Sappi Limited

Stephen Robert Binnie - Executive Director and CEO Glen Thomas Pearce - Executive Director and CFO Mark Gardner - President and CEO of Sappi North America Alexander van Coller Thiel - CEO of Sappi South Africa Berend John Wiersum - CEO of Sappi Europe

Caroline Learmonth - Barclays Roger Spitz - Bank of America Merrill Lynch Nishal Ramloutan - UBS Lars Kjellberg - Credit Suisse Sean Ungerer - Avior Research Bill Hoffmann - RBC Capital Markets

Thank you and good morning and good afternoon to everybody. I am going to go through the investor presentation slide deck and as I go through each of the slides I will call out the slide number to make it easier for you.

Firstly starting on slide 4, it has some of our highlights for the quarter. Firstly, profit for the period was $56 million, that’s up from $32 million for the same quarter last year and that’s a rise of 75%.

Earnings per share excluding special items was $0.11 U.S. compared with $0.05 U.S.

EBITDA excluding special items $170 million that’s in line with what we achieved last year, the $171 million last year. Significant progress on reducing our debt and the number came in at 1916 million at the end of the quarter and compared to the same time last year that was 2248 million.

Big highlight for us during the quarter was the successful refinancing of the 2018 and 2019 bonds which will significantly lower our interest cost as we move forward. Turning to slide 5 that has the historical EBITDA and operating profit trends by quarter and you can see that typically Q2 as a relatively stronger quarter, Q3 is less and that’s mainly because of the fact that we came to schedule a number of our larger annual maintenance shuts that are moved during that Q3 and we put that in our book statement.

Later you will see that would be the same for this quarter. And then the most important quarter for us and the one which generate the most cash is Q4 and that will be the same for this financial year as well.

On slide 6, we have EBITDA earnings bridge between 14 and 15 and talk to some of the key items relative to last year. Firstly sales volumes were down.

The main reason for that firstly related to the fact that our Cloquet Mill in the U.S., as you know we have the ability to switch between dissolving pulp and craft pulp and during this quarter there was a shift back to volumes to make craft pulp and that lowered the overall sales volumes. We also had the impact of the severe U.S.

weather in the North East this quarter, again impacted on logistics and productivity. In Europe we saw a slow start in January and that subsequently did pickup but there was a slow start in January and that was exacerbated by the fact that we had the Gratkorn shut in December for the project that we invested and we talked about that on prior calls.

We had the delayed impact of the lower volumes into Q2. On slide 7 you can see our earnings split between our two product categories.

On the right hand side you’ll see that roughly approximately half-half split between specialized cellulose and paper. And then on the left hand side from an EBITDA perspective you can see that 61% came from paper.

We had a good quarter for paper and each of the businesses have picked up nicely there. On slide 8, the trend in terms of our net debt and the net debt to EBITDA ratio and you can see that following the peak of borrowings in Q1 2014 that was after we funded the cost for the chemical cellulose conversions, you will see that we been able to significantly decrease our debt over the past six or seven quarters and we would expect that trend to continue as we move towards the end of this financial year.

Slide 9, has our maturity profile for our debt and this is the first time that you will see the new bonds, the 2022 bonds, 450 million Euros reflected. Obviously that helped to push out our maturities and improve the profile.

Some of the key items to call out firstly on 2015 you will see that there is some short-term borrowings, a 172 million. A lot of that arose as a result of the refinancing transaction of the product and we will be looking to repay that from the cash that we have on hand and you will see we have a significant amount of cash of $399 million.

So that will reduce considerably. Then in 2016, we have our securitization structure that’s in Europe, that structure the $326 million, the good news there is that we just managed to refinance that and that has been extended to 2018.

Moving to slide 10, it reflects our CAPEX and we split this between maintenance CAPEX and we call it expansion but perhaps the more appropriate description here is efficiency and cost reduction project. You can see that the CAPEX is split roughly half-half between the two.

Typically our maintenance CAPEX is around 150 million and you can see it’s been relatively constant for the year and we did include this in the outlook statement. We expect CAPEX for this year to be $280 million.

Turning to the divisional overviews and I will move to slide 12, firstly talking about the paper market. Firstly, it’s fair to say that the global -– sorry the coated woodfree demand decline has been in line with expectations.

I did talk about in Europe, January was lower than expected. However, since that period it resumed the same downward trend in Europe of about 2% to 3% down.

Coated Mechanical, those declines have been more severe and more of a concern. We are often asked about a lot of questions about how the stronger dollar and weaker euro has impacted on imports into the U.S.

We have analyzed that and have not had a significant impact so far for us. Turning to the cost and the selling prices, the good news is that coated woodfree sales prices have moved up in North America and in Europe we -– as recent as last week, we just announced some price increases both on the rails and sheet side moving forward.

From an import cost perspective, soft wood pulp prices have been falling, however hard wood prices have been high and that’s put a little bit pressure on input costs. Moving forward we will continue to look for opportunities for price increases and as I said, we have been relatively successful in recent times to achieving some price increases.

We will always look for opportunities to improve efficiencies and costs and I think a lot of good work has been done across the regions to reduce fixed costs. And we will manage our capacity in line with our demand expectations.

Moving to slide 13, this is now the specialized cellulose trends. Firstly, we have seen a deceleration of capacity expansion.

As you know there was a significant amount of capacity that came on board sort of two or three years ago that has certainly slowed down. There are further expansions planned but we have in the short-term seen a slowdown.

And in fact with the pricing in the market as it is at the moment, we have seen some of the capacity switching back to paper pulp and putting ourselves for some of our production at Cloquet. Overall the underlying demand trends for dissolving pulp are still moving up and our expectations are consistent with what we have communicated with you in the past around about the 6% mark, in terms of annual growth.

In terms of selling prices, commodity grade dissolving pulp prices are still low. However the good news there is that we have started to see some stability in textile fiber prices.

We have seen it in cotton prices, we have seen it with polyester prices, and even obviously with prices we have seen stability coming through. Input costs have been declining for producers with the movement in exchange rates for producers with non U.S.

dollar costs. And that obviously includes our two South African mills.

We will continue to manage our capacity and it’s very important that we continue our stronger relationship with our key customers and align our growth strategies with their. We will look for further opportunities to investigate other end uses for dissolving pulp.

Now turning to each of the regional businesses and I’ll start with Europe. We have a couple of graphs on this page.

The first one shows the EBITDA trends over the recent times and I think there has been significant improvement now and you can see all the way back now to the middle of 2013 to 2014 financial year. We have seen consistent improvement, a lot of that obviously is a result of the cost that we’ve managed to take out of the business.

On the top right we have the demand development, the forecast that you see attached there are the we see [ph] forecast and you can see that they are forecasting for graphic paper down or round about 2% to 3% and I think for coated woodfree that’s consistent with our internal thinking. Mechanical, we believe maybe a little bit self driven there.

The better margins that you are seeing year-on-year are a result of higher coated woodfree selling prices, the lower fixed cost had taken our significant cost, and as you know we closed the or we sold the Nijmegen last year. I mean we were able to cover sale of those production volumes and we also got a benefit from the transfer of the Dutch pension fund.

The weaker Euro has lifted export prices for us but that has been offset somewhat by the higher U.S. denominated pulp cost.

Logistic costs have been rising on the back of those increased exports and have been higher freight rates coming through that, and in addition to all of that our specialty business has been stronger and we achieved better volumes and higher pricing. In North America I had same structure for the slide and as you know 2014 was a tough year for the North Americans.

However, since then we have seen improvements which kicked in cost out of the business and we have been able to put through some price increases. On the top right there, the forecast outlook and what we see is slightly better than what the European situation is and estimating done about 1%.

Our estimates are in the similar range. The improvement that we have seen over the last year and the increased profitability has risen from the fact that we did get the higher sales prices, there has been a better mix on the sales side with a higher emphasis on premium sheet.

And we’ve been able to achieve lower variable cost. However, the severe weather that we did see during the quarter in the North East did impact negatively on productivity and logistics.

Dissolving pulp sales volumes were down and I talked about this already but we did switch back some of that production to make on fiber for our paper moulds at Cloquet. Our release business has been affected by weaker sales to China and in addition to that we do sell some of that into Europe and the weaker Euro has negatively impacted the pricing for sales to Europe when you convert that back to dollars.

The lower variable costs rose some lower chemical and energy prices which have more than offset higher wood input cost. In South Africa we continue to see stronger earnings growth, we’ve seen an increased contribution from our paper business, the margins are picking up nicely there as we streamline there and has a focused marketing strategy.

In terms of the dissolving pulp, what you see on the top right hand side is the outlook for dissolving pulp. The demand growth is consistent with what I said earlier.

It’s -- their expectations are round about 6% per annum growth. In terms of the earnings growth, the exchange rate gains on export sales benefitted us and in addition we were able to achieve further fixed cost savings of good work done there.

And did offset the lower dissolving pulp selling prices, the U.S. dollar denominated selling prices.

In addition, the dissolving sales volumes were impacted by -- negatively impacted by a boiler-tube leak at Ngodwana. In fact that occurred in December in the last quarter and I think we did talk about it at the time but obviously we have the delayed impact of the sales in this quarter.

Our paper business, I have talked about it improved further. It is making good margins now and its making an increased contribution to our profitability, which we are seeing high volumes and includes pricing there as well.

And we have been able to lower logistics and fixed cost. Part of the reasons for the improvement has been the strong fruit export sales, which has lifted the demand for our virgin fibre packaging grades.

Okay, then turning to the strategic focus moving forward and slide 18 is the slide that you have seen previously but it’s important to reemphasize what we are focusing on. And in terms of the key focus areas, going forward we will continue to achieve costs or look for cost advantages.

I do have some examples on further slides that I will expand on some of the initiatives that we are taking for each of these areas. We will continue to rationalize our declining businesses.

We will in the short term, look for smaller opportunities to grow through moderate investments, never losing sight of the key focus which is to generate cash, to strengthen our balance sheet, and reduce net debt. You know that we have our target of net debt to EBITDA of two times.

Then turning to slide 19, as I said, I would talk to some recent examples of each of these pillars. Firstly, on achieving cost advantages, some of these have been the investments that we have made at the power plants, in terms of Somerset, Kirkniemi, the changes that we made at Gratkorn on the paper machine, we talked about that one on the last quarter.

Important that we call out that we are, we do have the flexibility at Cloquet to switch between the kraft’s and dissolving pulp that enables us to benefit from price movements in the two respective markets. We are also putting a lot of energy behind our group procurement initiatives and we do think there are some saving opportunities there.

Then moving to optimizing and rationalizing declining businesses, as you know we have been transforming over a number of years now. Some recent examples of that has been the cessation of coated paper production in South Africa.

Recently [indiscernible] announced that they are switching their Husum now and they did produce volumes on our behalf and we will have the ability to transfer those volumes into our production location in the second half of this financial year. And then we are also on the lookout for opportunities to make more packaging grades at our mills around the globe.

Then moving to slide 20, as I said growing through moderate investments and again we list a few examples. We have made some investments at our lightweight recycled packaging at our mill in Enstra in South Africa and some upgrades to Tugela and Ngodwana, all these mills have picked up in terms of their profitability.

We also announced recently the nano-cellulose pilot plant in the Netherlands and that project is ongoing at the moment. Strengthening the balance sheet is extremely important for us and we will continue to focus on having a cleaner, stronger balance sheet so that we can accelerate growth in adjacent businesses and we continue to pursue the Twello forestry sale.

We have talked about that in prior quarters and that is an ongoing process. The bond refinancing, I am very pleased with outcome there and going forward our annual interest costs will be $110 million per annum estimated.

In addition to that, we repaid a smaller South African bond which is 450 million rand, so we continue to look for opportunity on that front. Then turning to slide 22, our outlook as we move forward graphic paper markets especially mechanical paper remained difficult and continued pressure from higher paper pulp and wood prices are putting margins under pressure.

However, lower oil and energy prices are providing some relief for us. Textile prices have stabilized over the last few months.

I mentioned it earlier, in fact we’ve actually started to see small rises in prices there. And dissolving pulp has been following that same trend, with a very strong correlation.

At the same time we remain well positioned with our strong relationships and the fact that our assets or many of our production locations are located in South Africa, the weaker rand does help with the cost there. We expect Q2 to -- well Q2 is a seasonally weaker quarter for the U.S.

and Europe and we do have maintenance shuts across all three regions. These will negatively impact results and what we’ve done here is we’ve compared the cost of the shuts this year relative to last year and there is an incremental impact, ones off of the $21 million.

We expect the operating performance for the year will be broadly similar to 2014 despite a number of one’s off impact from those capital projects that I discussed. At current exchange rates, the translation of Euro and Rand results into dollars may have an impact on good results.

Nevertheless, earnings per share excluding the special items is expected to be substantially better than that of the prior year. Okay, so that’s I’ve gone through the deck now.

So, operator I’ll put it back to you for questions.

Thank you. Three quick questions please.

So on the cost control and you’ve displayed some positive news on that in Europe and you’ve also given some examples going forward of how you are further going to focus on cost. Can you give any indication in terms of number or percent of how much further you can potentially get cost down in Europe in terms of the target?

And then secondly Cloquet, can you give any indication of what the return on invested capital has been like at Cloquet given that dissolving pulp markets haven’t been quite as you might have expected and you have had to swing capacity there into the paper side? And then just finally, there is a special item in the employee liability benefit settlement, is that to do with the Dutch pension fund transfer that you were talking about in the presentation, thank you?

Okay. If I take each of these questions in turn.

Firstly, in terms of the cost opportunities in Europe, as you know we’ve taken out significant amounts of costs over the last two years. The opportunities as we move forward, obviously we have a process of continuous improvement but probably in terms of giving you a number they are not as sizeable as what you’ve seen over the last couple of years.

I am a bit hesitant to put a specific number to it but it’s substantially less than you’ve seen in the last couple of years. But we do think there are further opportunities.

In terms of Cloquet, we don’t manage our capital at Cloquet in isolation. We look at the investment in the dissolving pulp business as an overall investment.

We have to do that because we service the same customers and we have consistent pricing and volumes being supplied to the same customers. So I would rather answer the question relative to the overall investments and it had been successful for us and we are happy with the conversions.

In terms of your last question yes, the item that you referred to that relates to the Dutch pension fund.

Thank you.

Thank you, a few questions one at a time. Regarding the April North American announced coated woodfree price increase, can you say how much of that was realized?

The April price increase?

Or May, there is some people have told me different months, but can you say a recent price increase incurred in woodfree has risen?

And we have recently announced one in Europe last week, Mark I don’t think there was other price increases in the U.S. or in the sheet side, okay, on the sheet.

Mark, do you just want to expand on the U.S.

Sure, we announced price increases back in the end of Q1 and again in the beginning of Q2. They were both initially on web and the last one on sheets and we have been implementing those price increases as we went through Q2 and we are seeing most of it come through.

Okay, you have given flat -- roughly, broadly flat 2015 guidance of profitability or perhaps EBITDA, is the celluloses going to be down, can you say if the difference will be made up where -- is that in your thinking U.S. paper, European paper, or Southern Africa other than cellulose?

Yes, in fact it is all three is prepared for processes [ph] are improving on last year. So, yes does make up the shortfall.

Okay, can you provide any insight into the rough contribution of Cloquet dissolving what put into for fiscal Q2 2015 EBITDA, I know you probably don’t want to give a number perhaps, maybe you can given us some broad sense of percent -- profitability?

As I said it is not something that we look at in isolation. We manage it as one business so it is not a number that we do disclose externally.

Okay on CAPEX, you gave the CAPEX guidance that implies I guess second half fiscal of 166 versus 114 for the first half, is there something in particular driving that and will that be evenly spread over the two quarters or more this coming quarter with the maintenance turnarounds?

It is because we do have a large number of fixed and maintenance shuts in the third quarter as we talked about. In terms of the split between the two quarters, it is roughly split half-half if I look at the numbers.

Perfect, the last one is 2016 CAPEX can you give any broad sense of what it might look like as 2015 CAPEX?

Yeah, at similar levels. We used 300 million as our benchmark, as our guidance and we would expect that to continue.

Thank you very much.

Hi, good day, thanks for the opportunity. Just on Europe, maybe just firstly to check on the price increases that you announced at the end of last year, have those all been given back, you said prices have sort of drifted down through the quarter?

I think the other thing is just trading positions still seem pretty week in Europe as the prices are sort of coming off, why do you think this new price increase that you want to implement would be successful?

Okay, I will take the first part of the question and I will hand over to Berry and the price increases that we saw last -- at the end of the last quarter that we talked to, Mark has already indicated that in the U.S. that most of that is stuck in Europe and some of that has come back on the coated woodfree side and as we have discussed we have put through a further price increase last week and I will put you over to Berry to talk about that price increase that we announced.

Thanks Steve. The price increases we announced last week were for the re-use business both woodfree coated and mechanical.

Woodfree coated re-use business has been particularly strong but the price level both for mechanical and for woodfree are now at a level where the increase in pulp prices makes them uneconomic, so we have to raise the prices there. So, it’s important but there is enough demand to do so.

The second thing is that capacities in the mechanical coated side are coming down and Steve already referred to the switch to other coated papers or other papers that is underpinning our capacity loading. We also referred to a sheets price rise, the timing of that we are still making up our minds about but it will be during the following quarter.

And in that case it is built very much on strong demand. Demand has been very strong from February onwards with capacities, current capacity utilization well above 90%.

Okay, and maybe just a follow up on that, just what’s your sense of how much of the industry in coated -- and coated mechanical is currently loss making in Euro?

Sorry, Nishal repeat that question.

I just wanted to see what’s your sense of how much of the industry in Euro on coated paper and coated mechanical is actually loss making currently?

What percentage is loss making and look we don’t have those specs. All I can say is that I think a number of the competitors out there are managing their access for cash.

And I have got to believe that if the machines are cash positive they will continue to operate them but we don’t have those specific numbers.

Okay, thank you.

Thank you. Berry, I didn’t just pickup on what you just said about our utilization rates, how do we rationalize what we have seen in coated sheet prices.

If I look and rece [ph] prices have fallen actually below the level where you raised them back in October of last year, if you have a strong demand what is going on with pricing and how do we reconcile the pine utilization rate has strong demand with given back more than their old price increase from October?

Yes, its correct that during the last three months of the calendar year last year demand was not so strong and that carried on into January of the quarter we just had. The January month was very low and that was quite a bit of price reduction.

But when we look at our prices they have been stable since February along with going down. There is no talk of price going down and the real price going down.

And part of the reason for that is the fact that prices outside Europe are significantly higher than prices within Europe. So companies have naturally started to focus on markets outside Europe and that’s taken the pressure of the cost from markets inside Europe and have also raised operating rates and I think that’s the background.

In terms of the issue you had with paper links and their trouble is that putting any pressure on the market as that’s relevant?

I’ll take a shot at that Steve if you like and as far as we are concerned we have no major problem with the changes at paper links with decline in paper links. We don’t see that as a particularly negative for the market because final demand at printers has not halted, it’s just the lead to the market that’s changing.

Thank you. And just a couple of bigger picture questions I suppose.

Steve, when you are talking about the ones off things that are going on, obviously various things at various notes, can you give us a sense of what you think the ones off impact is and also when you talk about the 21 million hired year-on-year, how that split between the one the sort of pulp upgrades at Gratkorn versus maintenance and its European share with us what it means quarter-on-quarter as opposed to year-on-year?

I think you touched all the question but let me try and answer how I interpret it. I think you were asking for the breakdown of the 21 million and its impact on what it arose from.

It’s essentially made up of two larger items, the incremental impact and firstly as you know we’ve been investing in the boiler at Gratkorn and that makes up about $13 million of the 21. That is a one's off project and in the balance of the change relates to a shift in the Ngodwana annual maintenance shut in South Africa and that was in Q2 last year and is now moved to Q3.

And what I am trying to also understand is the full year impact of this one's off items that you refer to including the Gratkorn and Somerset, etc. if you sort of when you -- heading into 2016 what would be the cost you would have in 2016 to carry so to speak?

Understood, if I take the tube projects at Gratkorn, the impact from Q1 and the Q3 that I just talked about and the Somerset project that also occurred in Q1 add it all together and you get to about $35 million to $40 million.

Understood and then a final question to Mark. It’s been seen in the statistics that there hasn’t been any particularly imports coming into the United States despite say strong prices such as Europe which to me is somewhat surprising and then I saw just the other day some North American statistics coming thorough shown as significant decline in North American coated paper shipments, in fact the weakest months or year should we interpret that as now the import starts to come or is that something else going on?

Well I think you are referring to the most recent monthly data on the drop. We are aware of that data too we didn’t know it’s just the slow period of the year when you look at the entire year in the North American demand cycle.

So I think we haven’t been able to put the two questions together yet. We haven’t seen a whole lot of imported product come in other than the product that we bring in.

And the other thing that’s going on too and I don’t have the data live maybe somebody has seen it by now, there was a fair amount of backup of I am going to say Asian product because the backup was on the West Coast and those ports have now opened up after the slowdown in strikes out there. So that maybe changing some of the dynamics in the month of April.

Understood that makes sense. Thanks.

Good afternoon, couple of questions. Just in terms of the pension fund transfer, are there any other sort of opportunities along this line, and then in terms of the your revised finance cost guidance and does this include or exclude the possible refinancing of the 2030 bonds and then just in terms of CAPEX guidance as well, since dawn is there anything that sort of drove this specifically and then just looking at the -- in sort of your paper packaging business, in terms of those margins, how you guys were sort of thinking about that in terms of the cycle?

And then just following on to that, it’s a cash cost for down about 5% year-on-year in rent and could you give us a little bit of color as to what’s helping that? And then lastly in terms of the further optimization for the European specialties business and the new all the test around I guess what the folding box, could you sort of give cash how much material this is sort of in the European business, I presume not that big?

Thanks.

Okay that was quite a few questions there. First, I’ll take some of them and I’ll pass some of the others to my colleagues.

Firstly, in terms of further pension opportunities, Glen, do you want to take that.

Yes. We have a number of pension funds that are funded across the group and we constantly are looking at opportunities as far as its concerned.

That pension fund was a specific opportunity that we managed to take advantage of. There are no immediate opportunities in other areas of the world that we continue to look at them.

Thanks.

Your second question was about the finance cost going forward and the guidance we gave. No, it didn’t include any savings on the 2032 bonds.

That was as our bonds currently are. Obviously we got the 2017 and 2021 bond but we won’t be able to refinance those in sort of 18 months, 21 months time.

But that’s not obviously in the guidance either. The CAPEX percentage, why we did pull it down, as I said earlier we have about $150 million of maintenance CAPEX per annum.

And then we identified a number of other initiatives mainly focused on improving productivity and our cost base and this year they added up to $280 million. As I said earlier going forward, $300 million is what we target each year.

The paper business has been strong and grows -– has been growing and strengthening and I am going to put you to Alex just to talk in some more detail about the opportunities there. And Alex maybe you can follow that up with the question on the cash costs which was the next question.

Sure Steve. Thanks Steve, just in terms of the margin, in terms of the cycle, a lot of that business is priced on a very strong agricultural export market out of South Africa.

And you see that that’s going to continue. We also make products which are very most sort after, we are keeping up those market expansions.

So we think we can maintain those kind of margins. Then from a cost perspective what is helping that, we are focusing on simplifying the business that gives you opportunities in terms of your recipes [ph] and production efficiency and that all drops down to the bottom line.

We have taken some actions in terms of closing our 13 operation at Enstra [ph] Mill. We also reduced some of our finishing house and cost in Enstra and I think the other situation is we continue to take some costs out of SG&A and looking at recipes, how do we drop our variable cost continuously that really covers it.

Thanks Alex and then your last question was about the specialty paper, packaging in Europe and the opportunities and you specifically asked about folding box for Mastrek [ph] and we estimate the opportunity there is about 30,000 to 40,000 ton. So it’s relatively small, but it certainly will boost the profitability of that specific moment.

Great, thanks guys.

Thanks, I wondered Mark, if you could talk a little bit about what you are seeing in the competitive situation after the Verso/NewPage as well as the spin-off and sale of some of those mills to Catalyst, what you are seeing in the North American markets? And then the second question I just wondered if you can talk a little bit more about Cloquet, it’s a mix of fluff versus modern wood versus dissolving, I mean what you are seeing in the fluff market, obviously there is more capacity coming into that market as well?

Thanks.

Okay, just in terms of your first question, we don’t like to talk specifically about our competitors. All we can say broadly is that post The Verso/NewPage merger and obviously the emergence of Catalyst into the U.S.

markets we are seeing some aggressive behavior -- competitive behavior and that has put a little bit pressure on prices. But we really don’t want to talk about them specifically.

Cloquet you asked about the fluff market, Mark, I don’t know if there is anything you want to comment on that side.

Yes, Steve I can say, first we do not make fluff pulp at Cloquet. So when we swing, we swing from the dissolving wood pulp to kraft pulp which we use all internally on the machine, paper machine.

We do have the capability, if the economics warranted it to also go to the market with kraft pulp but not fluff. The fluff pulp demand is apparently very large and we have seen a lot of conversions being announced and being done.

Most of them though are down in the Southeast of the United States, where they tend to use a lot of the soft wood, requires the soft wood for their product

Okay, maybe if I could just go back on the competitor situation, I don’t want to -- I was not looking for sort of a discussion about Verso versus catalyst and you mentioned that decreased competitiveness, I guess my question is from a contract standpoint or a customer standpoint, what is the reaction from customers, are they trying to really lock-in with obviously we have two source to supply and they are trying to get in more contracted business or they are looking to keep the spot markets open for them?

Mark do you want to take that.

I will say a few things there. I think customers are evaluating their situation.

Our contract customers are continuing about the same this year as prior years. I think there is a lot of change yet to happen in the market as people figure out how this is all going to settle out, who is going to be able to -- who wants to supply what to which customers and I think that is going -- it is going to take a while to play out still.

Thank you.

No, that's it thank you.

No, I think that's it. I want to thank everybody for joining us and we look forward to discussing our results at the end of the next quarter.

Thank you for joining us.