Well established for increased profitability that we envisage will come in the future. And then graphics, we know that graphics demand is in structural decline. We've been proactive by proposing this joint venture with UPM. We think it will deliver substantial synergies. and ultimately preserve flexibility for future upside divestments. And then on the joint venture, page 18, we've already achieved a number of milestones. The big one, and we've talked about it previously, the big one is to get approval from the competition authorities and the big one there is Europe. That process is progressing and we're still feeling good about fulfilling the conditions by the end of 2026. Turning to the segments. Firstly, pulp. Underlying demand is good. I've mentioned it a couple of times. We have been impacted by the lowest selling prices year on year and the Rand Dollar exchange rate. But other shorter term dynamics have meant that we have seen an increase in price in the quarter. Just important to point out, the Engadwana shop was in this quarter as well. So that did have an impact on this segment. And then the next segment is on page 21, the packaging. We've gone through a tough period. The markets here globally have been tough. Excess capacity in Europe. We've had the project that we undertook at Somerset. And then more specifically in this quarter, the South African business was impacted by the shutdown in Gurdwana. Looking forward, underlying demand for container board in South Africa is good. And we were starting to see Global Container, certainly in North America and a little bit in Europe now starting to come through. Hopefully that will all be beneficial for pricing in the South African environment. And then we anticipate higher volumes coming through in the North American business. In graphics, we've got the structural decline. We did take costs out. particularly on the fixed costs but the rising input costs that I talked about earlier have impacted on margins. The US market is in a more resilient or a more in balance position following our conversion and that will boost profitability. Seasonally Q3 is a lower quarter for Graphics and normally Q4 is our bigger quarter. Slide 23 has the regions. I don't intend going through that. The big themes coming through here is lower selling prices year on year but starting to rise quarterly and that's the overriding story with regards to the margins. and a great ramp up on volumes in North America. Then on the outlook. Firstly, demand. I talked a few times obviously about dissolving pulp being healthy and packaging ramping up as I referred to. Prices moving slowly in the right direction which will support profits going forward. but importantly we're not just sitting back and doing nothing on the cost front and we've been proactive at taking costs out and we'll continue to look at opportunities across all our regions and if you move to slide 26 we are targeting further operational efficiency improvement and fixed cost reductions. We've got to finish the joint venture which I talked about or the and Post Joint Venture, as I referred to earlier. So taking that all into account, we do have a smaller shut in the quarter at Somerset, but it is smaller. But taking everything into account and the improved conditions, the fact that we don't have a major shut, a higher dissolving pulp price coming through, based on all of that, Our guidance for the quarter is that Q4 will be materially above the Q3 numbers. So, operator, that's me going through the presentation. I'm now going to hand it back to you for questions.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by as we compile a Q&A roster. Our first question comes from the line of Sean Ungerer of Chronux Research. Please go ahead, your line is open.

Good afternoon, Steve. Can you hear me? Yes. Great. Thanks for the update, Steve. Just to turn to the fourth quarter guidance in terms of being materially up quarter and quarter, that's great news. What is your sort of threshold on Significant materiality and I guess there was no specific reference to Q4 last year where I think the print was about $111 million.

Yeah, sure. Look, the market conditions a year ago were very different so we didn't think it was appropriate to reference it against that. I'm not going to give you a specific number but what I would highlight to you Thank you Steve.

And then just in terms of a commentary around normalised profits to sort of bring net debt down, I guess the million dollar question is when do you anticipate normalised profits again?

Yeah, look, it's too early to call next financial year, but, you know, if you do the math and you work backwards, you know, you've got a maintenance capex number of around 250 and an interest bill and a tax bill. It's clear that to begin paying down debt, you have to get close to $500 million of EBITDA. That needs to be the immediate target. I'm not giving guidance, I'm purely giving you maths on debt reduction. That's our initial target and I think that market conditions are improving. But it's not clear as we sit here today when we can get to that number.

Okay, perfect. Thanks, Keith. And then just moving to North America on the SPS price increases. So just to confirm, in the current quarter there was no benefit from higher pricing, is that correct? And then perhaps if you could just, I know you did mention the further benefit in Q4 and Q1, but are you able to sort of give us any sort of weighting towards those quarters?

Look, there's no benefit in the Q3 numbers, none. The first announcement was $60 a tonne. It's not all come through yet on the recent numbers. I think it's fair to say that a proportion of that will be realised in Q4 and then the balance in Q1. So, you know, some of the contracts are linked and some of them are based on spot pricing so it takes time to realize so there's typically a two or three month lag.

Okay got it and then Steve just in terms of the cost base we appreciate a couple of the slides to explain the sort of cross pressures you have been experiencing across the business. I think the numbers quoted are sort of for the full year impact right but just to confirm I think most of these sort of pressures only started filtering through in the third quarter and obviously are going to be then Q4 with H1 fairly clean or was that an incorrect assumption?

Yeah at a high level and you'll recall our last results announcement we had a substantial increase in costs in the Q3 and There is incremental increases in Q4 as well. The jump is not of the same magnitude that we experienced from Q2 to Q3. But there is further cost and that's part of our outlook guidance. That's been taken into account. To answer you more clearly, most of that cost increase has been in the second half of the year.

Yeah, okay, perfect. And then just in terms of SHAPs for next year, I know you don't want to provide any guidance, but sort of at least on my numbers, the impact on EBITDA is likely to be similar-ish compared to FY26, whereas obviously FY26 was a lot lower than last year. Is that a reasonable assumption at this stage? Yeah, broadly that's right.

Our North American mills are on an 18-month shut, so you rotate the quarters for those two, and then in South Africa, broadly in line, right? Sorry, the team are just reminding me that the Ngadwana shut for next year will only occur in October, Graeme. So, there will not be an in-Gudwana shot in financial year 27.

Yeah, okay, perfect. That's great. And then just last one, perhaps just for Glen, just in terms of the networking capital for the fourth quarter, normally we see quite a sizable inflow. How should we be thinking about that for this quarter? Is that sort of in line with last year or perhaps you can share some insight?

Yeah, sure. It's Glen here. You're right, we do usually see a net inflow. We're anticipating a slight outflow this year, and that's really because of the ramp-up that you're seeing in our operations, the increase in prices, and we're building a bit of influence into next year for a shutdown in Cloquet.

Okay, perfect. Thanks, guys. Thanks for the questions.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Brian Morgan of RMB Morgan Stanley. Please go ahead. Your line is open.

Brian Morgan Hi, guys. Good afternoon. Thanks for the time. Can I just ask on the 2028 bonds, when does that window open? And just chat to us maybe a little bit about your strategy in that regard. Would you be looking to refi those bonds? Could you do term debts? Just what do you think in that regard?

In terms of refinancing, we're constantly monitoring the market. We will want to refinance it at least a year before the time, so it's in April 2028 that it matures. The window is a two-year window prior to that, so we're looking at it, Brian.

So, at least April 2027.

Early 2027. Brian, to the other part of your question, our primary, you know, we have to get to that refinancing, but our goal would be to refinance it with bonds, yes.

With bonds, okay, that's fine. Can you give us a little bit of colour on the SPS market as you see it? You guys are adding quite a lot of capacity into that market. There's not a lot of capacity coming out of that market. The industry has been able to pass through price increases into a lower operating rate environment. Is demand just that strong? How should we interpret this ability to put through price increases?

I'll briefly answer them and then I'll let Mike elaborate further. Brian, there has been capacity come up and I don't like naming other competitors, but two competitors have taken capacity out this year. In terms of the demand side, we have seen a pickup, but Mike, maybe you want to just go into elaborate further.

Steve, I think you are correct. So two competitors have taken assets out of the SPS market in North America. We continue to expect and we continue to see a growth of, you know, the 1 to 2 percent. And in addition to that, there's been another mill that's been down on the West Coast. You know, due to failure. And I think all that has had an impact on the market. Our market orders specifically have been continuing to grow and the machines running well. And now we're working to speed up, you know, as we planned. And right now we've kept all our assets full on SPS.

Okay, cool. Thank you. And just to confirm, you've received all your customer approvals now?

I'm not sure of the question. Qualification for all of our products?

Qualifications, yeah.

Yeah, all our base products are going very well and we've introduced several other products to the market such as an oil and grease resistant and those types of things which are We're still in the process of being qualified, but those are new products to the market as opposed to the standard products.

Brian, just one other comment. Typically in the industry, as you gain new customers, they do want to trial the product on the machine. So you may be making it for another customer, They do go through trials. That happens all the time.

Better put, Steve. We do have to qualify with brand new customers, but the majority of that has been accomplished at this stage.

That's cool. Thanks very much, guys. Just on TWP, we've seen net paper pulp prices drop in the last couple of weeks by around $20. Does this sort of cap the upside to DWP in the short run?

Yeah, look, it's an interesting question, Brian, and I'll let Mohamed jump in after I do. Look, there are numerous positives and I highlighted them earlier. The one negative has been these lower paper pulp prices. But just to re-emphasize once again that there are only a limited number of players who can use paper pulp in their viscose manufacturing process. And that kind of puts a cap on it. And similarly, swing capacity on the DWP producer side There's only so many machines that can do that swing capacity and a lot of that's already been directed to DWP. So it is a negative factor, but it is somewhat limited in terms of its influence. But Mohamed, maybe you can talk more broadly.

Yeah, Steve, I would just add to what you're saying is that the VSF industry in China, in fact outside of China also, the operating rates have continued to remain very, very high, low inventory levels. And the value of those very high operating rates, even though we are now in a seasonally slow time, means that from a quality perspective, dissolving wood pulp makes it easier for the guys to run harder. So with demand being good for fiber, I think the need for running, let's say, higher quality raw material is also much higher. So that also, I think, continues to create a positive situation for dissolving pulp and also limit the usage of PEK to just the guys that have the technology to actually use PEK.

That's excellent. Thanks, guys. Appreciate the time.

Thanks, Brian.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of James Twyman of Prescient. Please go ahead. Your line is open.

Thank you very much, and thank you for the presentation. The first question is, Steve, the covenants with the banks are until March. Could you give us some idea of When the timing is for extending that and how long you would plan to extend that by? And related to that, how much of your debt would you say is subject to those covenants?

On the first one, we're in constant contact with our banks. We have great relationships with them. Our estimates with them and they continue to be very supportive. So in terms of what would happen in 27 after the covenant come back, we would be proactive. We've always been proactive and we will ensure that we have sufficient flexibility In terms of the covenant itself, Glen, it's specifically the RCF, right? Yeah, it's linked to the RCF and the RAKB, yes. So it's the RCF facility and that OEKB lot.

Okay, great. Thank you very much. So would you expect us to have an idea of the extension this year or this financial year? What are your thoughts on that?

Look, it's an ongoing process, James. I didn't say extension, you said extension. What I was saying is that we will have flexibility based on the outlook for our profitability next year and we are going through a process to put that in place. It's difficult to give an exact date but it will be hopefully very soon.

OK, thank you. And then in the US, obviously, as you mentioned, you know, you're expecting a much stronger fourth quarter as PM2 ramps up and prices are picking up. There is always this big seasonality element as well. And I just wondered if you could talk about that impact, because sometimes We get a huge seasonal impact and sometimes we get a really small one and it sort of depends on where your inventory levels and other factors. So, you know, is that an additional factor that you would see helping in the US?

Mike, do you want to take that seasonality question?

There is a bit of seasonality but with the move it was it was more driven by graphics historically so I think we're going to see less of an overall seasonality impact with the balance between our pulp business our SBS business and our graphics business than what we've seen in the past and Although there always seems to be a bit of seasonality around the holidays in the US,

Okay, thank you. If I could just ask one more. Over the years you've always talked about cost-cutting as a general part of what you do and you often talk about 50 million dollars or euros of cost-cutting each year being something that seems to keep happening. You're talking about 120 this time and you've said that without a lot of fanfare. It's a huge number. Could you talk about really about whether that's all in the base? Because I think in the presentation you talk about that being a year to date number. I'm sure it's annual year to date or something, but is there more to come there? And could you give us a bit more detail on that? Because around the 29 million of savings in Europe from restructuring, but this 120 is a very big number to be happening.

Yeah, indeed. Roughly it's about half-half fixed cost variable costs. The fixed cost a big chunk as we've indicated is in Europe, but there are fixed cost savings in the US and in South Africa as well. On the variable cost side, a significant proportion of that relates to usage and other cost saving initiatives on raw materials. Once again, it's across the regions, but Europe is probably the largest of the three regions that make up the variable costs. I think going forward to the broader question, you know, we can't relax. We've got these headwinds. We've got to continue to look for opportunities. And more specifically in South Africa, because with the stronger rend, it's put pressure on us. And Graeme, I'll come to you now, but, you know, We are being proactive at looking at usage and alternate raw materials, which can build a more resilient South African business with the headwinds that we're facing. So, you know, Graeme, you know, obviously we can't give specific numbers, but broadly the areas that we're looking at at the moment.

Yeah, certainly. And obviously the best starting point is the highest expenditure areas, or those areas where we've seen the highest growth in costs over time. So timber, I think, although obviously market price has declined and you can see it in our fair value accounting, we need to adjust our forestry costs in line, our own forestry costs in line with what we see from a market price point of view. So certainly savings on timber and ongoing in the timber side. And then our highest raw material costs focusing both on usage and, as Steve has said, can we use potentially a lower quality, lower priced version of that material and understanding the pros and cons on our production processes. and then benchmarking ourselves against our own best performances but also sort of best in class and saying how do we drive ourselves, what do we need to change from an operational point of view to get there. So we're looking for long-term sustainable changes to our cost base in South Africa, try and get our dollar costs down to where they were five or six years ago.

So coming back to your question, I think when we go into 27, this is going to be a big area of focus for the business.

Yeah. OK, impressive. So but the 120 you've talked about is an annual number. And would you say that that part of the cost cutting is in the base for last quarter?

Yes. Yes, it is.

Okay, and then just related to that, you mentioned usage a few times. Could you just say what you mean by usage? Is it, you know, less wastage or sort of operational factors? What do you mean by that? Because that's clearly something where you've made quite a bit of headway.

Yeah, so typically for us, for example, at a sarcomole, how much sulphur do we use per tonne of pulp produced? And, you know, what Back to basics approach. What should you be using relative to what you are using? Where is there waste? Or where are you overusing and can compensate somewhere else to reduce that? So it is the physical use per ton of any raw material, I guess, in the production process.

Okay, and if I may, just one more. In terms of dissolving pulp, obviously there is weakness ongoing in paper pulp because of capacity and various other things. Did you envisage that the market in DWP is tight enough to actually get the premium picking up significantly to offset any weakness that we're seeing?

Yeah, look, it's a good question. We obviously saw the rise. and more recently it's kind of stabilized just around 900 just below 900. I think it is a seasonally slower time so we're not anticipating any increases in the next short period of time and we've got to get through this quiet period and then assess the market conditions beyond that. Mohamed, I don't know if there's anything else you want to add there?

Yeah, I noticed, Steve, just to again re-emphasize that it is a seasonal feature that we are seeing in the BP and viscose market. But just to point out that even though we are in a seasonal slow time, operating rates remain at, I was going to say, historically high levels. Even going through the seasonal slow time, the fiber inventory levels across the value chain also remains very, very low. and as we come out of the season in the slow time as we get towards the end of August into September, again historically what we've seen is that the DP prices start to move up again. So that's what the history tells us and the supporting factors that I've just mentioned tend to indicate that we have a good chance of history repeating itself as we get towards the end of September.

Okay, thank you very much indeed for all of that. Thanks.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Detlef Winkelmann of JP Morgan. Please go ahead, your line is open.

Hi guys. Maybe my first one would just be regarding Somerset PM2 ramp up. Are you able to share roughly kind of where you're at right now in terms of operating rates? You know, relatively close, not close at all relative to EBITDA breakeven, any kind of color you can share? And then even within that, kind of expectations as to when we should expect EBITDA breakeven?

There's a couple of questions there, Dylan. I think firstly, in terms of the operating rates, we are in the quarter that we've just been in. We're at about 75%, and we're anticipating closer to 85% in the fourth quarter. So we're ramping up nicely. In terms of breakeven, we don't give the specific numbers, but the North American packaging business was positive.

Okay, thank you. And then maybe one other one just on this whole, you know, SPS tightness at the moment that we're seeing. You know, if I recall back to Q1, calendar year Q1, you know, peer results, everyone was telling us that Clb was relatively tight, Sbs was quite loose but the Sbs price relative Clb was relatively compressed so we might see some substitution by customers it looks as if we've seen that I mean obviously commentaries now that Sbs is looking a bit better but at the same time a lot of peers are saying Clb is looking a bit worse So I'm just curious in terms of, you know, is this a temporary shift? Is this something that could reverse, you know, if SPS price increases go too far? Just curious how to think about this going forward. Thanks very much.

Once again, I'll come over to Mike just now. Just from our side, it's not had a material impact on our results, the switch to CRP. There's been a tiny amount, but but our focus has been on existing SBS customers and that's where we've taken market share. So, Mark, I don't know if...

I think that's accurate for us. I think if you think about it in this way, there's a small portion of customers, if you want to call them price sensitive, that might move are all back and forth based on their advantage. And CRB announced a price increase within the last week. Certainly not something that we're selling directly into, but so clearly that business maybe is improving also. But for North America, That hasn't really been our target. There might have been a little bit, but I'm not sure that that's a huge influence on SAPI.

Thank you.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Cole Hawthorne of Jefferies. Please go ahead. Your line is open.

Good afternoon. Thanks for taking my question. I've got a couple on my side. I'll take them one by one. Firstly, it's just on dissolving pulp. I'm just wondering, have any of the changes and restructurings at Lensing impacting your business, just like your thoughts of how it might or might not impact SAPI? Then second is one probably for Graeme. I'd just like to follow up on how you're going to improve the South African wood sourcing If I look at LATAM and I look at globally, the cost of wood's gone up, the cost of diesel's gone up. It has been an inflationary environment for wood, but I'm just wondering what action SAPI is taking to be more efficient in the forestry operations and try and kind of lower the wood cost delivered to the mill. And I'll come up with a third too. It's really too many. Thanks.

On the first question, lensing closures, it's only just been announced and we need to have dialogue with them, but net-net we're not worried about it. We think we can, if there is lower volumes, I don't think it's that material, but if there is lower volumes, we are confident that we can place that in the Chinese market at a better price for sappy.

Mohamed, I don't know if... Yeah, Steve, I would... I would agree with that, and also, you know, we have the flexibility of also making more paper part if we choose to do that.

Yeah, yeah, that's true. Graeme, on additional wood sourcing,

Yeah, I think there's a number of elements. Some have been a long time in coming. Obviously as we've changed our South African business over the last 10 or so years, the mix of mills and the mix of products, we've been steadily converting softwood plantations to hardwood and that's meant that over time our self-sufficiency and many more. The market conditions have increased and typically that comes at a lower cost than purchasing from external suppliers. Current market conditions globally, you're absolutely right, generally timber prices have trended upwards globally over a long time but right now with what's going on in China and pressure on market pulp prices, we have seen a weakening in Timberwood chip prices in I guess call it the Asia-Pacific region and that's allowing us to you know renegotiate and longer term contracts that where we were purchasing from external parties and then you know in the very short term you know prior to these diesel increases we'd already started looking at electric trucks and they were offering good savings even prior to the diesel price increases that we've seen so the opportunity to convert more of our fleet or more of our logistics we don't own the trucks ourselves to electric powered trucks is looking very attractive right now so and then yeah there's the usual efficiency through our own forestry operations but there's a number of things as I say that have been going on over a long duration and but also actions that we're taking in the shorter term to Thank you.

I always find it interesting when someone puts in a chart on sulphur when none of your competitors have put it out. I mean, I always think about caustic soda, but Wrongly, you don't quite think about sulfur for the white and black liquors. I'm just wondering, does dissolving pulp use more sulfur in the mix than other traditional pulp, and that's why you're highlighting it, or is there something to be aware of on particularly calling out the sulfurs, just as an aside? But the other question is on North America, which is on the demand side and coated papers. Is there any potential boosts ahead of the mid-term, marketing, things that we should be aware of that is ultimately going to allow the utilization rates of the full mill system to be a bit better in North America.

Thank you. Graeme, we'll talk about the sulphur usage and Mike, I'll come back to you on the mid-term elections.

Yeah, I think obviously the key thing for us is that Sycor is a sulphate pulp mill. So inherently they do use sulphur whereas a typical craft pulp mill wouldn't. You do get other sulphite mills across the world but they may be set up to use SO2 gas and not sulphur in pure form. So that's a key differentiator that applies particularly to us.

And then Mike on the midterms.

I'd say that we haven't seen a huge impact in midterms, but the truth is our graphic machines are running full. We don't have any underutilization, so I'm not sure where you're getting that thought from, but our graphics have been running full. I think the business is still very steady.

It was just more of a comment just to make sure order books are good and if you get more orders it's always helpful even if you have to put people on extended lead times. Thank you for all the color.

Absolutely true. As we get closer to elections you might see a boost More on the sheet side of the business.

Thank you. Thank you. We have reached the end of time allocated for the call and I will now pass back to Steve Binnie for closing remarks.

Thanks, operator. Once again, let me just thank everybody for joining us on the call today and we look forward to discussing our year-end results with everyone in three months' time. Thank you very much.

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