MNHFF (MNHFF) Q2 2026 Earnings Report, Transcript and Summary

To this video conference call of the Mayr-Melnhof Group on our first half year results 2026. My name is Stephan Sweerts-Sporck. I'm heading Investor Relations and Communications here at MM, and I will be the moderator in this call. Earlier this morning, we already published our press release, half year report and the CEO video statement, which is available from our corporate website, mm.group. Following our brief statement -- trading statement for the first quarter, we want to provide you now in this half year with a more comprehensive update on our performance through this live presentation with our CEO, Peter Oswald, who is sitting next to me; and our CFO, Franz Hiesinger. Subsequent to the presentation, we will enter into a Q&A session. For this, I want to give you some technical information. [Operator Instructions] I also want to inform you that this webcast will be recorded. I would now like to hand over to Peter to start the presentation.

Thank you, Stephan. Welcome, everyone, and thanks for your interest in our half year results. We have basically 4 messages. Number one is that our results were mainly broadly in line with last year, slightly down, but broadly in line with last year, but significantly up compared to the second half year. And we will come to the individual items later, but the really positive surprise for us was the strong performance of Pharma, significantly up. Food could again make a very strong results like we are always used to it. And in Board & Paper, the strong headwinds in terms of pricing led despite a very successful FFF project to a decline in our profitability. The second message is that Fit-For-Future is delivering far above our expectations, and it will deliver above expectations. The third message is that our expansionary CapEx, and we will come to that in more detail, are on track within budget and will contribute to our earnings growth in '27. And last not least, we said Monday morning, we announced that we have signed an agreement to acquire the Arnsberg mill from Reno de Medici, and we see substantial synergies here. Now if we go to our Fit-For-Future project in greater detail, it strongly delivered in the first quarter (sic) [ first half ] with EUR 105 million, above our expectations. We expect for the second half of this year, a year-on-year contribution of more than EUR 100 million and in the next year above EUR 60 million. So all in all, we believe that by '27 compared to the baseline in '24, excluding TANN, there will be an earnings enhancement of more than EUR 330 million, which is well above the EUR 250 million, which we announced at the beginning of the year with the full year '25 results announcement. And as already explained, it's a comprehensive program, core of the program is operations, procurement, top line growth, SG&A and supply chain also play a very important role. And with this information, I hand over now to Franz Hiesinger, our CFO, who will explain you our numbers.

Thank you, Peter. I will briefly explain our financial key figures for MM Group on a like-for-like basis, that means basically excluding TANN, which we have sold beginning June 2025. So, our sales came in with EUR 1.85 billion, which is slightly down to the comparable prior year figure, but basically stable to the second half year of last year, mainly due to lower pricing. Our adjusted EBITDA came in with around EUR 200 million which is quite up compared to the second half of 2025 and shows, as Peter mentioned, a strong -- fairly strong performance. Our adjusted operating profit came in with close to EUR 90 million, also quite up compared to the second half year 2025. And our EBITDA margin came in with 10.8%, which is quite an increase compared to both prior year and second half year 2025. If we look on the operating cash flow, due to good working capital management we achieved EUR 145 million and obviously significantly better than prior last year. And our capital expenditure with close to EUR 112 million, basically fairly stable to the prior period despite this includes already a lot of capital expenditure into our large Kwidzyn ROI project, which are well on track, as Peter will explain to you later. So, if you look on our balance sheet, we're pretty happy to present a very stable position, very solid picture. Our equity ratio with 47%, basically unchanged to year-end. The net debt amounts to EUR 945 million, also well below EUR 1 billion, which brings us to a net debt adjusted EBITDA ratio of 2.4x, which is quite well in our long-term range what we want to achieve between 2 to 2.5. And finally, our free cash flow positively came in with EUR 37 million, which also is a quite positive achievement for the first half year 2026. With this, I hand back to Peter, who will go more into details of the divisions.

Yes. Thank you, Franz. So let's go now into the operations of our 3 divisions, and let's start with our Food & Premium Packaging division. I could almost say, as always, a strong performance. Profitability was slightly up compared to a year ago. So the main we're very proud that we could also increase our adjusted EBITDA margin by 90 basis points. And they also enjoyed because of the initiatives, a strong contribution from our FFF project by about EUR 27 million. Looking into the future, it was very important that we could sign with a number of customers, multiyear contracts, some of them developing new products together. This is exactly where we are focusing on. We don't want to compete in all the tenders which are going on for the more commoditized business, but we want to be a partner of development and work many years together with customers to improve their packaging footprint. If you are a bit surprised why Topline did not develop, first of all, it's not fully comparable because we have divested the plants in Bangor and Leeuwarden, which are all adjusted, when we adjusted for the big acquisition. And so it's not 100% comparable. Now going to our Pharma business, we saw a very strong development. The EBITDA margin improved by almost 200 basis points, so a very nice progress. If you think back, we came here from 6%, 7% EBITDA margin number of years ago. Now we are on our way to 18%. Now we have reached 14%, we've surpassed 14%. So we are on a positive trajectory. Also here, we succeeded in signing a number of multi-year contracts with our main customers, developing products together, developing packaging solutions together. And so we can already go to the next page. Innovation is a very important part of our product offering. And here are just some examples where we have transformed in the first quarter from plastic packaging to, here for example to paper packaging. In this way, so to say, avoiding more plastics. We also use -- we are not just a producer of folding carton, but still a small producer of molded pulp solutions. And also here, we could sign some interesting long-term contracts. The topic in pharma, the big topic is cancer fighting. That's really something which is a very, very important topic for all of us, as consumers that you could buy a medicine, we are sure that it's the original medicine and not just a fake product. And we're very proud about our highly effective micro-optics technology, which gives us a good competitive advantage. Now moving on to our Board & Paper division. There, we were faced with extremely -- with lower prices. And the price deviation was about EUR 70 million. And thanks to our FFF project where we could achieve EUR 59 million profit improvement, we could almost balance this, but not completely. In terms of variable cost, it was a rather favorable environment, first half year compared to the first half year of last year. Our costs for paper and recycling were somewhat lower. Pulp was a bit lower, wood costs were broadly flat. Energy costs were a bit lower despite the already starting Iran war. The situation has now changed, and I will come to this point then in the outlook. Our fixed costs are down even though we produced somewhat more. Now, talking a bit about the top line. The outstanding thing, was which I already mentioned was that prices were significantly lower compared to the first half of last year because they've been sliding for most grades throughout the year, and there was a drop again at the beginning of this year. The good news, however, is that we see a positive price momentum in some grades, not in all grades. And we hope that this gathers momentum in the second half of the year. In terms of volumes, we were very pleased because we could gain market share in Europe, both for WLC, for our recycled cartonboard as well as for our fresh folding boxboard. That is important. We've seen that the overseas markets become less and less attractive also because of the tariffs in North America. And so it is important to sell, so to say, around [indiscernible]. And one reason of that is obviously that we have very good products and we have improved these products. Another reason is our good service. And by good service, we don't mean that we're more friendly sales representative than other companies do, but we are located, especially in FBB on the continent in Europe. So serving out of Frohnleiten and Kolicevo, we are much closer to our customers. We can react much quicker and this is something which is highly appreciated. Now let's make also a deep dive beyond the half year results into our overall competitiveness in Board & Paper because given the disappointing results, this is obviously important. These results, by the way, are very much in line with other competitors in our industry. So, first of all, it's important where we have to sit on the cost curve? And the good news is that 80% of our capacity is in quartile 1 and 2, so above average. I think that's a very, very important message. Then we have some more detailed charts which show what is the age of our machines compared to the competition. So it is on the right-hand side, then it's newer than the average of the industry. If it's on the left-hand side, it's older. And on the Y-axis, you can see the capacity. And here you see the first -- the right upper chart is on FBB. And here, you can see that with much -- so we have more modern machines with a lower technical age, which is obviously very good news. In terms of size, we are hovering around the average. I'm not worried about that at all because a very big machine is only useful if you can produce very homogenous products. But if you have many different products and even worse if you do not just produce FBB but CUK liner, all other sorts of products, then actually the big size of the machine is not of any advantage at all -- on the lower chart, you can see that in the right upper section, which is newer machines and bigger machines, all 3 machines are MM machines, so Neuss, Freudenberg, and Gernsbach. Kolicevo is also a relatively modern machine, but a bit smaller than the average. We could expand it, but don't do it in the current market environment. The only one which is in the left lower part is from Frohnleiten PM2. But as this is part of a group with 2 machines -- of a site with 2 machines, we also think it's very good. So, in summary, we have a very strong cost position from the cost curve. But let's go now to the next slide. It's not just where you sit on the cost curve, which is important. It's also what is your capacity utilization, having a great machine, which is 70% utilized is not what delivers the results. And here, the good news is that we could steadily improve our capacity utilization, and we're now at an average of 87%, specifically for FBB, to preempt here any question, it's 80%. The third aspect which drives your profitability is do you produce products for markets which reward your products or do you have to dump them all over the world? And the very good news is that we could pass now for our folding cartonboard in Europe. So both recycled and virgin together, we can sell more than 90% in Europe. So we've deliberately cut back on overseas markets, as the price competition against Chinese import tariffs in the U.S. is just not very attractive. And last but not least, it's not just about machinery. It's not just about capacity utilization. It's at the end of the day about people running it. And in terms of operational excellence with the CapEx, which we did in 2023, we were struggling a bit to adopt to this new machine setup, but now we have fully regained our leadership in operational excellence and also Kwidzyn and Kotka have improved very much. So in summary, we have a very strong market position. Yes, we have this extreme market share fight, especially in FBB, and we have to live with it for some time. But finally, we see that we are in a very strong position, and that gives us confidence for the future. And this leads me to the outlook. So there are negatives and positives for next year. First of all, not really a negative, but just to remind you about second half, we always do our annual maintenance stop in Kwidzyn and in Kotka mills. We did in other mills as well, but they are not so relevant. And that has a negative effect of about EUR 35 million. The real bad news is that due to the Iran war, we are faced with higher transport costs, up about 10%, energy costs, chemicals and not directly related now to the Iran war, slightly higher wood and paper for recycling costs. And there is -- we see at the moment, still a subdued consumer demand. On the positive side, we have our pockets of growth, be it in our pharma business, our GLP-1 products. We see a nice development in beauty, beverages and pet food. As I already mentioned, we see a positive price trend in some board and paper grades. And last not least, Fit-For-Future will deliver again with a contribution of more than EUR 100 million. So this is the specific outlook for the second half of this year. If we look more to '27, I think there are a number of -- we're not commenting here on the market, that's too far away to predict. But what are the things which we can improve. First of all, as already mentioned, the acquisition of the Reno de Medici's Arnsberg mill has a lot of synergy potentials. Just to remind you, the deal is not closed yet. It's only signed. We're still waiting for the competition clearance. Secondly, very important, we have several CapEx in Kwidzyn amounting to about EUR 100 million and the benefits will flow through, that will start to flow through end of this year, but mainly then in next year. And it's 3 important investments. One is the new continuous digester, which will significantly reduce our energy and CO2 costs and also material usage. Secondly, we get the new winder, which will enable us to produce more packaging kraft paper. We could sell here more, but we can't deliver it because of this bottleneck in the winding and also more uncoated fine paper in reels. And thirdly, we've invested in a new sheeter, which will help us to service this express service much more, which we've installed for Poland. We will roll it out to Germany, where our customers can ask very short-term deliveries, but we need this sheeting capacity in order to react on very short notice. This is very well received. It's a unique position which we have, only those who are really close to the customer can offer this. Then we have a number of packaging expansionary CapEx in packaging. One is in Romania, a new machine. We've invested in several machines in the U.S., and that will positively contribute in '27. And last not least, Fit-For-Future is not done. It will not just deliver for the next half year. It will also deliver then in the future for '27. And I'm fairly optimistic that we can upgrade then the expectation again in the next half year results announcement, so for the full year of '26, but let's wait and see. So far, our expectation is above EUR 60 million. And so, all in all, to wrap things up, -- we believe that in comparison to these market circumstances, we have delivered a good result. We are very well placed for the future, but we have to endure the price situation, especially on the FBB side, just now for some time as the market leaders are not willing to shut down their capacities. And so we have just to be patient until this happens. So -- and with this, I would hand back to Stephan, and we are looking forward to your questions. Thank you.

Thank you, Peter. Thank you, Franz. We will now start our Q&A session. [Operator Instructions] So first question, we got already one by Markus Remis from ODDO BHF.

I have a couple of questions. I would take them one by one, if you don't mind. So firstly, regarding the savings target. So congrats to the upgrade of your achievements. But can you help us understand a bit better how you calculate the number, specifically talking about the topline effect and then just thinking about procurement. Is that like based on an as if kind of calculation because procurement prices are volatile as well. So anything you can help us to understand this better is appreciated. And then also just to get it straight, are we talking about fixed costs exclusively? So that would be the first one.

Yes. Thank you very much. So I mean, we have valuation guidelines of about 30 pages. So I can't go through all of them. We have -- just to give you comfort, we were supported by a consultant in this exercise who was based a very result-based -- it was incentivized in a result-based situation. So we have no intention also for our own purposes and for the fees we have to pay to inflate our numbers. But just going through briefly, so first of all, it is only recognized any saving or profit improvement is only recognized when it is at least 1 month in our books. In some cases, it's for obvious reasons, 3 or 6 months already in our book because of volatility. The biggest contribution comes from, as I said, from operations. And in operations, it's typically things like reducing broke, shortening change over time on machines, improving energy efficiency, using the heat, which goes into the air in a new way. And so we -- there must be clearly identified initiatives, then there must be a result. And typically, in operations, we observe it for 3 or 6 months if the reduction of energy, if the reduction of broke, if shortening of change over time, et cetera, has really happened for a number of months to say this is something sustainable. In procurement, we typically work against -- it must be an improvement against an index. In some cases, it's easy to find these indices. So let's say, if pulp prices go down by EUR 50 and the index goes down by EUR 50, then it's not a saving. If the index, the PIX goes down by EUR 50, and we have agreed a contract following the PIX index, but with a higher discount, which was previously X and now it's X plus 3%, then the 3% would be an additional saving. In sales, it must be -- it's either price increases which go again above typical market. So it would be -- we didn't have a lot of price increase initiatives. It was more on supplement prices. So we ask if the order volume is small, if the run is very short, if it has to be delivered in a very short time, then we have typically agreed surcharges and sometimes our salespeople forget to implement them or haven't agreed on them. And here it was about to make sure that where we have higher costs, we also get been better paid. Volume increases were also counted, but again, only if the overall customer, the overall side, the overall section overall was growing. So there were some successful initiatives getting new customers, but it's not counted because the division as such didn't show or the part of the division didn't show the right growth. So then I left out the SG&A. There it's pretty simple. It can be about personnel, can be about other costs, services from service providers. And that's, in most cases, pretty easy to determine. So if you make a new contract, you get a 10% discount. To your question, is it fixed costs or variable costs, it is more variable costs actually as fixed costs because many savings like material savings and the production, et cetera, in operations are in more cases, variable costs than fixed costs.

Okay. Okay. Understood. Can you maybe also give an indicative breakdown between the segments? I would assume that a large chunk is attributable to Board & Paper, but...

Yes. So we have it -- sorry, I went over it, but in the presentation, you see per division, we said exactly which divisions saved how much. So if I go back, we had the breakdown of -- what was it now? So EUR 27 million in Food & Premium, EUR 16 million in Pharma & Healthcare, and EUR 59 million in Board & Paper. So we have given this breakdown. And if you calculate it and you sum it up, you will see a gap of EUR 2 million, which is group costs.

Okay. Secondly, on your remarks regarding pricing in Board & Paper. I mean, we have been talking about the overcapacities in the industry. And I think in the full year call, you also said that you expect your competitors to adjust capacities. You basically now repeated this statement. What makes you so sure that your competitors will do the first step? And coming to the -- or staying with the capacity topic, maybe you can also explain a bit the rationale behind the acquisition of the Arnsberg plant, which is, as I understand, loss-making at the moment. So you're adding capacity in a business, which is ailing at the moment. How much kind of investments into Arnsberg is needed? And how quickly can this turnaround be achieved?

Yes. So first of all, it's not that nothing has happened. We just don't see it in the numbers yet. So we have seen in FBB 1 market participant, I think, is what you use these days instead of competitor going bankrupt. The question is now if production will be shut down or if there is someone who buys it, there was an announcement. So this was our former company, which we sold a number of years ago for EUR 150 million. So this is now bankrupt. One part, Eerbeek in the Netherlands is reported to have found a buyer. They have announced the start-up on 15th of August, which did not happen. It was further postponed. So we will see how this works out. I can just say in terms of volumes, we are already benefiting from this. So we will see how this works out, and we will see who the next company will be. And finally, yes, I can't predict if one of the big players will just continue as is or finally take a decision. But as it -- so we don't know when this will happen. On the recycle side, we've seen a change. So also the fact that it was not a formal insolvency, but it was sort of the shareholder lost all shares and the bondholders had to take a big cut. And I think now that this competitor is owned by hedge funds, they will, I think, be more rational in terms of going forward. But exactly, we don't know it. So why did we buy in an oversupplied industry, another player. It's simply because we have in Germany, the infrastructure, Arnsberg is fairly close to our mill in Neuss. And therefore, we see that in terms of SG&A costs, you can do a lot, but also in production areas like maintenance, for instance, you could install one maintenance center servicing both mills. So we see a number of opportunities. And therefore, we think that at the end, we can create value with this acquisition.

And regarding the investment needs and the kind of prospective turnaround already next year?

Yes. We don't see any significant investment needs. It's really about reducing costs, but also being more rational in terms of pricing, filling the machines, better specializing the machines together with our other machine because a lot of productivity comes at the end of the day that you have a mill where you can specialize on products and not make changeovers over time. And obviously, if you combine several assets, you have more opportunities to do that.

Okay. Then one question regarding further restructuring costs in the second half. Is there anything on the horizon? And also regarding the maintenance cost, EUR 35 million you mentioned for the third quarter. I recall that last year, this was more spread over Q3, Q4 this year pulled forward into Q3? Or is there an additional impact then also in the final quarter?

No, there's no additional. So the EUR 35 million refers to the full second half year. But as we have moved it forward, last year, it was September, October. This year, it is August, September. And so by end of September, it's done. So the third quarter result will be more impacted in the fourth quarter will, compared to last year, not be impacted, whereas last year, we had these costs. Restructurings, we cannot really predict here anything concrete because it has to be discussed with unions, et cetera. But you can assume that we will work on our footprint and without being specific about any mills or our plants, we will do restructurings.

All right. And a final question before I get back into the line, 2 bookkeeping questions. Firstly, I would be interested in the factoring level at the end of the first half. And then you mentioned that in 2027, the CapEx figure or at least my interpretation will go down the reference, the EUR 160 million normalized CapEx. Is that what you're seeing as maintenance level in the current state of the company? And is the kind of the decline to below EUR 200 million, something we should expect for 2027?

So, I first come to the CapEx. So, maybe I was not precise enough. I meant end of '27. So we have a long-term CapEx of EUR 180 million to EUR 200 million, including -- this is not just maintenance CapEx. Maintenance CapEx is more like EUR 110 million, EUR 120 million. But realistically, we want to stay competitive and there are growth opportunities in some areas of the business. So overall, we should think about EUR 180 million to EUR 200 million per annum. Next year, this year and next year are elevated mainly because of the CapEx in Kwidzyn. And that is not all paid this year. Some of this will come next year. So this year and next year are elevated. And without giving a precise number for next year, we should wait for that, but it will be roughly where it is this year, maybe a bit down. And we have another year of elevated CapEx because mainly of Kwidzyn. Regarding factoring, the figure is -- the net factoring amount was below EUR 340 million, and that is basically the same figure as the year end 2025.

The next question comes from Michael Marschallinger from Erste Group.

Firstly, I would touch on the pricing regards and then comments on Board & Paper you made. So with this overcapacity still persisting, what supports the expectations of improving prices? And could you please quantify which pricing improvement you expect in H2, which specific grades and which regions?

Yes. That's a very difficult question. Obviously, yes, we only know what has happened until today and not what will happen. But we see somewhat -- so let's say, in -- we have to really separate out recycled cartonboard and virgin cartonboard in recycled cartonboard, we have seen now with several closures which have taken place in Spain, in Holland, in Germany over the last years and markets growing that we are much closer to a balanced situation. And therefore, we've seen gradual -- we've seen real price increases. We implemented pricing increases in April through June and some now in July, and we see this trend to continue. So here, we are. I wouldn't say we don't have a balanced market, but we are close to a balanced market. And there, we have seen during this year, an overall increase in prices, even if it's still somewhat lower than where it was last year. And obviously, yes, so -- and then we have the virgin grade FBB. And here, we see the 2 market leaders, the one market leader, so to say, trying to get market share in order to shift volume from the U.S. to Europe and the other one who has built a new mill, obviously wants to fill their mill. And here, it's difficult to predict when they will act. The only positive news is that, I mean, positive is now inappropriate word. But for us, positive thing is now that with the insolvency of FOLBB, we will, for sure, get some additional volume, but it will not solve the overall pricing issue. So for this part, I'm not predicting anything. We have to wait patiently until things will happen for virgin cartonboard called FBB. And then we have some other grades. So we have a good price level in saturated kraft paper. We have very weak prices in uncoated fine paper, but they are on the move up now currently, but difficult to see how it will go from here. Yes, and that's more or less it.

And just a follow-up, when would you expect the supply-demand balance to be reached in FBB with this mentioned the solvency?

Now on FBB, I'm not predicting it unless if none of the 2 capacity leaders, I mean, we are -- all 3 have the same size in terms of what we sell into Europe, but the 2 others have much higher capacity, which is used to a certain extent for overseas sales and to a certain extent, it's simply empty. And it's very easy if as long as they don't shut capacity, there is no major improvement in prices. And I can't predict it, and I think nobody can really predict it.

Understood. And just one last question on cost inflation. Could you quantify the cost inflation you saw now in the last half of the year across your major cost positions, energy, wood, recycled fiber and what you expect for the full year?

Yes. So let's start with the more easy thing. So wood is marginally up. It's not so relevant. I mean wood prices in Europe are generally on the move up in Scandinavia, they are more on the way down. So we benefit a bit in Kotka and we suffer a bit in Kwidzyn. Paper for recycling, the indices are gradually moving up. So I just wanted to highlight, they are somewhat higher than they were a few months ago. The more serious chemicals is a bit a mixed bag, also difficult to quantify. Overall, I don't think it has a major impact. And then we come finally to the 2 main items is transport. So we have typically transport contracts with forwarders, which say it's a fixed price plus an adjustment for the diesel price. So it's a question of if you believe that oil prices will rather be unaffected or come down because Iran is solved, then it's a question of a few months. If you believe in other scenarios, which say the crisis will deepen, then obviously, there is further inflation in transport costs overall. We will be a net beneficiary in Board & Paper because we don't have as high transport costs as our Nordic competitors, but it will affect us. In terms of energy, which is mainly for us, gas price, but also electricity, it's again the guess on what happens in the Middle East and in Iran and what are the long-term consequences. So I think all predictions have proved constantly wrong. Initially, it was when the war started, many said they will skyrocket, then they didn't. They went up but didn't skyrocket. Then at least I thought that the situation will at least calm down. And all of a sudden, it became even worse. So I mean, I'm reading weekly newsletters on energy from experts who have the best knowledge available. But even here, I've seen constantly wrong predictions. I'm just stating, so to say that as we stand here as per today or as per yesterday, when we finished it, we see cost inflation from energy and transport. These are the main issues and in transport, it's about 10% more higher than last year.

Okay. So you would expect further acceleration in H2?

I think H2, I'm pretty sure H2 will be worse than -- or we will have higher cost than in H1 just because, as a matter of fact, they are higher in July and August. And now it's anyone's guess if -- if things accelerate, so to say, throughout this quarter because gas prices go up even more yesterday, they reached a new high. So are these things getting worse? Or are these things getting better? And then the question is, of course, and here we are back to market balance in a more balanced market, we will be able to pass on these prices to our consumers in a market where there are significant overcapacities and unwillingness to cut capacity, no one dares to fully pass them on and then you have to live with them.

[Operator Instructions] And we have another question coming up from Markus Remis, a follow-up question from ODDO BHF.

Staying with Board & Paper for one more time, please. Now that you're about breakeven on an adjusted level in the first half, given what you said, okay, some price increases are coming through, more savings. On the other hand, this cost inflation. Is it fair to assume that the second half should also kind of be slightly positive on an adjusted basis? Would you consider this as a realistic range?

We don't give precise forecast because we are constantly surprised by how things develop. I would say this way, I would think it's a rather stable development minus the annual maintenance shuts. And this means the answer to your question is, I think on balance, it will be down, but there is a huge variance because it's very difficult to judge whether the -- whatever it will be, EUR 50 million, EUR 60 million. I'm now referring to the division. If the EUR 50 million, EUR 60 million contribution from FFF and some other positive developments outweigh higher energy and transport costs and some other cost inflation in variable costs. And this is still unclear because I simply don't know. I mean, nobody knows whether in October, the gas price will be at EUR 100 or, let's say, moderated back to EUR 40. And in this way, we don't know it, but it will be a rather similar level minus this EUR 35 million.

Okay. Then one question regarding Pharma & Healthcare Packaging. So we're seeing a certain trend in terms of the margin development, now 8% on an adjusted basis in the second quarter, if I did the math right. What would you consider like the target profitability level for that business? Apparently, there's a lot of restructuring has been done in the past. How advanced are we? How much more homework do you see? Is this a business which with kind of looking out '27, maybe more '28 can get to the profitability level of Food & Premium?

Yes. So overall, I mean, first of all, if we talk about EBIT, we have to appreciate that there is also some customer amortization included, which is in the food business because that's a legacy business, whereas this business is a business which we have acquired and we have to capitalize on the customer relationships and write it off over time. So this way, I almost think that [ EBITDA ] would be a better measure than -- so it has to be very clearly above 10% EBIT margin finally. And we know that this is possible. And with a number of operations, which are more in the 15% range for operating profits. But equally, you also have some legacy business, which you have to think how you deal with it. On your question, is there our restructuring done? And there, I can say, yes, it's done. Maybe there is a small plant where we still have a question mark. But otherwise, it's a solid sound business, which we can support with growth.

And the driver to bring up the margin with kind of restructuring done is, I mean, of course, further cost discipline and Fit-For-Future. But how much lever do you see from the top line coming? Because it's a business which at least in the most recent past has undershot like market growth, and I understand there have been some portfolio optimizations. But how should we think about the growth component?

Yes. So, we believe that -- so yes, we were a bit -- let's say, it was a bit frustrating to see that with nice growth in some sectors, and that will gain momentum because it's a very slow-moving industry in terms of it's a long approval process, et cetera, and you don't want to deliver the packaging for products which have been for 30 or 100 years around, and it's just about price, but you want to be with new medical treatment, so to say, and work with the customer, and that takes then always several years. And so we see this pipeline constantly strengthening, which is very good. And we see that the bottom slicing is not completely finished, but is finally coming to an end. So top line will be an important part of it. Of course, we have still a lot of room for productivity improvement. But the main driver, hopefully, will -- it's not hopefully. We believe we'll definitely shift to top line growth and not just any top line growth, but the top line growth with products which have a good margin because we've developed these products together with the pharmaceutical companies. And so we are in the top position with long-term contracts where our contribution to develop it is also valued. I hope this answers your question.

The next question comes from Cole Hathorn from Jefferies. [Operator Instructions] I see no more. Cole is here again.

Apologies for that. I just tried to join in from the webcast. Peter, I wonder if you can help me out. I'd like to follow up on that slide you showed on kind of your relative cost advantage, particularly on the recycled side. When I look at gas prices here, could you remind us how much hedging Mayr-Melnhof has? And the reason I ask this is because you've got FOLBB, which consumes gas that's gone under, and I imagine they wouldn't be able to hedge. You've got Reno de Medici, whose Apollo has given back the equity stake and they just had the bond restructuring. I imagine a lot of your competitors might not have the same level of gas hedges. And if gas stays higher, do you expect some of your competitors to take a lot more economic downtime, you to take a little bit more share? I mean, hopefully, that resolves itself in some capacity closures, but I'm just wondering how are you positioned actually even though higher costs are not great, do you actually have a relative advantage here?

Yes. On the recycling side, I think we do have a bit of an advantage. Obviously, I don't know. And we don't even know from FOLBB because even if you go bankrupt, it's up to the administrator to terminate contracts. So if they had hedges, they still have them today because he hasn't terminated them and someone else -- the part -- the counterparty cannot terminate it. So we simply don't know how much they are hedged, and we are not extremely well hedged. So it's somewhat below 50%. Unfortunately, you should have written your report on the gas price a bit earlier so that we had hedged more. But, yes, so it is a slight advantage on FBB, I think it's a slight disadvantage because in Gernsbach, Frohnleiten we are producing our own energy to a very high degree. In Kotka, we are only partly integrated with the pulp mill. And therefore, we have somewhat higher energy costs to buy in. And therefore, we are a bit more dependent and it's a difficult game. By investing into the e-boiler from spring next year, we have more options than to use electricity even for the heat. Instead of buying the gas at the moment for heat, we need the gas, but we can play between gas and nuclear power. So that's our situation. So I would say on the margin, maybe we have an advantage in recycle and maybe with a slight disadvantage in virgin.

Perfect. And then maybe just following up on the acquisition from Reno de Medici. You haven't given any valuation or price. Is there anything that you can comment on that? I mean I imagine when you're a forced seller, you get a good price, but I'm just wondering a little bit more on the synergies there. You talked about SG&A, maintenance location of the mills. But is this a WLC mill or kind of a recycled carton mill? Or is it more white top test liner?

No, it is a WLC grade in more of the lighter grammages, so what we then call WLC liner. And I mean, we have agreed in the contract not to name the price. I mean what we can say, it's not material what has been invested there. And yes, we have to work on the costs and see how this works out altogether and also how the overall market develops. But it is a consolidation of the market because, yes, especially in Germany, we were historically fierce competitors and yes, they were extremely aggressive.

Let's hope there is more economic downtime and other players have less gas hedges for you going forward. But maybe following up on the cost point, you did mention wood costs, and I'd like to follow up on Poland, considering that there has been some restrictions on harvesting levels. Is there anything that you can call out or any kind of lobbying that Mayr-Melnhof can do to kind of maintain reasonable wood supply to your mill, make sure that you don't have a situation where availability becomes an issue and wood costs continue to inflate?

Yes. Of course, we are lobbying on that. And I wouldn't see it as particularly worrying. I think with all over all in the Nordics, you have various interest groups who say we should put more -- and also EU legislation, more and more forest should be put aside to be preserved and be natural and not used for harvesting. So we are working on it. I mean it's a sad story, but Poland has lost, I think, 30,000 jobs in the wood converting industry over the last 3 or 4 years because a number of especially sawmills have gone bankrupt. And so the demand is adjusting to the supply. And we don't see the price increases, let's say, are, of course, in contrast to the Nordics, but they come from a much lower level, and they are less than they are, for instance, in Austria or some other kind of Central European countries.

And then just finally, maybe this is a question for Franz, but your contribution on Fit-For-Future, an extra kind of EUR 60 million into 2027, I mean, it is a big number. What kind of visibility do you have on delivering that? Because that -- I mean, it is a big improvement, a big increase from the original EUR 250 million. So just what gives you the confidence in actually being able to deliver that number?

Yes. There is a number called the run rate. So both projects are what we call L4. So they are executed for at least 1 month, in many cases, several months until we see that it's a sustainable improvement, as I explained it earlier. And so we are currently at above EUR 270 million L4 and L5 to L10 has been there for more than a year. And we have then visibility. So this is already banked. And then we have an L3 number, which is everything has been prepared, everything has been identified. We are already in the testing phase, but we don't know if the full benefits will come through. And in some cases, there is a higher uncertainty like in procurement. So the tender has been done, but we haven't received the offers yet or haven't finalized, haven't signed something. In some cases, there is less like we see, yes, we have good success, but we still want to look 1 or 2 months more in order to do it. And out of -- and this is a very significant number, which gives us confidence that the EUR 330 million is really a very conservative number.

Thank you, Cole. So since we have crossed the hour, I think we will come slowly to an end of this conference call. Thank you for your participation, the questions, the interest in MM, and Peter, perhaps a final sentence before we quit.

Yes. Sorry I talked so much, there is almost nothing to say. So we have this adverse market situation in parts of our Board & Paper business and where we can't logically judge how and when it can be changed. But being in a strong position in terms of cost curve, capacity utilization, sales focused on Europe, sitting in the middle of the continent, we feel that we are in a very good position. And then at the same time, we will develop our 2 packaging businesses, which have delivered a strong result further and they will, going forward, I believe, show also more organic growth. And in this way, this part of the business will grow and develop. And in this way, I also want to use this opportunity to thank all our employees. They've done a fantastic job. It's not easy if there are so many headwinds you have to face. But finally, I'm confident and we shouldn't forget that comparing ourselves to many peers that a result like first half year was more or less the same as the year before. That doesn't sound very exciting in itself. But if you study a number of annual reports, of other companies, then I think you see that this is quite an achievement. And in this way, we look positive to the future. Thank you.

Thank you again, and we wish you a great day and say goodbye to you all. Bye-bye.

Bye. Have a good day.