BillerudKorsnäs AB (publ)

Thank you, Lena. Good morning, ladies and gentlemen. I'm here with Eva, and we start with a short presentation. Let me give you first of all an introduction. I think this was a very strange quarter. We had the best quarter in our history when it comes to the financial performance. We had probably one of the most difficult operating quarters when it comes to the environment in which we are operating, be it on the production or be it on the sales and logistics and customer service side. And then we have clearly a very tragic first quarter when you think about the overall environment, in particular the war in the Ukraine. So when it comes to the business side, you have seen our results. Net sales grew by 13%, which was very good, both in carton board and paper products, very good performance. We have an all-time high EBITDA at 22 percent margin. And price impact and mixed improvement offset most of our cost or all of our cost inflation in the first quarter. This was the first quarter where we basically really fully worked on our strategy. And some of the financial results that you have seen in the quarter are reflecting that. But in addition to that, we also had the opportunity to close our Verso acquisition. We closed that on the 31st of March. And we signed a memorandum of understanding with our partner, Vikenskog, to explore the opportunity of pulp production in Norway. And these two events, more focused on the strategy, are basically addressing the prioritization about carton board, the prioritization about North America and building a very good business there, and also our aim to find new sources in wood supply and widen our opportunities to buy both pulp and wood. So overall, very good quarter, very difficult environment in terms of operations. Everything that the war is now basically having an impact on Europe is in addition to what you have seen before with Corona. Logistics has further tightened. Prices of raw materials, in particular chemicals, mainly driven by energy prices, are very significantly on the rise. And also wood supply is starting to get expensive because of the closure of the border to Russia. Eva will tell you a little bit more in detail on our results, and then I will come back to talk to you a little bit about the different projects on the strategic side before we go into Q&A. So, Eva, please, over to you.

Thank you, Christoph, and good morning, everyone. Starting with some coordinates on our net sales performance. As Christoph alluded to, it's really been an excellent quarter. double-digit growth and continued a nice trend we've seen for the past quarters. We're up 13% versus a year ago and 11% than adjusting for any FX impact. Pricing is by far the biggest building block and we added more than 300 million or approximately 5% of incremental pricing versus previous quarter. So that's Q4 21. And we do see pricing activity on pretty much all the categories in our portfolio. We also have a sizable help from driving profitable mix. And we really found our stride in optimizing the board sites in particular. And that was one of the main objectives behind our 7 investment, as many of you remember. Small negative impact on ,, which is now still sitting in our base for some quarters, pulls our comparison down by 2 percentage point. If you look at our categories, And where that performance is all about, the growth is coming broad-based, particularly strong this quarter has been from Carton Board, Container Board, and SAC. So if we move over to the profitability bridge, I would definitely say it's been a sensational quarter in terms of profit delivery. We have all-time high EBITDA for the company, and actually with quite some distance. 22% margin reported, 24% then adjusted for annual stop timing is something that we are extremely pleased with. It continues focused on price management and driving profitable mix that are the two biggest building blocks. And we partly talked that already in our net sales bridge. There's probably also one more comment on we're really finding now the rhythm within product area board with portfolio optimization between Gruve, Gävle and Trövi. This has been enabled by KM7 and had a really good quarter across all of the sites. And this has been enabled by KM7 in particular. And we are super pleased with the performance this quarter across. We also had another good contribution from our cost and efficiency program. One of the main negative items on the chart is maybe not very surprisingly linked to cost inflation on different items. So 270 million versus a year ago. Some details on where that is coming from. Logistics, 135. Chemicals, 100. Fiber, 60. On the electricity, it's a slight positive as our hedging was extremely effective in Q1. And to the right, you will find that 80 million of the Grooven annual stop. was recorded in Q1, as the stop started last week of March, and the remaining part will be recorded when we come to Q2. So if we move on, and some further words about cost inflation and also going forward, this is, I know, a very big topic for pretty much all the industries at the moment. So quarter over quarter, and that means for us now Q1 versus Q4, The cost inflation was actually quite limited. It's roughly minus 40 million or 40 million cost increase in total. We've seen increases for logistics, 35 million. Chemicals is more up, it's 70. We also seen fiber or the wood purchase starting to move with 35 million. Most of this has then been offset very effectively to our energy and electricity hedging. that has given us a hope of approximately 100 million, and that is in Q1 versus Q4. And for Q2, the situation will start to accelerate, and we will hit harder of the cost inflation in Q2. We can pretty much say that with the insights we have on the contracts, we know pretty well on how the situation will end. We do expect the quarter over quarter, so that will be Q2 versus Q1, to land in the area of 250 million. There's two major items, so the biggest item, which is fiber or the wood purchase of 90 million, chemicals of also 90, in particular the caustic soda. Pricing are accelerating hard. We would see further increases of logistics between 30 and 40. And energy, we also expect a minor hurt, 10, 15 million. if the current spot prices we've seen now in April will continue. Now, as it also states in the heading, we are looking to offset all of that cost inflation coming our way in Q2 with incremental pricing and focused on continued profitable mix. And we are adding another 44% of incremental pricing in the quarter. So we should have another good quarter in terms of financial delivery when we close our Q2. Moving on to some words on cash flow and some coordinates around our balance sheet. It's another quarter with positive results. And our excellent EBITDA result is certainly a good starting point. We've had a bigger working capital hurt this quarter versus what we've seen over the past quarter. A couple of reasons for that. One is that we have returned our inventory level to a bit more normalized level, including safety stock being on the low side in certain categories. There have also been some phasing on the payables between the quarters, and particularly there were quite some invoices being paid in the beginning of the quarter. So at least part of this working capital increase that we've seen now for the quarter are not something we would expect fully going forward. Now, one item that has also increased in Q1, and we will expect to continue on the receivable side, that keeps going in line with pricing in particular and your positive momentum. And we probably would expect the receivable balance to keep going as our net sales is increasing at least for some more quarters. Next step to adjusted EBITDA ratio moves to 2.3 post the transaction of Verso. Do keep in mind that that ratio excludes any EBITDA contribution from Verso. So we will certainly expect this ratio to come down over the coming quarters. If we move to the left side, sorry, left bottom side of this slide, you would get a little bit update on the CapEx outlook for 22. And here we talk for the time being excluding Verso. Base capex relatively unchanged of 1.5. We have done a small adjustment on the survey, recovery boiler project and move that up to 1.1 billion. Please keep in mind that this is purely timing between 2022 and 2023. There is no change to the overall project frame that has been communicated earlier. So with that, I hand it back to Christoph.

Okay. So the next slide is more of a placeholder. You all know our strategy. And on the commercial side, you know that we are focusing on carton boards. We see that as a major growth engine. We have identified North America as one of the key growth markets. We will pursue all good select opportunities and look at packaging board. and our focus is really on added value when it comes to the second craft market. In operations, just to remind you, organically we have the opportunity to grow OEE over the next foreseeable future, about 2025, 2026, and we'll continue to optimize our footprint and to some extent continue to renovate our current assets. When it comes to wood supply, as you're aware, with the European Union policies, with a different competitive move in the market, we have a relatively tight wood supply in Scandinavia or, say, Northern Europe in general, a little bit exasperated now with the war in the Ukraine, but definitely we're also looking to widen our sourcing opportunities for wood. So, the next few slides are really about bringing the context of what we have achieved on the strategy going forward. As Ivo already alluded, we had a very good production quarter. Across all this, we had a record production in Gävle, very good production on KM7 in Grøven, and also Frövi has performed really, really well. And that basically this focus on the basics of our strategy is so important for us to deliver now over the next few years before new capacity with the transformations US comes on stream. We were very happy with the acquisition of Verso and now you have seen the quarterly results and you have seen the results of the fourth quarter. So we believe this acquisition fits our strategic perfectly. They're currently operating in two segments that are not part of our course. We added significant business to Billiwood-Kochness in graphic paper, speciality paper, and pulp. But generally speaking, as you can see the result of the first quarter of Verso, the business is performing really well after many years of restructuring before we bought it. I think, Eva, why don't you talk a little bit about the detail on Verso? This is just to give you a glimpse so that you understand what is to come. And I think there are always a little bit of skepticism sometimes about our ability to run this transformation. I'm absolutely convinced we will be very successful to conquer the carton board market. It is now our intention that we build up significant volumes. over time until the conversion is done, and then switch that production to our North American asset. We have already started the conversion work in the sense that we are at the concept stage. We will move into feasibility. And my expectation is that we have a very solid CapEx plan for this transformation in 2023. And by then, we can talk to you in much more detail how that will be executed. But generally speaking, I'm very pleased by how early we could close and also about the performance in the business as we speak today. And we will now continue our integration program. But in order to give you visibility, Eva, please take us a little bit through Verso, which is now called Billiard North America. And you will see that now quarter after quarter flowing into our numbers.

Good. No, I will certainly do so. Thank you, Christoph. And yeah, we've already mentioned, you see it from the top of the point, last hours of March, the deal was closed. And we're obviously delighted that we're able to get the support from the Verso shareholders and obtain all of the needed regulatory approvals a bit faster than expected. Yeah, given that the closing happened pretty much right before the quarter was closed. There's no P&L impact now in Q1, but certainly it will be from Q2 onwards. Purchase price of $798 million, FX rate of 926, meant that we landed quite close to 7.4 billion SEC. And it's pretty much a debt-free company we're taking over. Strong cash balance of 1.4 billion. Pretty much the only major debt item that we will take over is the pension liability. And you can see for yourself that is 900 million for the time being. We worked for some weeks with the purchase price allocation exercise. We have reached what we call the preliminary completion. Analysis has gone well and confirmed to almost the full extent the purchase price allocation. consideration meeting the net value of acquired assets and liabilities. We're probably also going to talk about some potential small tweaks on that for the coming quarters, but we are in good shape on that exercise in general. In terms of the conversion project, there's not so much new news from what we already talked and communicated. We will be starting up concept studies during Q2 and moving to pre-feasibility second half of the year. And we do expect to be able to bring more details on timing, potential CapEx phasing, et cetera, after the feasibility is reaching its conclusion, and we will be in the beginning of 2023. Right, so if we move over to some further coordinates on the Q1 versus performance, I mean, not only are we taking over a pretty much debt-free company, It's also profitable and generates cash, which is excellent news. And pretty much as the BK performance for Q1, it has been an excellent quarter also for Verso. Net sales up by 13%, double-digit growth across all categories. Profitability is very strong with pricing and driving mix more than offsetting cost inflation. Now, one comment to the EBITDA result, and particularly the 25% you see on the screen. This is per US GAAP. And we do expect, when consolidating RORSO into BK from Q2 numbers, that this number is typically taken down by three percentage points to comply to the accounting standard we use, which is IFRS. The main difference is mainly related to treatment of pension plan return and handling of some smaller leasing amounts. But please take that into account when doing some kind of comparison on the profitability level as we see it now. But in general, extremely pleased with the Verso Q1 performance that was now reported. Right, so moving into... Some more items on Q2 and probably some coordinates also for the rest of the year. We would expect a very similar story for Verso for Q2 as we have already talked about for bill of coarseness. Continued strong market condition are expected and focus on price management. Driving the mix would be expected to offset the inflation. If you go into then Q3, both sides are planned to have their annual stops or the maintenance stops during the quarter and there are some differences between the sides i'd like to comment on this canaba downtime is pretty close to what we have seen and are seeing in our nordic based sites it's going to be a downtime of eight days and a estimated impact of 180 million, which is, again, pretty much in line with what we also see in our current sizable Nordic mills. Now, for Queenie's sake, and this amount probably stands out a bit bigger than maybe at first sight you would expect, but this is what I would explain is a normal annual stop in combination with some of the more significant mill upgrades that have been done since the site was built mid-1980s. And at this time, for 22, the paper machine is expected to be down for 14 days, with the recovery boiler planned to be down for 37 days. Some of the key items would include a power infrastructure upgrade, digester top replacement, recovery boiler lower furnace, and different upgrades on the paper machine. So this is a bit of exceptional in nature. And it's got a pretty big event, naturally, for Verso 4 for 2022. And going forward into next year, you would expect Quinnisec to have more of a normal 7 to 10 days downtime schedule, as we currently also see in the Nordic. Another item in Q2 as a one-off, we would expect 150 million one-off negative impact. This is related to the inventory step-up and as a consequence from our PPA analysis. Depreciation going forward, we would expect it to be roughly 200 million from Q2 and onwards. Could be that there's some changes down the line, but we are, for now, this is the number that we are guiding on. And then capex for the remainder of the year, 700 million is what we expect for Q2 to Q4. That obviously includes the items that are listed under the longer than usual QINISEC maintenance stop. A more normalized annual capex number for Billiard in North America will be in the range to 450 million SEC. But we will come back to that when you're getting closer to 2023 and what we expect. So with that, I hand it back to Christoph.

Thank you, Eva. So another very exciting project that we announced during the quarter was basically our Memorandum of Understanding with Vikenskog. We have worked together for quite some time to understand whether a partnership with Vikenskog could be an alternative for us and also for them, and came to the conclusion that they are sitting in a very good woodbasket in the south of Norway. It's relatively close to our gruven mill. It's connected by sea. It's connected by rail. And the idea was that we would together build a pulp mill and be at the same time the owner, but also the buyer of that pulp. And in addition to create additional wood flows from Wieckenskog into the operation of Billerud-Kurschness. This is a very exciting project. It's based on the Fulham in the Fulham area, and it's the plant that I think was built by Norske Skog about 25-30 years ago. And we see a very good opportunity for relatively low capex per ton to develop one of these BTCMT production sites in Norway. The feasibility study is basically ongoing now and will complete in the first half of 2023, by which then we will decide if this project goes ahead, and then basically we're negotiating at the same time a joint venture, which will then be born, so to say, with the finalization of the feasibility study. For us, this would mean over time an investment of around 600 to 800 million. That is to be defined. But in view, if you calculate in CapEx per ton, it's very profitable. And as I mentioned to you before, also the same as we do with Billuit North America, there's an opportunity of multiple steps in terms of capacity. And therefore, it will allow us a high degree of flexibility going forward. So I'm very happy about this. And this is fully in line with our, as I mentioned before, our wood supply strategy to basically widen the sources of wood that we can rely on. Moving forward, a very quick update. I mentioned it in terms of the renovation and improvement of our existing footprint, which is the recovery boiler project in Frövi. Everything is proceeding to plan. despite all the disruption in logistics and raw materials and things like that. So we are very happy. It's hard work to get all the things aligned. But for the moment, we are definitely on time and on budget to deliver to the end of 2023. Good. Having said that, let's go in our outlook Q2. It's, I think... Q2 is pretty certain that we will offset with pricing and mix all the cost increases that are coming. And that is because, you know, on the price side, you know, we know what's coming on the cost side. We also know what's coming because we have contracts and things like that. But clearly the situation for the second half is very, very uncertain. And it's not even that I don't tell you what my beliefs are. It's just it's very hard to predict. I can give you a little bit of the drivers that we are seeing, which will be balanced out one way or the other. So the first one, I think we all believe that raw material will continue to increase, because we don't expect, even if the war was over in the Ukraine now, that the Russian border would be open for wood supply. So the wood scarcity, to some extent, or the relative scarcity, will continue and will have effect on pricing. When you look at energy prices, the same scenario applies. It is very unlikely that the borders for energy will be open from day one, and therefore we continue to expect rising prices for chemicals and all high energy derived raw materials that we use in our production. The next step is that We still believe that the transport disruption, so logistics, be it just in Europe or also overseas, will continue to be disrupted. You have seen the closure of Shanghai with COVID. COVID has not gone away. So that will be disrupting transport into Asia. You have seen the scarcity of logistics even prior to the war. was bad, and now it has been even increased with basically Russian transport being banned from European Union, but also a lot of Ukrainian drivers going back home to defend their country. And then on top of that, you have still the issues that we have faced in quarter one and successfully mastered, that sometimes we're not just talking about scarcity and prices. We are actually talking sometimes about inability to deliver. certain raw materials which are essential for our production. And these challenges, I think, makes a forecast for the second half very, very difficult. And therefore, we would like to say to you, look, we aim at finishing a very good 2022, but don't take quarter two and quarter one as basically a forward projection of what will come in the second part of the year. What we will continue to do, our priorities are very simple for the coming year and a half, two years. It is really delivering 2022 as best as we can and 2023 the same. And this is true for the Billerud-Kochness business in Europe and rest of the world, but also for the business in North America, of Billerud, North America. The challenges of cost inflation and prices and mix are basically very similar, even if it's in slightly different segments. And that is really the bread and butter of our operation. The second part, clearly we have started, is now the integration between the two companies. We are very happy to have kept the majority of the management in North America, who are very experienced and qualified people. This also, as you know, creates a lot of stability with the wider population of our new colleagues who are working in Billywood, North America. And therefore, there's not much disruption by this acquisition in the operations over there, which I think is very good. We will now start to work on systems and consolidation and integration. And as Eva already mentioned, GAP versus ISFR and all these type of things. And I think by the end of the year, I think the visible part of that will be achieved. And by the end of the year, sorry, and then there will be further integration, which are much more structural like IT, et cetera, which will follow on. The third priority is clearly our transformation project, which we have already mentioned. So we go now into concept phase. We go into pre-feasibility. We will have a CAPEX by 2023, Eva mentioned at the beginning. I think that could be the first half of 2023 because we want to do a good job understanding really the cost. And as you know, with the uncertainty around and the war with Russia and Ukraine, we need to make sure that we have all the right estimates for that CAPEX and the planning for implementation. But at this stage, our intention is still that we have one of the mills up and running in carton board, one of the machines by the end of 2025, beginning of 2026. Good. I think we stop here. As you know, you will now ask question and in one breath give us three and a go. So I would really appreciate you can ask two questions, but please ask them one by one. We answer one and then you ask another one. That's all fair. Otherwise, it will be difficult for us to remember. But I'm very happy to look forward. I'm now looking forward to your questions. And thank you very much for your attention during this presentation.

Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound hash key. Once again, start on one if you would like to ask a question. Your first question today comes from Robin Santavirta from Carnegie. Please go ahead. Your line is open.

Yes, thank you very much. And congratulations for a strong quarter in Q1. Now, surely the pricing outlook is strong short term as well as you mentioned earlier. My question, the first one is related to wood, raw material availability and pricing outlook in Sweden and perhaps especially in the Baltics, given the shot of the Russian borders. What do you see? You give, thank you very much for that, a quite detailed outlook for Q2. What do you see sort of going ahead from that? Number two, you have now had time to take a bit of a closer look at the two mills overseas, Quinnisec and Escanaba. How well invested are these mills? Versa had some financial troubles a few years back. Now you come out with quite significant maintenance shots and cost investments related to them. Are these mills well invested or not? Could you share some details on that? And finally, that conversion topics of $9 billion, what is the outlook of that? We see quite significant inflation now. If we listen to Andre's voice or the equipment manufacturer, we see some companies pulling investment plans given the significant inflation. Could you share some information about the outlook on the transformation complex? So, Doshri, thank you very much.

Okay. Maybe on the wood price, let me start about the general context, and then, Iva, if you want to answer on the prices itself. I will talk about the mills and then the outlook on capex. Okay, look, there's about 15 million cubics of wood coming from Russia into Finland, of which one-third is hardwood and two-thirds are softwood. And by closing the border, this created clearly a gap in the market in Finland, and then Finland turned around and looked at Sweden and at Baltics, and so that is the mechanism. Why the prices? So we had 80,000 cubic of Russian wood planned for this year. We have canceled that and are not using any Russian woods in our operations. But clearly we have seen now some price increases at the end of the quarter one coming already through in Sweden and also an acceleration of pricing in the Baltic states. So we think that this trend will uh... you know clearly not stop immediately because as i said the war in in the ukraine would basically and the sanction on russia will will not go away from one day off the other even if the war hopefully would stop as soon as possible uh... and therefore we expect some inflation on wood do you want to talk a little bit about the impact that these would inflate would happen i see the police yeah i can do that and good morning robin uh...

I think in particular the hardwood where the situation is a bit more tight. I can say, and I think you also observed the same, that there is list price increases now coming across on several rounds even. You also know that we are one of the few players who have a pretty large portfolio of buying positions, so we try to maneuver this as good as we can. But I think the overall story is that on softwood it's still pretty good availability. But again, it's a hardwood. It's tight. And I don't think necessarily the market has found its full balance yet. Currently, what we're seeing is that there is a 40 sec per cubic meter increase coming our way. And it's with some time lag, as you know, probably going to start hitting us during Q2 into Q3. But I certainly would expect a couple of more list price increases on top of that when we're coming into Q3. But again, impact is much harder on the hardwood versus softwood.

Okay, thank you. Okay, let me go to your second question. So I think that the mills in North America, generally speaking, are well invested. The big investment or the big outage now in Quinisec is really an upgrade of the mill, which will have some further improvement on productivity and on cost. And this outage was basically always planned. So we knew about it and we knew that this would be a big outage. But it is a very profitable investment of the CapEx into that mill. Both mills, as you know, are the cost leaders in North America. And if you look at graphic paper and decline, they will be the last man standing, so to say. And I think that's a very good strategy in order to make sure that they continue to work on lowest cost and best productivity. And therefore, there is no particular comments other than that the investment into our transformation project will basically not be focused on renovating some of these assets, but we'll go into making these assets fit for our purpose, i.e., creating a very good carton board business in North America in general and in particular in the U.S. When it comes to the CAPEX outlook, I mean, that is so far away that it's just a black hole. So my perspective is we will now go into feasibility and we will do the concept, we do the pre-feasibility, we do the feasibility. We all know that energy prices will not stay at that level forever. We all know that steel prices will not stay at that level forever. And the time that we are ready with our CAPEX, we will know what then the implications are. So I think it's very hard to comment on that. And I think when we are ready and our board has agreed to the CAPEX of the transformation, then we will come back to you to talk about that. One other thing to keep in mind, we have a very strong market in the U.S., and actually as long as we do the project and the machines are running, we will deliver cash flow, which is the key advantage of having bought a business which is actually a good business delivering cash flow rather than an idle mill or a green field or any other things. where you first invest a lot of money in it, and during that time you don't profit from the cash flow of the existing business. Thank you, Robin.

I understand. Thank you very much.

Thank you. Your next question comes from the line of Linus Larson from SEB. Please go ahead. Your line is open.

Thank you, and good morning to all. Please let me continue on. CAPEX, you outlined pretty well what you expect for 2022, but to the extent that you have visibility, could you also give some more color on 2023? I understand if you don't want to comment on the transformation CAPEX at Verso, but maybe if you could clarify the base CAPEX at Billerud and the base CAPEX at at Verso plus your own, let's call it, Swedish operations expansion capex.

Do you want to take that, Ivo, or should I start?

No, no, I'm happy to do that. Good morning, Linus. Good morning, Linus. I think we go back to what we also presented in the Capital Market Day back in the fall of 21, where we did mention that we will invest a bit more on some of our Nordic sites. And I think we quoted an interval of base capex of 1.5, 1.7. That's still, I think, the best number I can give for 2023. We will come back in second half with a little bit more accurate number. But I will probably use the 1.5, 1.7 for now. We would expect 900 million for the Frövi solar recovery boiler project. And I think I just went through for the bill with US, probably somewhere between 400 and 550 is the best number we have for the time being. Now, I think, yeah, you also mentioned that this is excluding any potential startup we might have on the conversion case, but it's too early to say. I think it is also then excluding potential anything we might do in the weekend project if that will become a reality and we decide to go forward. But hopefully that helps.

Also, I think I just want to add a little bit to that. Billerud North America has currently a very different strategy to the Swedish mills, how they do their maintenance over the years. So as you know, Linus, in Sweden, we tend to have one week, 10 days or something where we shut the factory, do all the maintenance, and then start up again. In the U.S., they do that slightly different. They have operating permits of two years for the recovery boiler, so they stop them every second year. And for the machines, actually, they do major maintenance every four years. And if the recovery boiler just stops for a couple of weeks, then they would continue to produce paper based on the pulp that they have, you know, in reserve. So it's a very slightly different way of operating. And I think 2022, this just happens to be a heavy year with a big stop in Quinnisec and also the upgrade of Quinnisec. And then you will see 2023 is not a regular thing, but it will be lower at one year and then a little bit higher on another year. It's just a different way of doing it. And they have been very successful with that in order to maintain the mills. So there's no reason at this stage to believe that their strategy should change.

Great. And then on shipments, if you could just explain a little bit on the volume development. You had a fantastic quarter, you said, production-wise, yet shipments were down 8% year-on-year in the first quarter. And you touched upon it with regards to beaten, but if you could maybe explain a bit more why volumes were down both in board and paper in the first quarter year-on-year.

Yeah, no, it's a good question. Let me start, and then maybe Christoph jumps in. I think there's a couple of things in particular on paperboard where last year we actually got rid of a lot of, I wouldn't call it scrap, but it's certainly secondary items from the KM7 ramp-up. And we didn't do this this year. This year was solely focused on the very high percentage of primary good value products. So that's part of it. I think in general, though, we see, and this is a pretty big change from how it was a year ago, delivery times takes longer. We have a 25,000, 30,000 ton estimated of, let's say, more product good in transit on its way for longer delivery time to the customer. And I think if you're just for those two items, those are by far the biggest that would explain a lot of the delta gap on the volume.

And the other part, Linus, is that you remember we were very low on some safety stocks, in particular in liquid packaging board after the explosion in Järvle and after the rain, you know, this basic big flooding in Järvle. And we are basically building these stocks back. So I think all in all, that explains, you know, the delta between volume growth and value growth plus the price increases. Okay.

Just one final housekeeping question you mentioned on, well, first of all, you said you've done a preliminary purchase price allocation analysis, and then you also say from Q2 onward, you expect additional 200 million of depreciation from the Versa acquisition. Just to get things right here, is that DNA altogether increase? I mean, does this also reflect the potential... increases in amortization relating to the acquisition?

Yeah, no, I think absolutely. And it's a bit of an estimate. I think we, as I said, it was a preliminary completion. So there's still some items that we expect to, you know, get a bit more familiarized with over the coming quarters. But, you know, the 200 million per quarter is definitely an estimate now taking into account what we know. after the PPA exercise we've completed so far. And there might be some small fine-tuning of that number, and then we will come back in due time.

Great. Thanks for clarifying. Thank you very much.

Thank you. Your next question comes from the line of Johannes Grunzelius from DMV. Please go ahead. Your line is open.

Yes, hello, everyone. It's Johannes here. I have a follow-up here on... Linus questions about shipments being down quite a lot year over year, but you're indicating a production is, I don't know if I should interpret that to be flat or even up year over year. But my question is, what about if you would sort of ship out what you produced? Could you give us perhaps an indication what that would have meant for your P&L? Because I gather that the positive effect on the P&L comes with shipments rather than production. Thank you.

Hey, Johannes, good morning. Hey, that's very speculative. We have an increase in production, okay? I think it's around 1% to 2%. And as we said, it goes into stock, and you don't see it in the P&L because of delayed shipment. But it's entirely speculative. I would say, well, if we would have sold that, we'd have gone more. You cannot underestimate the challenge, which I think we succeed in quite okay right now. to get the logistics right from our factory to the end user of our products. And this situation has incredibly tightened or has become more difficult with the war because, as you know, you have a number of Russian trucks, you have a number of Ukrainian trucks. The Russian trucks are banned. The Ukrainian drivers went home to fight the war. And that has basically exasperated the situation even more than before. So that's the situation, and I think the only point I can make on top of that is to say, well, everything which is on the road will at some stage reach our customers, and we will then book the sales and the profits as soon as it hits their factory gates. Okay, okay.

That's good to know, and thanks for that clarification. And I was also wondering... what your interpretation is about Russian paper exports that normally comes to Europe, which I suppose is more or less zero at the moment. You mentioned brown sack paper as one of the grades being hit here in the report. Could you maybe give some color on that and which other grades that you are involved in are mainly sort of impacted on the supply side here?

Yeah. Maybe let me give you some color here because it looks like that how we have a prioritization growth in carton board and then suddenly second craft is exploding and that's all good. Basically there are two effects. The first effect that takes the scenario 21-22 is that clearly in second craft we have some longer term contracts in particular with the cement industry and there's an annual price increase and this annual price increases on the 1st of January and therefore second craft has benefited basically, has suffered in 21 and now basically gets the benefit back in 22. So that's one. The other part, you're absolutely right. So there is no paper export anymore from Russia into the European Union. Prices are going up. The market is very hot. We all know that this is a very short-term effect. The underlining trend remains good, i.e. e-commerce, all these type of things moving from plastic away to paper packaging. That trend is still there. But I think what we see today is entirely a very, very short-term effect because of the lack of, I think it's around 80,000 tons of craft paper, which would normally be in the European Union available for packaging material. And that will not be able to replace so easily by the European producers. A, because they're struggling with incredibly high energy prices and high pulp prices if they're non-integrated. And for those who are integrated, well, they have the capacity they have. And when it comes to us, very specifically, clearly the strike of UPM in Finland hasn't helped us to cover some of this volume. So whatever production we have lost, we have tried to continue to work on pulp. but whatever we have lost out of the strike in UPM is gone. Now we are back in full production also in Finland, but the situation based on the Russian closing of the border is basically driving this incredibly high price rise.

Okay, that's helpful. Thank you.

Thank you. Your next question comes from the line of Christian Kupfer from Handelsbanken. Please go ahead. Your line is open.

Yeah, thanks, operator. Just a few follow-ups from my side. First on Verso. And sorry if you mentioned it. Maybe I missed it. But did you say how much deliveries you had in Verso for the first quarter?

I mean, we went through the Q1 result, and we talked about roughly 3 billion of net sales. So that dollar went through.

Yeah, I know, but how many deliveries? How much the shipments were? In tons?

Yeah.

In U.S., non-metric tons?

Exactly. I think we can follow up with... No, no, no. Do you have it? Yeah, I do. It was roughly 300,000 tons.

Okay, that's right. And also, you have guided for the maintenance stop in Verso for this year. How much was it for last year in Verso, and which quarter did they appear in?

I don't think we want to go into that. I think it's quite well stated into their previous quarterly report.

Okay. And then finally for Q2, if you can mention how much cash is left to be spent on the acquisition.

Yes, we will probably not expect too much. I guess now you're talking about a cash out impact, are you, Christian?

Yeah, exactly. Okay.

Yeah, we would expect, I think, an area of 300 million.

Okay, that's great. Thank you very much.

Thank you, Christian.

Thank you. Your next question comes from the line of Oskar Lid, Danske Bank. Please go ahead. Your line is open.

Hi, this is Oskar Lindström. I have a question about wood sourcing. I mean, you're guiding for tighter wood markets resulting in likely rising costs in the coming quarters. Do you also see a risk for actual supply issues like there were a couple of years ago? And so what share of your wood purchases are on sort of longer-term contracts versus more spot or near-term contracts. Yeah, that's my first question.

Okay. Hi, Oscar. Good morning, Oscar. So let me say, so we don't see any wood shortages at this stage. What we see is that basically hardwood clearly is more impacted than softwood, and softwood price increases went through as well because of some substitution effects between those. But I do not think we are in front of a supply shortage in the sense of we wouldn't get the wood. That is not the problem. I think what we are seeing is that forest owner and also the large companies have now increased their prices and that effect will trickle through the market but there is supply security on the ground, so that is not such an issue at this stage. Eva, do you want to add something on contracts?

No, not really. I mean, as you know, Oscar, we have a pretty large basket of different suppliers, and I think with the pricing mechanism, that's more of a contractual part per se. No, and I can just concur with what Christophe mentioned. There is still pretty good availability on the softwood, so that looks to be less of a challenge. Hardwood, for the time being, is tight but manageable. So for the time being, at least, we feel all right. But no doubt, hardwood is getting tighter.

All right. Thank you. My second question is on carton board and the carton board market. I mean, we're seeing a lot of capacity additions, you know, the pipeline and also being announced in carton board from your Nordic peers. To what extent does this new capacity give you concern? Do you think that the market can swallow the new capacity?

Oscar, if we had the double capacity, we would still sell it for you sometimes. So I think the market has been so short and this has to do by, as I said, the underlining trends, a recyclability that has to do with the fact that e-commerce is moving into much more carton and paper and whatever you have. It has to do with the fact that all brand owners switching over from plastic. So the underlining market situation for carton board is excellent. And I think the capacity increases we have seen so far are basically covering just the shortage of some what exists in the market. And therefore, that's a good thing because it will stabilize the market a little bit better. When you look at our situation, we still have incredibly long order books and we don't see the end of it. And what we see, however, is that in certain areas, if prices continues to rise, that brand owners will look for alternatives in packaging materials. Maybe not, I mean, it goes even from, you probably remember the times where toothpaste was in a carton board package, okay, where they then decide to get rid of these type of packaging because the prices are totally inacceptable. So I'm more worried, or not worried, I'm more worried that, or I think I see more an end to the price increases because it will, ultimately then lead to a demand decline. But I think the added capacity is not something we are worried about.

So you see sort of a structural increase in demand.

Exactly. Exactly.

More than offsetting this.

Exactly. And then you have the ups and downs because of market disruptions like Corona, like other things. But the underlining trend in carton board is very, very good. I think paper is still under pressure because of the conversion opportunities from newsprint into packaging paper. But on the carton board side, that's clearly a totally different thing. I must admit, I'm very sorry, we arrive at 10 o'clock, so I suggest one more question and then we stop here.

There are currently no further questions, sir.

Perfect. Hey, guys, you're so well organized. So thank you, everyone, for today, for joining our call and the key questions that you have. Looking forward to speak to you in quarter two. And as you know, the forecast becomes better as the future moves closer, so we can tell you probably a bit more about H2. as we get to the quarter two results. So I'm looking forward to speak to you then. And in the meanwhile, all the best of success in your endeavors. Thank you.