is in essence, what the play is from our portfolio and the geographic coverage point of view now.

Now on top of that.

Now being able to work not only southern yellow pine, but also as we were working before SPF out of Spokane. So we also have a mix of different types of.

Raw materials that are that are commonly used whether it's in the southeast or the northwest.

So we're able to serve our customers depending on what their needs and desires are.

And that has played out very well one of the.

Investment projects that we had in Spokane lineup was exactly around adding <unk> capacity.

We have deferred some of those investments because now obviously, we have acquired an RFP are able to run.

Out of Conway in Arkansas, very efficiently. So so that's a little bit of how things play out.

And that is one of the reasons why we wanted to so much and we thought it was such a good play.

Not only because we were buying it out of bankruptcy, obviously at a very at a high discount.

But because he will allow us to already immediately start participating out of that market being able to offer both blueline and CMT to our customers.

Because that's obviously what the market demands in most of the cases when we receive inquiries now in terms of growth. We see this business growing very quickly beyond $100 million in revenue.

So we're aiming for that in a very short period of time.

And Thats.

Obviously very positive from a profitability point of view.

If already being.

Small as we are right now.

Now getting into bigger numbers than obviously the profitability increases.

A very significant way.

So that's about.

Mass timber.

Great. Thanks, very much and then last one for me.

Do you expect any impact to your peace River mill, either over the near term or longer term from the wildfires in Alberta.

We are in terms of our own FMA.

Didn't suffer major losses as a consequence of that.

So the impact the direct impact is negative <unk> <unk>.

Now what what I can say, though is there was a tremendous amount of losses around softwood and that obviously impacts our sawmills in the region and other businesses in the region.

We are increasing at the same time, our softwood capabilities in peace River. So we're running more softwood than we normally do.

Obviously this these two situations combined create a bit of a crunch when we're adding more software and theres been softwood fires that affected the region that.

That hinders our ability to do more softwood as we would like to do but despite that we.

We are being able to drive higher campaigns or longer campaigns of softwood, which benefit us in the long run.

We're still make.

Decent profit with softwood in Peace River.

And we shy away from a hardwood which is obviously where.

We struggled the most even though in hardwood already.

At breakeven at the current prices of hardwood so so.

We believe that going forward with hardwood prices slowly picking up in China, we will get back to two.

To the plaque on hardwood in Peace River.

Okay. Thanks, very much that's all from me I'll turn it back.

Okay.

Thank you again to ask a question. Please press star one on your telephone again Thats Star one one on your telephone to ask a question.

Our next question.

Comes from the line of Cole Hathorn.

Jefferies.

Good morning, Thanks for taking my question I was just like a little bit of color on what you're seeing in.

Kind of the cost of fiber in pulpwood in in Europe .

Particularly around Youll.

German mills and could you just put that in in reference to what's happening out there in the Nordics nordics.

Nordic Wood pulp wood costs have been higher and they're probably going to be higher for longer.

Just some color around what you're seeing in Germany, and then relate that to do you have kind of an improved cost advantage versus some of the Nordic peers. Thank you.

Recall thank you.

Yes very important.

The point that you bring up.

In the Nordics, obviously, there is suffering from the fact that with Russia being out of the equation.

They are there.

The cost of fiber has obviously escalated significantly and we've seen the impact of those by law.

Listening to the news of mill closures in Finland and whatnot.

Now when it comes to our German mills of the situation is quite different.

We have an increased beetle infestation that is currently developing in Germany.

There is additional award that is being made available as a result of these increased beetle infestation.

We see actually a.

A very significant increase of harvest as a consequence of this and this will carry on for.

Most likely already in the coming quarters. So in Q3, we'll really start seeing some of that.

Q4, the same thing and we think it's going to be sustained for the rest of next year. So for 2024, we expect.

<unk>.

Pulp log prices to come down in Germany.

At a significant level.

And the same thing already beginning in later part of this year. So the prognosis for us is favorable.

Very favorable on the back of the beetle infestation in Germany.

And which puts us as an advantage at an advantage versus other geographies.

And then maybe just following up on that point.

From from the pulp side I imagine it's helpful Rich.

Overall wood raw material cost spread format sawmill perspective is there any kind of further kind of processing costs.

<unk> needs to be thought about four.

The beetle infested wood door.

No no and as a matter of fact, it's equally positive.

So the same or even more.

Because it's a direct the first one to be benefit as the sawmill.

Pulp logs will follow.

The first benefited would be <unk> and freeze out directly so both mills will enjoy much lower.

Prices for four.

For southern timber for Sean.

For saw logs excuse me in Q in Q4 and already in 2024.

And then if you allow me on your.

On your mass timber business could I did understand the commerciality am I right in assuming that Youll scale.

Gives you quite a significant advantage going forward I mean store Enzo.

One of your competitors is it was called out.

The ability and reliability to supply cross laminated timber from multiple sites too Big a project. So from a commercial perspective do you expect to see greater interest from from your customers.

And related to that commerciality should.

Should we think about mass timber as being kind of a more stable volume and pricing business versus traditional number.

We really make that.

Assumption from a kind of profitability and pricing perspective. Thank you.

Absolutely absolutely when you look at at mass timber. This is not a commodity business. So this is this has a very different dynamic than what we see in pulp or or or lumber does.

By being part of the same construction industry. The dynamics are very different the margins are very different. These products are tailor made for our customers.

And obviously, we look at them from a project on project basis.

Where we're replacing concrete and steel so it's.

Again, the parameters under which we look at this business and evaluated are very different.

The fact that we have a 35% of north American installed capacity.

As an edge.

It gives us a more competitive cost to work with that allows us to bid for projects that since North America may not have the capacity to support in Europe is bringing products in from from across the ocean.

April two already compete also with.

With the Europeans that have that have taken advantage of that situation and the fact that North America is just developing.

So, yes that puts us at an advantage with a very modern facilities that we have the Conway facility is probably the most modern facility.

In North America, and not very far away from Spokane, whereas Spokane was.

So yes.

The good facilities highly competitive.

Properly dispersed geographic fashion is just a tremendous.

To have.

Thank you.

Thank you.

Our next question.

Comes from the line of C J Badami a principle.

Hi, Thanks for taking my question following up on the last questioner.

Your answer could you could you talk about the margin profile of the business.

What you might expect and over what timeframe.

Yes.

We don't disclose the specific.

Margins for our products.

One thing that I that I can say, though.

Jay is when you look at Spokane, one of the things that we have been working on precisely was how can we fill up the plan how can we ramp it up and so forth.

I can say already that the plant the plant is running full.

It's been running for already for the last couple of months.

And with the order book that we have that plant is going to ramp for with what we have already in hand.

Through the end of the year easily with the projects that were about to sign off in signed contracts for.

Which is quite significant at probably twice as much as what we have in our order book.

That plant will be running at full already through at least half of next year.

And Conway, obviously, it takes advantage of it because we will be ramping up.

As we go through the process, so having spokane running in full.

Now on one shifts running full and in Conway ramping.

Ramping up that obviously puts us in a in a.

Good situation from a from a cost perspective and make sure that we that we are driving good results from it to the bottom line, that's why we say that.

Despite of it is being is still a small business today.

By the end of the year, it's going to be already.

Cash positive or profitable EBITDA.

And obviously the prospects are very very good for the coming year.

Okay are you having to.

Use price to kind of.

Grow and scale up your business.

Or can you comment.

Do it without making concessions on price no as a matter of fact, it's quite the opposite.

And just to illustrate a little bit on that particular subject.

When we picked up structural EM and.

And we looked at some of the things that they had been working on.

And we went to bed for those for those projects or rebid for those projects because obviously they were canceled altogether.

We end up looking at our at our cost position and what we should be able to bid for and all of our bids came much higher than what's structural him had bid for them initially.

So if anything for those projects that were.

That had already been secured by structure long before their bankruptcy and that had been halted because obviously they ran out of money and had to put a stop on everything when we picked up some of those things since we started the conversations from scratch.

What was the surprise to them, obviously was the fact that not only have <unk>.

<unk> been going through a supplier that had went bankrupt, but the fact that the new owner is coming with <unk>.

<unk> higher price than what they.

<unk> talked.

<unk> talked for their project initially.

So if anything we apply very strict.

Demands in terms of what we expect for profitability of our products and.

Willing to just give concessions to make ourselves through into the business not at all pretty much the country.

And you rebid those.

Site, having a cost position that was no worse or even better correct and.

So the vast majority where we're executing on in process of signing contracts for all of those.

Okay and thank you and then lastly could you talk a little bit about working capital over the back half of the year given all the moving parts in your different businesses and the ramp up of CLO.

Yes, absolutely on working capital we continued to exercise.

Australia measures to make sure that we bring inventories down for either fiber of pulp.

We're aiming to significantly continue those efforts and bring in bring at least $50 million.

Further reductions in working capital through the remainder of the year.

So yes, that's that's a big area of focus for us and it's across all businesses.

Great. Thank you for answering my questions.

Thanks C J.

Thank you.

I would now like to turn the conference back to Juan Carlos <unk> for closing remarks, Sir.

Okay. Thank you Latif and thanks to you all for joining our call rich and I are available to talk more at any time, so don't hesitate to call any one of US otherwise we look forward to speaking to you again on our next earnings call in November Bye for now.

This concludes today's conference call. Thank you for participating and you may now disconnect.

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