BICO Group AB (publ)

Good morning and welcome to this presentation of SCA's third quarter results. With me here today I have president and CEO Ulf Larsson and CFO Tobbe Låten. Please Ulf, go ahead.

Thank you so much Anders and also from my side, good morning and a very warm welcome to this presentation. When I summarized the first quarter I can state that we delivered our strongest quarter ever. We made 2.7 billion SEC on the EBITDA level and a profit EBITDA margin of 53%. We have seen a very strong market during the quarter, underlying strong demand in all product areas more or less. And not the least important, we took the decision to leave publication paper last year. And that has also been very contributable to our good profit this quarter. On top of that we have had a stable cost level and also good production. During this quarter we have performed two maintenance stops and we have also started up a third one. And I will come back to this later on, but the impact during this quarter has been around 170 million SEC in comparison with 60 million SEC third quarter last year. Our net sales went up and the main reason for that is of course the price and mix. On the other side, as already mentioned, we took the decision to leave publication paper last year. And we also took the decision to divest our supply operation in wood for UK. During this quarter we have also announced that we will invest 700 million SEC in a joint venture together with ST1. So we will take a stake in their biorefinery in Gothenburg. Total capacity in this biorefinery is 200,000 cubic meters. And 40% out of that can reach the quality of biojet. And just to give you some kind of relation, that is approximately 50% of what's needed for the Swedish domestic air flight. In this agreement we have also said that SCA shall annually deliver 60,000 tons of tall oil into this JV. Finally, I'm happy also to say that we continue to run our two big investment projects in strategic investment projects in Craftliner, Obolla and CTMP, Oortviken, according to plan when it comes to time and budget. So if we take a closer look at some KPIs, as already mentioned, we delivered 2.7 billion SEC, which gave us a strong EBITDA margin of 53%. And if you look to the right hand side, you can see that that is substantially higher than previous quarters. Our industrial return on capital employed calculated as an average for the past 12 months reached 25% during the third quarter. And if we just look at the third quarter, our industrial return on capital employed was 46%. Our net debt in relation to our EBITDA went down to one, and that is of course due to a strong cash flow. And I'm pleased to say that we continue to finance our big strategic investments through our operating cash flow. Then I walk over to our segments and starting with the forest. And I can just state that we have had another quarter of stable supply of wood to our industries. And if you look to the bottom left, you can see that the price development for pulpwood is rather flat. We had a positive effect when we decided and when we took the decision to leave publication paper, but since then it's been quite flat. When it comes to solar prices, we have seen gradually increasing prices during the third quarter. We will see it also in the fourth and maybe also in the first quarter next year. Our EBITDA is in line with the last quarter. It's positively impacted by higher revaluation of biological assets that gave around 70 million SEC for the month. On the negative side, we can note that we have had a lower harvesting level from our own forest during this quarter in comparison with last year. And the reason for that was that we had a strong harvesting level in last year and just now also we have a very strong external supply to our industry. If we then turn over to wood, we can also state that we have a high level of global demand. We have seen strong markets in Japan, UK and also Scandinavia. Slightly less good demand in China, also in Middle East, North Africa and also maybe in the US. Nevertheless, if you look in the bottom left, you can see that we have had a significant price increase during a couple of quarters now. We have reached definitely a top record level when it comes to prices for solid wood products. I said last quarter that I thought that we should in Q3 reach 50% better prices in Q3 in comparison with Q2. And that was exactly the outcome during this period. Then I will come back to our forecast for the coming quarter. Sales was up 37% due to higher prices and also due to the fact that we even if we took the decision to divest our supply unit in the UK. EBITDA was also substantially up and we have the EBITDA margin of 54%, which I think is highly competitive. Here are some graphs and if we start top left, you can see the stock level in relation to the average for the past five years in Sweden and Finland. And we can now see that we have come back to some kind of normal situation when it comes to the stock level. Bottom left, you can see the production and also here we can see that we are more or less on a normalized level. And top right, you can see the price development and as I said, prices in the third quarter in comparison with the second one this year is 50% higher. We've reached some kind of record level. And I think now when we have a combination of a balanced stock, a normal production and then a seasonal lower consumption in Q3 and in Q4 and the first quarter. I believe that we will reduce prices now in the fourth quarter by 15 to 20% from a very, very high level. So if we then turn over to pulp, we have had during the third quarter a good demand in Europe. We have also had a OK demand in US and slightly weaker in China. Nevertheless, we also here are on a record level when it comes to pulp prices. The official PIX listing price now is $1,340 per ton. We reached the bottom Q1 2020 on US$820 per ton with a different discount rate, with a different currency, but nevertheless. We have in I say higher volumes during this quarter in comparison with last year due to stronger production. And our EBITDA was up as much as 380% due to higher prices, due to higher volumes. On the other hand, we had a negative currency effect of about 90 million SEC for the quarter when we compare year on year. Here we have also started up a planned maintenance stop. It's a quite long stop, 22-23 days in Öresstrand. And we had a negative effect in the third quarter of 20 million SEC and the main part, major part will come in the fourth quarter. Here are some words about the pulp market development. And as I said, we have seen decreasing prices in China. If we compare now China with Europe, one can say that in Europe we have a net price of US$900 per ton. US slightly weaker, US$800 per ton and then China around US$700 per ton. So it's quite substantial spread as it is today. We have seen that in China now we have an energy crisis and it's also very expensive to move products from China over to Europe. And I think that's one reason why we feel that the European market is still strong and we see somewhat weaker market in China. For SCA we are almost 100% focused on the European and the US market. As you also can see, inventories are today on a normal level for hardwood and on the slightly high side for softwood. On the other hand, we know that now we will see a couple of rather long maintenance stops during the autumn. And I think that will change the situation somewhat in the coming months. And as you also all know, supply is impacted by global logistical challenges. But for us, focused on Europe, we have managed that quite well. Turning over to ContainerBoard. And here we have performed two big planned maintenance stops, one in Åbola. And as you know, we have our ongoing big investment project in Åbola. So I can say now the mill is prepared for the start up of the new craft line machine in the beginning of 2023. So everything has went very well there. And we had a 12 days stop in Munchsund, a planned stop. All in all, the negative impact during the quarter has been for these two stops around 150 million SEK. SEIS was up substantially during this quarter when we compare year on year. And that is due to higher prices, volume of course lower due to these maintenance stops. And EBTA also substantially up, but again, negatively impacted by a lower volume, of course. If we then take a look at the ContainerBoard market development, we can see that we continue to have a steady growth of European deliveries. And if you look at the bottom left, you can see that inventory days, they are below average. And also here we will see a couple of big maintenance stops coming in during the autumn. Prices have since the bottom November last year increased by 250 euro per tonne. We have had another price increase announced from 1st of October and that one will come through, another 50 euro per tonne for unbleached craft. We see that it's still a very good demand for ContainerBoard. Underlying consumption is good. We know that the prices for OCC in Europe has went from 70 up to 170 euro per tonne. And also at the same time we see that the energy prices is rising. So I mean that is good conditions for further price increases also for craft line. The delta between craft and test line today is 150 euro per tonne, which is quite on a normal level. On the top right you can see also that we have still a strong box demand and that I mean this demand continue well above trend since we had this drop during the first phase of the pandemic. So by that Toby I hand over to you.

Thank you. Thank you Ulf. Good morning everybody. I will start as usual with a bit on the income statement. And here you can see on the net sales line we've had a growth in net sales of 17% versus Q3 last year. And this is also to remember that last year we had around 1 billion of sales from publication paper per quarter. So we've obviously taken away the publication paper business, but the strong top line development driven also by the strong pricing environment has more than compensated. And then bottom line we have an EBITDA of 2 billion 684 million this quarter. So a very strong profit development EBITDA margin 52.9%. So record level coming further down the income statement. You can see financial items very stable at 24 million this quarter and then tax at 453 million which is an effective tax rate of just under 20%. Earnings per share you can see also strong development earnings per share driven by the net profit for the period at one point more than 1.8 billion in the quarter of net profit and then 2.59 SEC per share. And that means that year to date we're also 5.85 SEC per share earnings per share. So a good development also earnings per share and net profit. If I just give a bit more detail by segment and here you see the different segments. And if I start on the left hand side with forest and the top left, you can see the net sales is down a bit this quarter versus last quarter. That's a bit due to the maintenance stops that we had during the quarter and at the end of the quarter for pulp as well which reduces the deliveries of wood into the industries during the quarter from forest. The bottom line here on the bottom left is driven then mainly by the share of our own forest. That's where the profit is driven by. And we have a seasonal pattern here that we normally have less harvesting from our own forest during quarter three, which we had also this year. So that's that's the reason for the seasonal pattern, the drop versus quarter two in the forest division in the wood division. You can see a strong growth in net sales, obviously driven mainly by the strong price development that has already mentioned. And that really drops through to the bottom line as well, where we had an EBITDA in the wood division of more than 1 billion SEC, 1 billion 180 million this quarter, which is then an EBITDA margin of 54 percent. So a very strong delivery from the wood division. The pulp division top line we have is slightly down 1,522, a little bit lowering the deliveries ahead of the maintenance stop to keep a stable delivery also during the maintenance stop. But bottom line also a strong increase in margin up to 42 percent EBITDA margin and 659 million in EBITDA. And then on the container board division in the sales, where you can really see, of course, the effect from exiting publication paper, which came from between Q4 and Q1 this year. And then basically pretty flat in top line. We've had price increases, but again here it's smoothing out the effect from the maintenance stop. So slightly less volume compensating. And then in the in the bottom line, you can see also the EBITDA margin has been impacted by those maintenance stops, which had around 150 million SEC of impact in the container board division. So but despite those EBITDA margin, 27 percent. If we come just to the bridge on net sales, you can really see the impact of prices, the 44 percent impact on basically higher prices in all product areas, all segments. So 44 percent in total. We've had a bit positive impact from volumes, three percent, mainly from the pulp division with the higher volumes versus quarter three last year. Currency slightly negative minus three percent. And then we have the impact, which is in total 27 percent from from publication paper and also the divestment of the wood supply division in the UK, which we made in the autumn last year as well. So overall, a 17 percent increase in top line. And then when it comes to EBITDA and you can really see the strong drop through from the price here, one point nine billion impact from price, price and mix. A small contribution from volume as well. Raw material, a slight negative. This is partly due to it's also partly due to that we source a little bit less from our own forest this quarter, but also a bit the the OCC prices, which have a we have a limited exposure to energy is positive impact. We have increased sales of energy, mainly from this quarter. Negative currency impact, as I mentioned, and then other is mainly the maintenance stops impact, which which we've mentioned already, which has a negative impact of one hundred and forty nine. So and I think when we see this bridge, I think just one reflection is that the decision to exit publication paper, we're certainly happy that we took that decision last year because without that we wouldn't have seen anything like the same positive impact on price and the same stable cost development. So I think I think that really supports the strong delivery through to bottom line here. When it comes to cash flow, I'll start on the left hand column here, the quarter. And we have even if we take the EBITDA and we take away the impact mainly from the revaluation of the biological assets in the EBITDA. That means we have an operating cash surplus of more than two point two billion SEC this quarter. I'm happy with a strong or tight working capital management despite the price increase environment, which impacts on the working capital. Of course, we've managed to hold working capital a bit lower this quarter at with a positive impact of sixty one million restructuring costs, which is really related to the closure of publication paper. We had sixty five million in the quarter. And then after taking off the current capex of three hundred and sixty five million, we have an operating cash flow of one point eight seven two billion SEC. So again, a strong operating cash flow delivery. And then when you look to the next line on strategic capital expenditures, you can see that once again, both in the quarter, but then also in the year to date numbers, you can see that we're funding basically the the growth of the company and the strategic capital expenditures from our operating cash flow. With some margin. And here, of course, the strategic capital expenditures are the largest project is the expansion. But we also have the growth in the investment in the expansion in what we can as well. So all being funded from self generated cash flow. All right. A few words on the balance sheet. We have the top line, the forest assets, which are now valued to seventy seven point five billion SEC. This is valued at basically the market price, according to market statistics, which is three hundred SEC per cubic meter. Working capital here, you can see we have just under three point two billion of working capital. And even though that's increased since the end of last year, you can see the working capital to sales ratio has come down. And that's what I was talking about with the tighter type management of working capital. Then, when including the other capital employed and deferred tax, we have a total capital employed of eighty four billion just under and net debt, very stable at seven point six billion. So we've delivered then a D leveraging down to one point zero net debt to EBITDA through the strong cash flow. I'll just come back on that in a moment. And then equity, seventy six billion, just over seventy six billion. And then finally, just a few words on the operating cash flow. And we've now had actually more than four quarters, but we show four quarters here, a strong operating cash flow delivery, more than one billion per quarter on average. And this quarter, especially getting closer to two billion SEC in operating cash flow, so really strong development in the financial position of the company. And you can see that really from the D leveraging line. We've gone down now to one point zero net debt to EBITDA. So a very, very strong development in in the balance sheet. And I think the right hand side of this pitch is also very nice to be able to show. And this is the new paper machine hall and paper machine under construction in Oberla. And that's that's what all this cash flow is helping us to to finance from own cash flow and at the same time, D leverage the company. So it's a good performance. And with that, I will hand back to Ulf for a summary and Q&A.

Yes, well, I don't really have too much to add. I mean, it was for us a super strong quarter. It's the best quarter ever. Fifty three percent profit margin for the total company heavily contributed by the decision to leave publication paper. And I think we leave it there and open up for questions.

Thank you, Ulf. Thank you, Toby. OK, and today we are moving into the Q&A session. But first, we do have some questions or one or two here in the studio in Stockholm. We start with that and then we will hand over to our operator Maria. Please go ahead.

Thank you very much. It's Linus Larsson with SEB. I'd like to start on the pop division. You gave some some color, but maybe first on volumes, you were somewhat constrained by the pending or the planned maintenance chat in the fourth quarter. But looking at volumes in the fourth compared to the third quarter, given that planned maintenance chat, are you expecting stronger volumes or how will that work out?

Maybe I can I can. I mean, we we we try to smooth out the effect of the volumes in in delivery volumes. So we do have, of course, significantly lower production when we take a maintenance stop. But we smooth that out and we've had so we've taken a bit of that effect in Q3, but we would expect it also to come in Q4. So so I think it will be it will be tough to have a positive volume development Q4 versus Q3. But but it's not the full effect of the of the production stop.

Thanks. And also on price and if you describe the discrepancy we see now between Chinese and European prices and one would at least under normal circumstances expect that to translate into redirection of volumes into Europe because prices are obviously higher. Are you seeing that and are you seeing price concessions taking place in Europe in the fourth quarter?

I mean, first, as I said, I mean, we have some kind of energy crisis in China and we also have substantially higher cost for going from China over to Europe and vice versa. So I mean, I think we see less of paper and other products in Europe. So that creates some kind of stronger market for pulp, at least for us in Europe. We are not too present in China. I mean, we do the main part in Europe and then some of it in the US. Some in as I said, I mean, we felt really good demand from from Europe in the last quarter. And of course, long term, I think the prices still they will come together in one way or another. So, but I mean, we don't know. We have had the same price now for four quarter in a row and negotiations are ongoing just now.

Thanks. And then just one question on the stock performer in the quarter would I think you had returned capital employed of one hundred twenty two percent in the quarter. And you again make a forecast for the for the wood wood price in the fourth quarter. But could you describe a bit more what you're seeing among your customers right now? I mean, what's their behavior? Is there a de-stocking cycle we're entering into? What's what's real underlying demand? What's the twenty twenty two? Do you think

it's very hard to say? I mean, as you saw, I mean, stock level has now normalized when it comes to we have statistics from Sweden, Finland and at Somers. I mean, we have a normalized stock level more or less. Production is also reasonably normal because I think the so many that can really produce more. You have a limited availability of so logs and also, I mean, you have a limited capacity. So that is what we see there underlying the consumption is good. But as you all know, in Q4 and Q1, normally we have a seasonally lower demand. And I mean, that is what is just now creating some kind of adjustment of the price level. But I mean, from a record level, we moved on 15 to 20 percent. So it will still be a very strong profitability in the Somer business for the coming at least for the coming quarter.

Thanks. Thank you. And with that, we will hand over to the operator. Maria, please go ahead.

Thank you. So those who wish to ask a question via the telephone lines, please press star and one in your telephone keypad. Your first question comes from the line of Robin Sandoverta. Please ask your question.

Thank you very much and good morning. First off, I would like to ask about the container board market. The prices are quite significantly up year to date. And you said one additional increase in October. What do you see in that market going into the winter? Is this now the peak price in October or is there potential for further increases in the winter in Europe?

I definitely think that we will see further price increases in container board. I mean, the underlying demand is still very good. And that is one thing. But the other thing is when we I mean, to some extent, we are dependent on the test liner market. And I mean, test liner producers today, they see really high energy cost level and they also see a very high cost level for OCC. As I said from I think it's November last year and up till today, the price increases went from 70 euro per ton up to 170 euro per ton. And it is a problem for test liner producers to get the availability of OCC in the market. So I think it's a really strong market and I see that we will I forecast that we will see further price increases in this segment. All right,

thanks. That is clear. And in terms of the wood division, you commented on demand and prices. Thank you for that. What is the outlook when it comes to costs now in Q4 and in 2022?

I think it differs a lot depending on where you are in Sweden. I mean, for us, being the biggest private forest owner in Europe, I mean, we have a high degree of self-sufficiency when it comes to solox. So that is very positive for us, of course. Nevertheless, we buy some volumes from the let's say open market. And I mean, in that case and for that part, we see some slightly increasing prices during the fourth quarter. And that might continue also into the first quarter. It's nothing substantial, but still the direction is north here, of course.

Good. Thank you. And then, for Toby, could you comment about the capex for this year and potentially for next year? What is your estimate? Yeah,

I can say we expect current capex still to be in line with our guidance of 1.2, 1.3 billion SEC for the full year. And strategic capex also to be still in line with our guidance that we expect 3 to 4 billion of strategic capex for the full year. So that means we expect quite a big strategic capex in the fourth quarter primarily related to Obula as well.

Sure. Thanks. And 2022, is that around similar numbers to be expected?

Yeah, we expect slightly less in 2022 because, I mean, we'll see where we actually come out this year for Obula. But we expect this year is basically the heaviest year of the investment in Obula. And then it should come down a bit next year. But obviously, if we don't take as much in the fourth quarter this year, that will roll forward into next year. So it depends a bit on how things land in the fourth quarter.

I understand. That's all. Thank you very much.

Thank you. The next question comes from the line of Oscar Lindstrom. Please ask your question.

Good morning, gentlemen. I have three questions. And the first one is kind of a general question. We now have or you have record price levels for both pulp and sawn timber. And we're probably heading there for container board. As you said, I mean, these are the best earnings that you've ever you ever had. I mean, in your opinion, and I suppose this is for you, Wolf, how much of this is a temporary boom driven by very special market conditions after Covid and money supply increases and all that? And how much of it is underlying structural change? I know it's a wide question, but you can answer it as you want.

Yeah, it's very hard to answer on that one. But I mean, fundamentally, I think we are in the top portfolio we have now when we have when we have get rid of the publication paper business. I mean, we are in growth areas and we are also favored by the sustainability trend. I mean, to move from plastic to paper, from concrete over to solid wood constructions and from fossil fuels to liquid biofuels. And that has also been the our we have been striving to reach that position. So we are very happy about that. So fundamentally, I think over over time, you will have steady growth in these segments. I mean, structurally, it's so hard to say. I feel that we can if I give you some view for the fourth quarter, I feel that we are I mean, we have a strong order book. We are very well booked. We will see. We will have some I've already said that we will have some small adjustment in solid wood products, but we will continue on a record level when it comes to profitability. Container board will be even stronger than it is just now. And pulp, we don't know yet. I mean, we are, as you say, on a on a good level. But again, we feel a reasonably strong, strong demand in Europe. But long term, we will not see the spread from from 700 up to 900. And but what will happen? I mean, I cannot really say.

Yeah, that's fair enough. A second question, which may be a little bit easier, but not that much is on capital allocation. You already have a very strong cash balance sheet and you've got also very strong cash flow at the moment. You know, where are you going to where can you spend the money that's attractive? I mean, what what significant earnings growth opportunities do you have? Is there a possibility to expand capacity in your your existing facilities? I mean, is there enough wood supply for that in Sweden? Or would you need to look at byproducts more or expansion abroad? Where do you see the most attractive capital allocation opportunities at

the moment? I mean, first, just to remember, I mean, we are just now in the middle of a very big project in Obola, eight billion SEC. And we shall I mean, the project is perfectly on time and we are very satisfied with the development that we see there. But I mean, we have to finalize that one. The second one is the new CTMP line in Oortviken. We are also in the middle of that project running according to plan, but it should be finalized. We are also in the middle of a big project in Bolsta Somil. That is 800 million SEC that shall also be finalized. We also during this quote, the third quarter took the decision to invest 700 million SEC into liquid biofuels. So, I mean, I think we do a lot of things here. But I mean, going forward, of course, I mean, we can further increase capacity to Oestrand. We've said it before. And when we have fine tuned the production line in Oestrand, then we will take that decision. But I mean, it's too early to say when. We see lots of opportunities in, I mean, we continuously buy forest. We have our program in the Baltics. We have done 50,000 hectares there. We have said that we should reach 100,000 hectares in five years. If we can buy more forest, we will do that. We will also look into new investments in energy. Wind power is one thing, and I think we will maybe start to invest some more money ourselves into wind power. But we also have a lot of ongoing pre projects and things like that in the area of liquid biofuels. I mean, we have a lot of things to do here. But first and most important is to really deliver on the projects that we now have started.

Yeah, sounds wise. Just a final question from my side, and this is more concrete, is on the pulp. You talked about long maintenance stops this fall. I believe you were not only referring to your own stop, but to the market in general, that that would potentially or maybe you said it will change the situation in coming months. Could you expand a little bit on that? It sounded as if you were expecting the pulp market to tighten a bit.

Yeah, I mean, as I said, I mean, for us in the third quarter, we have had rather if not tight market, but a balanced market. Europe has been quite balanced. And that's the reason also why we have kept prices unchanged for four months in a row. We know that, I mean, we will ourselves we will perform a 22, 23 days stop in in Östran, which is quite substantial. And which is planned and which we have to do for regulatory reasons and things like that. We know that many others, they have to do exactly the same thing. And I think again, also this year that some maintenance stops, they have been postponed from the spring over to the autumn due to the risk for the pandemic. So I think that will have an impact on the stock level for softwood.

Maybe I could just add, but when you look at that graph that I've showed of the softwood inventories, I think you've seen the last couple of years have had more stops concentrated in the fourth quarter. And you see, I mean, it's the trend also previous years that the stock has gone up over the summer ahead of the stops and then come down, obviously, in Q4 when the stops have taken place. So I think we're seeing the same trend this year that we've seen in previous years.

And do you believe that the market can handle this or is that something that you think might cause at least a short term squeeze in the market?

We don't believe we have to sell.

Okay, that's great. Yeah,

but I think we and others, I mean, we, as I said, to Lena's question earlier, we smooth out our delivery so that, you know, we, if you like, we take an impact in Q3 and Q4 and Q1 basically from the lower production volumes in Q4. So and others do the same. So it doesn't it doesn't create a sort of short term impact in the same way. It's more more smooth effect. But it of course, it's volume that's not not not there in the market.

All right. Well, thank you. Good answers to some general questions. Thank you very much for my questions.

Thank you.

All right. Thank you. The next question comes from the line of Cole Hotring. Please ask your question.

Morning. Thanks for taking my question. I have three questions my side. I'll take them one at a time. The first one is around the container board market, and I'm hoping you can give a little bit of color. Tenshi, what you're seeing from the competitors on the recycled side, I mean, you talked about, you know, high energy prices, OCC availability causing a bit of problems for some of those recycled producers. Are you hearing of any of the smaller players taking downtime because of energy just not making it worthwhile for them to produce tightening the market there? And if there's any color you can give on the recycle container board inventory levels, I know you've given very helpful data on the craftliner is the first question. The second question. Can we please can we start? Can we start

with the first one? Otherwise, we will not remember. I mean, we are not too in. We are not into details when it comes to the test line market. But again, I mean, what they've done so far, I think, is to drive the price. And that's the reason why I think we will see another price announcement coming up here. And as I said, I mean, the delta between craft line and test line and prices, there are still 150 euro per ton, which is quite the normal level. But if they won't come through with the further price increases, then I think that you will see a containment taken. So that's my view on that. And it's not easy today to get access to recycled fiber, I think, in the in Central Europe and in these regions like to add something, Toby.

Yeah, I mean, it's the I mean, the test line of suppliers are when you read they are struggling with both the OCC prices, but also a number of exposed to gas and energy prices. So, you know, they they need price increases. And

I think for us, it's I think important to underline that because we have had some questions about the impact from increasing energy prices. But I mean, we are totally neutral since we closed down our publication paper business, we produce as much as we consume, which is just now a very favorable position. So we are not impacted at all by by the energy price. It will change slightly when we have Ebola in production and the CTMP plant in production. But as I said, then we will continue to invest in in energy production. So we like that balance.

Thank you. And then if I take the second question, if I look at your business medium term, I mean, you've now completed the Ostrand expansion. You've got Obelir and some other projects out there. Is there any color you can give on the EBITDA level you're going to be at or margin level you're going to be at on a medium term basis? I mean, if I think about normalized pricing levels, I have .E.A. on potentially a seven billion SEC EBITDA business, you know, twenty five medium term. And that is 20 to 30 percent above your your twenty nineteen EBITDA levels. I mean, that's a good medium term growth outlook. Is there any color you can give on how you think medium term on a normalized pricing environment?

I mean, I think we we we don't give forecast code. But what I mean, maybe the color I can give a little bit is we have said obviously the Obelir project drives a bottom line improvement. And we've talked about the 800 to one billion EBITDA impact from the Obelir project. You know, we're on a trend pricing level, of course. Yeah, of course, prices vary. But on a trend pricing level from the CTMP, we expect around a 300 million impact. So those those are both positive impacts in in terms of bottom line development that we know we expect to have an impact and also closing. If you look at kind of on a margin basis, we've also talked about closing publication paper and the exit of the UK would supply business drives a margin improvement, maybe not a bottom line improvement, but a margin improvement of around five percent. So I think all those things we expect to have an impact. But we don't give forecasts. Of course. Thank you.

And then just the final question is on how you thinking about the forest business medium term. There have been some questions around a kind of voluntary carbon credits and whether Europe would ever be able to get voluntary rather than being official EU ETS scheme carbon credits. Is there any discussion you're having around voluntary carbon credits on the forest business? Just some color there would be helpful. Thank you.

I mean, you have a lot of discussions around the forest and the European Union. And I mean, we saw that it was presented the new forest strategy from the union during summer. It's not the legislation. It is a strategy. And now we are looking forward to see what will come now during the autumn here when when suggestions for legislation and things like that. But I mean, we feel confident in this situation. I mean, we are the biggest private forest owner in Europe. We have a high degree of self-sufficiency of when it comes to raw material supply to our industries. So we are in a good position. I mean, I don't think we should have too much view on it. I think personally that we also see a lot of politicians now they say that forest and forestry that is a national competence. And from Sweden, from Finland, from France, Germany and other countries, I think it will be a balanced solution here at the end.

Thank you.

Thank you. And the next question comes from the line of Joe and Grimselius. Please ask your question.

Hi, everyone. It's Johannes here. Most of my questions have been answered, but I can ask you maybe on the cost inflation side, how you think look at things for the fourth quarter and next year. You have this very useful picture on page 16 in your presentation deck, minus 75 million. That's the year of year impact from raw material. I mean, how do you how do you sense that this will develop this component in the coming quarters?

Yeah, I think we have maybe relative others. We have more limited sort of impact to input prices in that our wood we partly source or largely source from our own forest with energy. We have a balanced or net net seller. So and we have relatively maybe fewer chemicals or other input chemicals is a fairly small share of our input costs. So we are we don't today see a big sort of impact from input cost inflation. Probably the of course, the biggest one for us is when we we source wood from third parties. We've seen fairly stable this year, but as I mentioned earlier, at least on the the the round saw logs, we do expect to see some not huge, but some some price increases during Q4 to Q1 in particular. But but as I say, not huge. So that's that's probably what we have visibility of currently going forward.

Yeah, that's helpful. Maybe I can also do, you know, ask you about the wood products that's been quite discussed already. But but still, do you sense that there is a risk on the volume side here since it seems to be quite much of a wait and see mood in the market where where prices gone gone ahead or you you're confident that you will, you know, sell out, sell out all your production there.

I mean,

as always, it's a question of what's supply and demand. I mean, for the fourth quarter, as I said, I mean, we have we are more or less sold out. We are on the we have a rather strong we have a strong motor book and and the price is more or less set in the market. I mean, otherwise, I wouldn't have said that we will reduce prices up to 15 to 20 percent. I mean, by that, then then then we have the floor there. And and I feel that there is a good demand, as I said, in it differs a little bit bit between different markets now. But Japan, UK, Scandinavia is still very strong. I mean, we have seen US recovered a bit. And still rather slow in China and and also in the MENA region. And I think, again, China is maybe hit by this energy crisis and they've been forced to close down some industry and things like that. So, but all in all, it is stable underlying demand for wood products.

OK, that's that's very useful comments. Can I just finally ask you on wood product, how much roughly speaking are you exporting out of the Nordics? I mean, overseas market, if you could give us some good, you know, rough numbers there.

Out from Europe, you mean?

Yeah, yeah.

Let's say 25, 30 percent or something like that. It differs. It differs between. I mean, if it's a good demand in Japan, China, US, then it's a little bit more. But I would say in that region.

Yeah. OK, thanks a lot.

Thank you. And the last question comes from the line of Michael Doepel. Please ask your question.

Thank you. I have three short questions first on the on the capital allocation side of things and regarding the biofuels project that you have ongoing. What kind of a revenue and earnings contribution would you expect from this to flow through into your P&L? And when when when could that happen?

Yeah, I mean, we don't. It's well, it's the investment is around in total around seven hundred million, we expect, into the biofuels joint venture project with ST1. So that's the investment. We don't give a forecast of the profitability of all investments, but we expect this to have a good return and good payback. But it will come. It won't come before 2023 is the first year that we expect operations to be running. So it won't come. The profitability will come, obviously, when when the operations are up and running. So I think that's about all I can give for the time being.

OK, and on that same same topic, what kind of a capital return requirements do you have in general when you are considering growth projects?

Maybe I can start again, but we don't have one number that we say in every project must have a 15 percent return tick under 15 percent cross. It's not that simple. I think we look across a profile of the risk involved in the project, how long term the the the business, the businesses and the forecast is. And so I think I mean, if you take the energy project we just mentioned, for example, there we would have a higher demand on return because we want to have a quicker payback on those types of projects. When it's a long term asset like a forest asset, then then we don't have the same view on on return and we don't have the same view on risk either. So it depends. I think I think we we need to get a good a good return based on the profile of risk.

OK. Good. And then just finally coming back to the container board markets, you said that the demand continues to be good. Is there any any particular end use segments you could point to? I mean, for example, do you continue to see e-commerce being strong? Is it the industrial part of the end use that is driving it or any any color on that front would be great?

I mean, we know that e-commerce has increased substantially during the pandemic and I think that will it's a changed pattern. So that will remain also going forward, I think. And I mean, if you compare with the first second phase of the pandemic, industry is up and running nowadays, even if they are. Yeah, some of them struggle with the supply chains, but still it's a good pace in the industry just now. So I think it's a combination on in different areas. So it's I mean, container board and packaging just now seems to be very strong. And and and also in combination, as I said, I mean, you have in some areas problems to get access to OCC and and you have increasing energy prices and things like that. So that will also push and push prices, I think, for a while. That's something to be more. No, I think. Okay, good.

Thank you very much. Those were my questions.

Thank you. Thank you very much. And Maria, we don't have any further questions, do we?

There are no further questions at this time. Please continue. Thank

you. And then that concludes our presentation of the third quarter results. And welcome back for the presentation of the fourth quarter results. Thank you very much.