BillerudKorsnäs AB (publ)

Good day and thank you for standing by. Welcome to the Billerwood Q4 Report 2024 webcast and conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session. To ask a question during the session you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lena Chatawa, Head of Investor Relations. Please go ahead.

Good morning and welcome to this presentation of Billerud's fourth quarter and full year results for 2024. The presentation will be held by Billerud's President and CEO, Iva Vatnes, and our CFO, Andrei Kvist. Afterwards, there will be a Q&A session. So by that, we would like to get started. So over to you, Ivan.

Thank you, Lena. And good morning, everyone. And thanks for listening in. We are excited to present another solid quarter for Billerud and some concluding remarks for 2024. So let's get into it. And next slide, please. Now trying to summarize 2024 in a simple manner is not easy. It has been a year with several twists and turns. And also for 2024, much of the year was in essence about navigating through uncertain and difficult market conditions. Having said that, 2024 landed clearly better versus 2023. It's also been a year with different realities between the two regions. A region, North America, has had another very solid year and delivered consistently strong results. Tail-winding of a strong performing U.S. economy. It's in particular impressive to see our North American result when we keep in mind the operating rates are still below 70%. Our Europe region has experienced more challenging conditions with relatively slow consumer demand for many of our categories and all-time high costs on portfolio. In terms of the financials, I am satisfied with improved results we see on several fronts. We end the year with 5% net sales growth and significantly improved profitability. We have a strong balance sheet. and will proceed to the AGM with a dividend proposal of 350 sec per share. That is in line with our dividend policy and is up 75% versus a year ago. Next slide, please. And for our quarter four, it was another period of robust financial performance, enabling us to end 2024 on a good note. We recorded plus 20% net sales growth, plus 18% organic and currency neutral. And encouragingly, the top line growth is broad-based, stemming from both regions and across most categories. The profitability improvement is significant. 13% adjusted EBITDA for the quarter, which is 5 percentage points up versus last year. North America continues to impress us and delivered again a wonderful quarter. Its best profitability performance in almost two years with an EBITDA margin of 19%. It's also good to see a region, Europe, which suffers from more soft market conditions, delivered a clear profitability uplift versus a year ago. Strong cash flow conversion in the corner, meaning we end up with a net debt leverage of one time EBITDA, which is the lowest ratio we've had in quite a bit of time. So next slide, please, and over to some comments about market condition and sentiment. Q4 turned out to be a bit better than we had expected. In fact, we managed to Q4 with strong volume delivery, particularly for region Europe. Most of our channels and categories are operating on the close to normalized conditions with the only notable exception being consumer and luxury. And for us, that means carton board and coated liner. They are suffering from weaker conditions with plenty of supply out there and in general, weak consumer demand. Now, going into 2025, There are reasons to believe we passed the bottom of the curve and we are seeing some signs of improved marketing conditions. As we had anticipated for Q1, we will have a positive net pricing impact from a substantial and needed price increase for liquid packaging board, which is partly offset by price reduction on paper board and second craft paper. But positively, We have very recently announced price increases on both Container Board and SAC, which will help us from Q2 onwards. These come in addition to the price increase we also recently announced on quota-free sheet rolls in North America. We've also seen recently that pulp pricing is starting to come upwards again. We are more optimistic towards 2025 than we were three months ago, although I do want to stress the point that uncertainty is still high. So with that, I want to hand it over to André.

Thank you, Ivar, and good morning, everyone. So we've had a very strong sales growth in the fourth quarter. Volume and also mix were by far the biggest contributors. with volumes up by 6% in Europe and 15% in North America. We also had sizeable pricing impact of 5% and price increases in Europe standing for the most of it. For the full year, we had a sales growth of 5% with a volume growth of 3%. Next slide, please. And we almost doubled our EBTA versus last year. Also here, volume and also pricing as the main drivers. Our efficiency enhancement program had a solid contribution with 230 million, while we did have some input cost and also fixed cost headwinds versus a year ago. The raw material cost increase of 160 million was mostly from higher pulpwood prices in Europe, but offset to some extent by lower costs for other input materials. Our fixed cost increase is mainly due to higher operating rates in quarter four versus last year. And all in all, we had a robust profitability level with five percentage point margin improvement versus a year ago and pretty much in line with our quarter three level. Now, moving on to the regions. Next slide, please. Starting with region Europe, which had a solid sales growth across all categories, the quarter four volumes were better than expected, both versus last year and also quarter three. And I'm pleased with our pricing efforts that continue to offset the cost inflation on raw materials and the EBITDA improvement for the region. As expected, heading into the first quarter, we will see significant and needed price increases on our liquid packaging board segment, which will be partly offset by price declines in our paper board and second craft segments. And in total, we expect positive pricing impact of around 1% in the first quarter compared to the fourth. Sequentially into the first quarter, we also expect 30,000 to 60,000 tons lower sales volumes. There are really two major reasons. First of all, we did have very high pulp sales in the region in the fourth quarter, where we took pretty heavy inventory reductions. and we expect more normalized level for our pulp sales in the first quarter. And secondly, we also see some signs of high inventory levels within liquid packaging board, primarily in Asian markets, and hence expect somewhat slower start to the year, but that should only be temporary. On a positive note, we do see some areas where market sentiment and demand looks better, And we have announced price increases on container board grades and SAC paper, which will give positive impact from quarter two and onwards. Now, a couple of points on cost development for the region. Next slide, please. The input cost situation in Europe developed very much in line with our expectations, and we had a cost increase of around 120 million sequentially. Pulpwood costs and also seasonally higher energy costs were the main drivers. Our pulpwood cost increase in the quarter was a lag effect from the previous movements during the third quarter. And the price list remained stable in the quarter in the Nordics and actually slightly decreased in Baltics. And we now see that the pulpwood cost situation has stabilized. And note that we in general have high inventory levels of pulpwood in the Nordics. Heading into the first quarter, we see relatively stable cost situation with marginally higher fiber costs. And that is due to full impact from announced price list changes in the beginning of the fourth quarter. And we anticipate heading into the first quarter, a total negative impact of around 30 million on our input costs. And now over to region North America. As Ivar mentioned, North American region had a very strong finish to the year with double digit volume growth for paper segments and also highest EBITDA margin since beginning of 2023. Sequentially, volumes in North America were in line with the third quarter, and also the operating rates for our assets remained in line with the third quarter at 68%. So we do have more upside potential to utilize our capacity if the demand improves further. And as we've communicated at our capital markets day, Evolution towards paperboard production in North America will be the key priority for the region. And we have, during the last months, carried out numerous trials with our customers with promising results. And we're also close to commercializing paperboard grades in North America. We announced up to 5% price increase for our coated free sheet rolls. And that is approximately 60% of our total graphical sales in the region. This price increase will have a positive impact from quarter two and onwards. Last week, we also announced $80 per ton price increase on pulp. Also here, we expect impact from quarter two and onwards. Now, I'm sure there are a lot of questions around newly announced tariffs and impact on our North American business. As we see right now, the imposed tariffs on Canada, Mexico, and China can have some upside to our asset utilization, as there are meaningful imports of graphical paper from Canada. But we also source some of our input materials from Canada. primarily chemicals, and we are now looking for alternatives to mitigate the impact from the tariffs. We'll for sure provide more comments down the road as the situation evolves. Next slide, please. Couple of points on North American costs, and we continue to have very stable cost situation in the region, also in the fourth quarter. At this point, we do expect some cost headwinds into the first quarter with a total negative impact of 30 to 40 million, coming primarily from higher energy costs and also slight increase on our freight rates in the region. Next slide, please. Cash flow and working capital reduction has been in focus for us during the fourth quarter, and we delivered a solid cash conversion of 95%. For the full year, we did have some working capital buildup in support of higher sales. But with that said, our working capital in relation to sales is at healthy 10%. And this is what we target also going forward. Capital expenditures for the year landed somewhat below previous guidance at 2.4 billion, but that will spill over into 2025. So our guidance for 2025 is 3.5 billion in line with the capital allocation plan that we presented earlier at our capital markets day. The strategic capex in 2025 will be 1.3 billion and will be targeted to evolution towards paperboard production in North America. We have already started that work in 2024 and the project is proceeding well. The proposed dividend of 3.5 SEC per share for 2024 corresponds to a payout of approximately 900 million planned for May, and is comfortably cleared with our current leverage level. I'm encouraged to see that our return on capital employed improved to 7% in 24, and we are looking to strengthen the performance further in line with our new target of return on capital employed of about 11%. With that, I would like to hand it back to you, Ivar.

Thank you, André. Delivery of our efficiency enhancement program has been one of our highlights during 2024. And I'm particularly impressed how we've been able to maintain the momentum and engagement in typically the more difficult second year of these kind of programs. We've delivered 840 million during 24, a sizable over delivery versus our in-going target for the year. It also means that we are very close to our overall program ambition of 1.5 billion SEK. Well ahead of the schedule we thought we were going to need. We take great encouragement and confidence from the program with us going forward into a next phase and it will be an important building block for Region Europe in their task to strengthen financial performance. Next slide, please. Now, 2024 was an important year for another reason. We launched an updateability strategy our way forward. And I want to make a short recap of the choices we made and what we will focus on going forward. Safety is today and will continue to be our most important priority. They have an updated purpose, taking us on in many ways back to the core and focuses on what Billiard is great at, matching it with strong market opportunities. For Region North America, we are committed to graphic and speciality paper. However, graphic is in secular decline and we need something more. Hence, we will evolve gradually our portfolio towards paperboard and packaging materials. Region Europe will have a different task. Operating conditions are different, which lead our focus to be all about a strengthened financial performance through the existing asset base. We will steer towards developing a stronger performance culture in Belarus, and that will be necessary to successfully deliver on our strategic choices. And lastly, sustainability focus has always been instrumental for Billerud. And towards and into the next era, we aim to embed sustainability in everything we do. Next slide, please. So to round it up, we go into 2025 a bit more optimistic than we were some months ago, although uncertainty is still expected to remain high. Market condition North America is solid. in the wake of a well-performing U.S. economy, and they are very well-placed with local production in the attractive Midwest region. And we are starting to see some signs of improved marketing conditions in Europe, with the exception of carton board and corded liner, which at least for the moment remain weak. We continue to drive a discipline of focus of pricing and mixed actions to offset cost inflation, and that is expected to happen once again in Q1. And we have recently announced price increases in both regions on several categories, and that should help us from Q2 onwards. And lastly, as you heard from André, we will have reduced sales for Region Europe, first and foremost on liquid packaging board, but this should be considered only temporary or one-off in nature, and we should bounce back to a more normalized level in Q2. So with that, I hand it back to the operator for Q&A.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to our first question. One moment, please. And your first question today comes from the line of Ephraim Ravi from Citigroup. Please go ahead.

Thank you. So three questions. Firstly, on the macro, I get it that the 30-day pause in the tariffs on Canada from the U.S., but more broadly, have you changed your business configuration in North America in some way in anticipation of these tariffs? For example, building pulp inventory, increased boat production in anticipation of supply disruption, etc.? ? And secondly on that, on the operating rate below 70% in North America, again, I understand there is the transformation of the business happening, but then do you kind of expect to see the operating rates kind of hit 80% or above? And last question, on the efficiency improvement effects, so the full year 25 is probably somewhere between $40 million and $1.5 billion. So when you say early 25, you will hit that 1.5 billion level. Can you give us a sense of how early it would be for us to gauge the FI25 effect of efficiency improvements? Thank you.

Hi, good morning. Let's probably do a bit of a mixed bag between me and Andre. I'll start that, then maybe hand over to Andre on the second, and then I'll probably take the third. Now, listen, on the first one, I think... Yeah, it is a tough question to answer. I think we can all agree that things are moving on a relatively high pace at the moment. And we definitely try to follow a bit of a tight regime of what's happening instead of just what seems to be happening or what might happen. I think for the more obvious point on Canada and Mexico, The situation for us in North America is that with the exception on certain chemicals where Canada has a very important part of supplying the whole North American market. You know, we have a good way forward to find alternatives within the north of the US base. So we're not overly worried, but probably there will be, again, if the Canadian tariffs come into play now, it seems in a month or so, small cost inflation, but nothing that stresses out significantly. I think it's more on the commercial upside that we have our big potential play. You heard the 70% operating rights. That means we have free capacity pretty much starting today or tomorrow. And there are certain inflow of graphic paper, also speciality, even paper board from Canada into US. you know, us as a locally producer in an attractive Midwest, that should benefit us, everything else equal. We clearly would open, welcome with open arms any opportunities that comes our way but um i think we will just selectively try to maneuver what happens for now there's uh nothing that we change our configuration significantly uh nothing that really drives and and and clearly without getting into too much speculation if there would be tariffs also into uh towards eu that that's a much bigger play uh and that's also where the ramification uh would be bigger just because there's a strong outflow and inflow across the Atlantic. But nothing right now that we spend a lot of energy and focusing on since it can go different ways. Handing over to you, André, for the second point.

Good morning, Efrem. So on operating rates, I mean, we have operated at below 70% for 2024 now. And of course, I mean, this also creates a possibility for us to do the trials for the paperboard grades and the expansion we plan there. We certainly look to improve the operating rates into 2025. Now, either through better demand and more capacity utilized for production of graphical paper, or more importantly, into paperboard grades that we now anticipate to launch within short.

Yeah, and to the last point, so we have now pretty much all the COVID program deliverables or the building blocks in motion delivered. We will probably have a small COVID carryover impact or a full year impact into 2025. Nothing significant. It probably will be more in the 10 to 30 million quarter over quarter sequentially helped. in terms of what that tail is.

Thank you.

Thank you. Your next question comes from the line of Lars Schellberg from Stifel. Please go ahead.

Thank you. A couple of questions from me. Starting with your comments on sack and craft paper prices, that you called out being down in Q1 in your outlook. It's obviously not been recognized in the publications, but you're also talking about, you know, improving demand trends and price increases into Q2. So if you can put some color into that direction in Q1 and what you expect in Q2 and what, you know, the demand recovery there. On the European comments that you made about better than expected volumes, What segments were there in? Is that kind of linked into VX's inventory we're now seeing in Asia, i.e., an inventory build ahead of your price increases in LPB? Could that be one factor explaining that? And also, if you could comment on what you said about improving demand in container board and crowd planner, what you're seeing to back that up. Thank you.

Yeah. I think André will probably kick in also on the first question. I just also want to highlight on the pricing though that I think there has been a pricing pressure in Q4 in general that we've been able to withheld and we're seeing impact coming more into Q1. But please, over to you, André, on the first topic.

Good morning, Lars. Also, as we commented in our earnings call in quarter three, we were expecting some price impression. And this is what we really see holding up quarter four quite well. But we do see some price reductions within SAC and also within paper board into quarter one. Now, with the announced price increases that we commented on, we anticipate to revert that impact from quarter two now going forward.

So if I go into the next point on the European volumes, and yeah, I'll be honest enough to say that if we go back three months and conclude now, We were a bit surprised on how strong the volume delivery in Europe was in Q4. I think in particular towards the end of the year and also in December where there is several red days as part of the whole Christmas vacation this time around. But I think we've seen, again, a pretty good flow across the categories. I mean, second craft had a better quarter. We also had container board coming a bit better than we thought. As Andrea also mentioned, we did sell a significant amount of pulp from the inventory. That's not something necessarily we will do every quarter. But again, adding it all up and also see how strong December was, it was a bit of a surprise. I think... Backing it up into your third point of what we see, there is a certain question mark still on how strong the underlying demand really is. But in some sense, the best evidence for us is that our order books are strong now for the next month. In many ways, we have very high utilization for most of our machines in Europe until May. That's a very good sign. We just see good, you know, again, pool in particular industry has also been better now on SAC than maybe we thought some months ago. Container board is just coming in well. I mean, fluting is doing well and encoded line also has been surprisingly okay. Again, the exception we're seeing is within yeah, luxury and more premiums or carton board and coated liner, that's still pretty weak. And I think it's something I also referred to earlier that is a bit of a portion of hope and maybe some analysis that it should ideally start to improve towards the summer when interest level are very likely falling and we should get a bit more consumer confidence and fail up the loose item.

Okay, just one follow-up then. Are you seeing, it sounds like you think it's going to be somewhat temporary in some of these weak spots. Are you seeing in the bright shoots and, for example, expecting that excess inventory in LPP to go away? And that's going to return borders in a better fashion in Q2?

a bit difficult here but i think if i could uh well i'll try the the liquid packaging uh yes i mean as you know that's that's a much more stable and uh non-eventful category at least tend to be between the quarters uh we had a strong uh finish also of q4 and um yes it will be lower now in in in q1 we feel pretty comfortable about that and uh mostly related to some some higher inventory levels we've seen on some of our customers mostly in the asian space uh nothing that we are very worried it should be again temporary and a one-off and uh we should bounce back on this uh from q2 thank you we will now go to the next question and the question comes from the line of johannes gronzillas from dnb please go ahead

Yes. Hi, everyone. It's Johannes here. I have a question on capital allocation and your balance sheet and basically your dividend proposal today. I mean, if I look at consensus numbers, you would clearly go below one time net debt EBITDA for 2025. And if I recall it correctly, you have the target being below two and a half. So obviously, there is a lot of room for you to distribute cash to shareholders beyond what you do today. Can we get some color on that? That would be great, because I'm thinking maybe you want to run the company in a more conservative fashion, balance sheet-wise, than previously, or maybe you have seen some M&A opportunity on the road here. If you can elaborate on that, please.

Yeah, no. Hey, good morning, Johannes. Yeah, I mean, you are right. I think we're coming down now to a... leverage ratio, which is lower than we had for some quarters. We believe the dividend proposal we have on the table is solid and in line with our policy. I think the main point for us is still that the uncertainty is still relatively high. And it's not like we are debt-free yet either. We still have some billions still to take care of. It's full focus now just delivering on our strategy. We launched this two months ago. And again, if it turns out that we are really successful and delivering well as we hope and maybe also have clearly as our focus in 2025, we will reconvene with the board on a natural interval to have that discussion. The focus we also mentioned in a capital market is a more predictable billerhood and not something that we want to be recognized going back and forth. So no, we don't have anything big items under the radar on the block at this stage. So for now, this is where we stand. Again, we are very aware that we have had shareholders that have been patient over the years. And now if we succeed with our strategy into 25, it's a luxury problem to be in and then we will take the discussion from there.

Okay. Okay. That's good to know. And also a bit curious on your volume gains in December, which exceeded your own expectations. Are you thinking that maybe you'll gain market share or does this reflect basically

your addressable market i can imagine that food and beverages segmented pretty well that's my impression at least if you can elaborate on that yeah it's a bit early i mean the you know the market share situation also in this space is not always transparent as we maybe like and there's some lag before we get the data but no i wouldn't say that there's anything at this point that uh signals that we've taken a significant share I think we kept the good momentum, but again, all the books came in a bit better versus expected across several categories. It was nothing super dramatic, but it was a bit of a more positive shift than we saw in September and going into October. I think it's also a sign that maybe across the whole value chain, different converters and customers are maybe being a little bit less careful in terms of how they look at the near-term and mid-term outlook, which is a very good thing. The only thing I wanted to just repeat is we had a pretty hefty pulp sales in that quarter. That's not something we will repeat. And that was the deliberate choice to also drive down a bit of inventory. But besides that, nothing else extraordinary. Okay. Thank you.

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

Thank you very much and a good morning to everyone. I'll have another go at these very strong shipments in the quarter and maybe if you could say whether the strong shipments were supportive or dilutive to your

mix just to get a feel for where where the strength really came from in the fourth quarter please yeah i i can i can try i think um you probably know that um we refrain probably uh quite deliberately to uh to comment too much on on category performance but there is no secret that uh when you compare the two regions that we have I mean, we have higher profitability and higher structural profitability in North America. So any volume or kind of relative share move towards that region help us quite a bit. No, I wouldn't say that when you then dissect into region Europe, there was anything in particular that stood out. Yeah, pulp pricing is a little bit of a volatile, but in general, it's been holding up quite well. So no, I wouldn't say that there are any specific mix impact, at least on the category customer level in that quarter that is known for this.

How much of an explanation was pulp, for instance, in the quarter to these strong shipments numbers?

Hi, Linus. Good morning. So I think, you know, if we look sequentially, we sold maybe around 20,000 tons higher pulp volumes compared to quarter three. And we expect that to come back in quarter one now.

Cool. Great. That's very helpful. Thanks a lot. And then just on the other line, which was, I mean, notwithstanding these one-offs that you did pre-announce and very much detailed in the report, but that aside, underlyingly, other EBITDA looked strong to me in the quarter. What is a normal level of EBITDA from the other line going forward, would you say?

yeah so in i mean in quarter four we had underlying minus 87 million uh we tend to guide to you know around 400 450 million uh looking for into 2025 we would expect somewhere in between 400 and 600 million maybe on that line at this point 400 to 600 correct yeah cool

Thanks a lot. And then maybe finally just coming back to what you said on the pulpwood markets and the stabilization that you may be seeing, could you please expand a bit on that, how you see wood availability and going through your various sources of wood supply and maybe what to expect in the coming spring months, please?

Yeah, I can start, and Ivar, just add on. So as I mentioned, Nils, I think generally during the fourth quarter, we did see a good supply situation. And we know that there are high inventories across the region in terms of the pulpwood. I mentioned that we have not seen any priceless changes during the fourth quarter, and actually prices in the Baltics have come down. So we've certainly looked at a plateau currently compared to the situation we experienced for most of 2024. And, you know, we expect that in the short term at least to continue.

No, and I can just add I mean, it's been notoriously difficult to forecast over the last years. So it's probably not a very easy task to do. But I mean, there is, well, it seems to be very high inventory levels across the industry in this item. That's clearly a sign as well that it's not as heated market as it was. I personally struggle to see good reasons why the price will continue to go up now. But I think a plateauing now on this level is what we see. And that seems to be a relatively similar situation for our bigger sources here in Nordic. Notice that prices have come down in Baltics during Q4. It's not a massive source for us, but it's an important piece. And surely that's something that... maybe indicate where we're heading, but again, very difficult to draw too hard conclusions.

Okay. That's helpful. Thanks a lot.

Thank you. Your next question comes from the line of James Perry from Citi. Please go ahead.

Good morning. Thanks for the presentation. I just want to ask about Europe. You said you expect normal conditions except for carton board and coated liner. What do you think it is about those products that's leading to the relative weakness to what extent are you expecting disruption from the new Nordic supply and what should we be looking for really in order to see them pick up alongside the others?

Yeah, hey, good morning. I mean, if you think about, and this is maybe where you get slightly different answers from different companies, but a big part of our cart and board business and to extend the coded line there is They land in that channel that we refer to as luxury and premium. I think that channel in Europe, which is clearly our biggest region for those categories, have suffered through N23 going into 24. Consumer disposable income on the pressure, household disposable income certainly being a bit more tight. I think that's one of the first categories you start to feel those kind of reactions. It's also a clear sign if that starts to be better that the economy is recuperating and coming better. We don't see much of that yet. I think all of our history in the past and learning how to maneuver that category is that when interest levels are coming down, It's a slight lag, but over time, the consumer confidence come back and there's more activity and that should also fuel. As you also mentioned, there is a lot of capacity available at the moment. There's come more capacity online. Certainly doesn't help. And that's also why it's right now. slightly different animal in our nordic or european portfolio it's not the biggest piece for us though i just wanted to uh to remind everybody that's roughly 15 percent of our total european uh net sales so um in that sense we have you know the vast majority of exposure into more stable and and more optimistic categories okay thank you thank you

Your next question comes from the line of Martin Melby from ABD. Please go ahead.

Yes, good morning. You mentioned liquid packaging boards several times, but I don't think you mentioned the actual price increase. And that is a big sensitivity for you. So could you indicate the actual price increase, please?

Good morning, Martin. I can take that. I think now, during the fourth quarter, we concluded the majority of the contracts. There are still some parts to be finalized. I will not comment on specific price increases in the contracts, out of respect for our customers also. But we do expect that the new contracts will have a positive impact of around 500 to 600 million for region Europe. And this is really a combination of, I mean, partly price, but it's also customer and product mix that we've now, you know, agreeing on in the contracts. And that's, of course, an important building block to restore the profitability for the region.

I see. So it's like 5%. Okay, and second question. You also announced a 5% price increase in coated fine in the US. How big a part of the portfolio that you're selling is that relevant for?

So the announced price increase is on the coated free sheet. So coated free sheet, that's only rolls that we've announced the price increase on. And that's approximately 60% of all total graphical sales. The remaining is sheets of coated free sheet and then coated ground wood. Okay, excellent. Thank you.

Thank you. Your next question comes from the line of Christian Kotfer from Handelsbanken. Please go ahead. Christian, is your line unmuted? Hello, Christian.

Yeah, I will try this. Thanks, and good morning, everyone. Just a few follow-ups from my side. Firstly, I think, Eva, you mentioned that you expect temporarily lower volumes in Q1, and then to jump back on shipments for Q2 and onwards. So I just wanted to see if you have Or if you can say something on what you expect in terms of shipments in the region for Europe. Is that just shy of 700,000 tons a quarter? Or what kind of region are we talking about?

Hey, good morning, Christian. I mean, as you know, we're not maybe too... how can I call it, eager to comment on much into the future. But I can say the following, that if you look at the whole year of 24, how we landed the sales volume for Europe, I mean, you come close to 750. And I think that's also a number in total, which is not too far from what we had over the last couple of years. I think everything else equal, we would expect to have a bit of an uptick for the full year 25 with everything we see right now. And clearly when we just said what we did, that Q1 is weaker, that should give you an indication a bit on how we look for the rest of the year or for Q2 and Q4. And that's probably as much as I want to say.

Right. That's fair. And then I don't know if you said anything on... sorry, SG&A costs such as salaries for the group? Do you see any real-life salary increases that we should model into the numbers for Q1?

Hi, Christian. Nothing really into the first quarter. We will see some impact heading into the second quarter. Now, we haven't finalized the salary negotiations with the unions yet, but we would expect maybe somewhere in between three and four percent across the company.

Right. And then, Andre, just finally, if I understood you correctly, when you talked about realized price hikes for Q2, was that for around in the region of five percent for Europe only or was it for Europe?

So for region Europe, we will have the price increases on the liquid packaging board, which will be offset with some price declines within SAC and also within paperboard. So for region Europe, sequentially, we look into a positive pricing impact of around 1%.

Yeah, that was for Q1. I referred to what you were talking about for Q2 and onwards. Yeah, sorry.

So I think in terms of quarter two, I mean, we just recently announced the price increases on the container board grades and also on the SAC paper. So we are starting those negotiations now. We'll see how those develop, but we would at this point expect that we will revert the price declines we've had in quarter one now heading into quarter two. All right.

All right. Thank you very much.

Thank you. Your next question comes from the line of Oscar Lindstrom from Danske Bank. Please go ahead.

Yes. Good morning. A couple of questions from my side. I'll maybe start with the quicker ones. Just following up here on Christian's question about the Q2 price increases that you've announced. on container water and sack paper. You say you'll revert some of the declines that you expect will hit you from these segments in Q1. You will be able to revert them in Q2. Could you still put a percentage number on that? I mean, what kind of reversion are you expecting here?

Yeah, so, Oscar, I mean, in terms of the price increases that we have announced, those are announced from 1st of March. And if you look across the... Container board grades, they are in the range of 10% to 14% announced on the categories where we play. In terms of the SAC paper, it's in the region of 6% to 8%. But we need to carry out those negotiations before we can guide you more specifically on percentage points heading into quarter two.

Yes, super. And then a question on this. pulp sales, which Celine has asked, and you gave us the answer on how many tons. I mean, you sold this out of your inventory. Could you say what the sort of EBIT effect of this was in your Q4 result, the higher pulp sales?

During the fourth quarter, Oskar, we have reduced inventory, not only within pulp, but also within other categories in Europe. And this has had a fixed cost under absorption effect in the region of 150 million, impacting the fourth quarter. And that was really across most of the categories within the European region.

All right. Wonderful. Thank you. And just my third question here, I mean, this is more of a general question perhaps for Ivar, is, I mean, you're now coming towards the end of the last year of a very successful cost-save program where you've been able to squeeze out a lot of costs with it while keeping the same organization. Do you see further potential for cost reductions also from

structural changes uh in the years ahead yeah hi oscar i i think the answer is yes um i think now when we announced what we did at the capital market day where we said that there's clear roles for the different regions we also outline what the long-term target we have for the reach in terms of the revita It does point towards Europe needing to strengthen their performance. We are still, when we look at the 24 in total, a bit far from that. There are several building blocks that need to be successful for us to get there. I mean, higher efficiency from our mills is part of it. we need to be even more clever and be even more kind of stringent in terms of how we source our pulpwood but there is more potential also from our own internal deficiencies and that means that there are no holy cows including any structural things and no further looking over the EFTs there's nothing at this point of time which I can comment or give any flavor on. We're moving into different phase now where Europe will take this with them in their quest and journey towards above that 15% EBITDA over the cycle. But rest assured, you will get updates continuously in our earnings calls on how we're progressing on that and if there are any specific items that we highlight.

Wonderful. Thank you. Those were all my questions.

Thank you. Your next question comes from the line of Cole Hawthorne from Jefferies. Please go ahead.

Morning. Thanks for taking my question. Just a quick follow-up on North America. Are you already seeing some of the volumes coming in from taking market share there on the graphic paper side? And is it safe to say that you know, that's the region at the moment you feel most comfortable with getting towards your 2024 capital market state targets.

This is a high good morning call in February 25. I think it's difficult to be comfortable about anything, but I can say that I think we have a lot of positivity and confidence about our ability to compete very well in the North American region. We also had a very successful year in 24. where this value of volumetality has certainly been instrumental. I think we're well-placed. Yeah, there are imports coming in both on quota-free issues and specialty from different regions. And if there will be further tariffs along the way, that should certainly point towards us getting a better capacity utilization. I would even argue, and this is quite an important one for me, that if there is no tariffs and the whole thing disappears, We still think that 25 has a potential upside, partly because now we are getting into our transitional evolution to paperboard. We haven't sold any commercial paperboard yet, but we are very close. And it's not going to be a massive uplift from day one. But when we come to the end of 25, we certainly have a view that we're starting to get into some meaningful growth. commercial positions. So again, everything else equal, we are very confident that North America has momentum into 2025.

And then switching to Europe, I mean, it's encouraging that you're seeing pulpwood costs stabilizing. But if I look at your kind of market outlooks for food and drink and industrial, where you're talking about some improvements, would you mind calling out What areas or anything specific you're seeing in industrial or food and drink? In particular, I'm looking at the speciality craft and the sack craft market. Is there anything that you can call out there that is of interest to you?

Yeah, I can try at least. I think on paperboard and liquid packaging, we might cover this, but since you asked more specifically for paper and speciality. I think for SAC, we have pretty evenly split between brown and white SAC. Brown in general, as you know, go to construction first and foremost. And there's a strong demand. All the books are solid. pretty much sold out for the coming months. Yes, there was price pressure now in Q1, but we are certainly expecting also this to improve towards the summer. So good activity from our outlets typically in Asia first and foremost. White SAC has been a bit slower towards 24, but picking up some space and also there are order books are pretty solid. And also you heard from Andre, we announced price increase there that should help us. And that's, again, another indication that it is taking a notch to the more positive direction. I think craft paper, and that for us meaning the MG and the MF paper, it's a bit more of a mixed bag. MG has been soft for a big part of 24, and it's still certainly not as good as SAC, but it is also coming with a notch a bit better. And certainly part of our MG exposure into food and drinks now has a bit better order books than we saw. into second half of 24. We also had some innovation there recently, which has helped us and also into hygiene, which has been positive. So MF, that's probably the area where it's the softest. It's not the biggest item for us, but again, weakest of a craft paper. It's a bit more niche, as you know, with certain items like e-commerce bags and some medical or technical solution, but that's probably where still Bit muted, but also maybe some signs that it's starting to come a bit better towards the summer.

And then finally, are there any positives or negatives you're calling out from capacity closures or new projects ramping up? I mean, with Canada, there's always risk of sawmills and ultimately mill or even a sack paper machine closure there. And then we've also got Store Enzo's Olu mill ramping up. I'm just wondering if you've got any kind of positives from capacity closures that might impact 2025 or any negatives from new capacity ramping.

Thank you. Yeah, it's a good question. No, I wouldn't say that we've seen a lot of reliefs or big items in terms of closure that is meaningful. I'm sure you noticed over the last weeks there has happened things in Finland, also continental Europe. I think our view still is that that's not the last we will see. And the balance still in Nordic is not exactly right according to our view. And I think it has helped just taking maybe some relief out of of pressure, as you mentioned, with new capacity coming online. But let's see. I mean, the whole Canada thing is still a bit, again, uncertain. I think it's difficult in terms of if it will be that there's a close outlet to a certain extent from Canada into US. I'm sure there's a lot of those producers who will ask themselves, well, where is that going to be? Is it going to be a profitable proposition to get some of that into Europe? Maybe, maybe not. We'll see. We cannot speculate too much on it. But at least for now, we can confirm that nothing really has happened that has changed our view that more capacity should be expected in the region.

Thank you. Thank you. Your next question comes from the line of Pallav Mittal from Barclays. Please go ahead.

Good morning. Thank you for taking my questions. A couple of them. Firstly, on the SAC paper side of things, so the benchmark indices are not reflecting any changes in terms of pricing. So can you just quantify the reduction that you saw in Q4 and expect to see in Q1? Or in other way, does the 6% to 8% increase that you mentioned from Q2 completely offset that? That is the first one. And secondly, on tariffs, as you highlighted around Canada that you import a lot of chemicals into the U.S., considering tariffs between EU and U.S. across categories, especially when utilization rates are low and more capacity is being added, if you could just help us understand the key things to consider between your EU and U.S. trade flows.

Good morning. I think André will probably start with the first and I might try at least from the second.

Good morning. So, I mean, in terms of the second craft paper and the pricing pressure that we talked about earlier, so quarter four, we have held up pricing well and really no major changes in terms of pricing for those categories. We will see some price declines heading into the first quarter in the region of 2% for second cross segments on average. But with the announced price increases, we now expect to revert that heading into quarter two.

Yeah, and I think on the second point, let me see if I answer your question correctly. If not, just please follow up. But I think, you know, the Canada piece. again for us selfishly and isolated from North America should help us as again the inflow of some competitor or some competitive volume first and foremost on graphic party speciality and also paper board should again everything else equal mean that we can increase our utilization and sales volume deliveries from an attractive Midwest region. Partly offset for maybe some cost inflation that will happen on chemicals where we are unable to find credible alternatives in North America. But that last point should be, at least for the moment, an analysis that should be more minor. I think that the last point, just in terms of if there would be tariffs between EU and North America, it's a question that we probably haven't had the full time and even scope to analyze fully. But if you just go with the big brush, there is a pretty big volume inflow from Europe into North America on several categories. I think particularly on paperboard and a lot of cardboard volume. uh there's also volumes coming the other way and you know the whole material and input uh component is is certainly bigger what will then that means i think that is uh more difficult to say but it's certainly big you play you know one thing you can just ask yourself a lot of that carton board volume being exported today uh where is that going to go uh the other choice is then trying to find alternatives in europe and asia where there's already quite a lot of capacity available. So that is just brewing for some, call it over capacity in an already partly troubled category. So maybe that's as much as I can say today, but I understand that this is a topic we will probably recur back to during 25.

Sure, thank you.

Thank you. There are currently no further questions. I will now hand the call back for closing remarks.

That concludes this conference. So our next earnings presentation will be on the 29th of April when we report our first quarter. Thank you for listening and asking questions. Goodbye.

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