BillerudKorsnäs AB (publ)

Good day and thank you for standing by. Welcome to the Billerwood Q4 Report 2025 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 Shatawa, Head of Investor Relations. Please go ahead.

Good morning and welcome to the presentation of the Builders 2025 year-end report. I'm joined by our President and CEO, Iva Vatne, and our CFO, Andrei Kleos. They will present the results and afterwards open up for questions from the telephone conference. With that, let's get started. Over to you, Ivan.

Thank you, Lena, and good morning, everyone. And thank you all for listening in this Friday morning. 2025 has come to an end, and also for this year. It has been another eventful year with several twists and turns in our packaging universe. And as usual in IQ4, we will do a bit of an evaluation of the full year, before swimming into the quarterly results. So, let's get into it. Next slide, please. So, for 2025, you have heard me repeatedly talking about two stories or different realities in our regions. And that's really the essence of what 2025 has been familiar with. Continuing a very good run in North America while navigating through highly challenging market conditions in Europe. And North America has really had another outstanding year. And on a currency-neutral basis, net sales grew by 5%, although the market for choreographic paper is in secular decline. Now, that's a true testament to a very strong value proposition as a local partner in the U.S. And coming in at 20% EBITDA is certainly satisfactory. In some contrast, a region, Europe, has had a challenging year after a promising start. And the themes throughout the year have circled around uncertainty, continued slow demand, and oversupply within the sector. This has pulled down both top and bottom line versus year ago. We have remained focused on items we can control, and our relentless discipline on working capital has paid off, meaning we have succeeded with a strong cash conversion. And to further strengthen the competitiveness in Europe, we launched a cost reduction program during the second half of the year, which is progressing as per plan. A balance sheet is healthy, and the board of directors proposes a dividend of two SEC per share. Now, over to some comments for Q4. So next slide, please. Now, in general, our Q4 was a challenging quarter. Net sales currently adjusted down 14% versus a year ago. And continuing on the same spirit, as I mentioned, for the full year, our region, North America, recorded yet another excellent quarter with 20% EBITDA. For region Europe, both net sales and profitability is down, both sequentially and versus year-ago. And it's first and foremost lower sales, even on board categories, that is driving the development. And it also continues as the whole sector finds difficult market conditions. Another clear theme during the quarter has been acceleration of falling public prices in Nordic, and that will certainly be a big topic for us into 2026, but more on that later. But first, some additional comments on the market sentiment, so next slide, please. Now, market conditions during the fourth quarter continue to be polarized, and in the U.S., again, overall economic sentiment is better versus other regions. and we continue to see solid conditions. Graphic paper is in secular decline, but we managed to gain share throughout the year. And we would expect the secular market decline to continue into 26. Now, back in region Europe, liquid packaging board is relatively flat on a global basis, but with big regional differences. And in essence, we see three trends. A, the plastic is gaining some category share. at the expense of packaging materials. And B, competition of packaging material suppliers has intensified, first and foremost in Asia. And C, some of our converters are losing market share to local competition. Now, for carton board, it is a challenging market with slow demand, a lot of available supply. We are keeping our focus on brown carton board, which is actually growing quite nicely. that we are not expecting any improved situation short-term. For container board, situation is weak, but situation is stabilizing. And also, a recently announced price increase on recycled could potentially help us and improve the competitiveness on new fiber products. For our paper grade, situation has been tough in Q4 with additional pricing pressure, but different versus board. The situation for paper is more related to muted demand and not that much oversupply as the case is on board. For SAC, brown is in a bit tougher situation versus a white SAC, but in general, we have good position to stand on in our regions, Europe, Asia, and Africa. Next slide, please. Now, on the more positive side, And this is likely a well-known fact by now. We do see pulpwood prices in Nordic are falling significantly. And we see similar situation for both soft and hardwood. A key driver point of decline is less demand from the pulp and paper industry recently, but also still low or slow activity on the sawmill side and on the bioenergy sector. We expect this trend to continue its decline into 26, and for Billiard, as the biggest pop-up purchaser in Nordic, this will provide a needed and significant cost relief. We are seeing some impact on the declines already now, but given the two, three months inventory turnover, the impact will start to accelerate from Q2 onwards, but more on that in a few minutes. Next slide, please. Another highlight of 25 has been a progress on the evolution program in North America. And as a reminder, these programs aims to shift gradually our portfolio towards packaging material with local US production. We have engaged with numerous trials and qualifications across both existing and new customers over the past year. And we aim to reach a more meaningful sales now during 26. We will start reporting packaging material as a separate line item in North America from Q1 and onwards. We are investing in the U.S. to enable the packaging materials journey with a $1.4 billion SEC investment program as previously communicated. And the first batch of that has successfully been completed with the upgrade of the Escanaba wood yard. And success in this context means on time, on budget, and safely executed. We will continue to update you on our journey throughout 2016.

So with that, I hand it over to André. Thank you, Ivar, and good morning, everyone. I would likewise like to start by summarizing the development for the year. And our top line decline of 7% was down to two parts. The strong volume growth we had in North America of 6% was offset by declines in our European business. Foreign exchange has also been a factor the past year with significant strengthening of Swedish corona throughout the year, which has impacted both our European business and also translation of our U.S. operations. Next slide, please. Profitability for the full year was down with pretty big movements across several drivers. Our pricing efforts during the year did offset the input cost inflation, primarily coming from Nordic pulpwood. But facing additional FX headwinds and also the reduced volume in Europe and Asia were the main drivers for the profit decline. Now, 10% EBTA margin is, as you know, below our targeted level. And we are also during the year taking decisive measures to improve our profitability heading into 2026, which we'll get back to. Next slide, please. Zooming into the Q4 performance, the main drivers for the top line decline were similarly volume and also foreign exchange. The weak demand we were facing in Q4 in Europe and Asia, did also have an impact on pricing with more spot volumes at lower pricing points. The volumes in North America did slow down in December, which was also in line with the ordering pattern we saw last year. And we did face some logistical hurdles to get out all the orders due to weather conditions at the end of the year. Nothing dramatic, and this, we expect, will spill over into the first quarter of this year. Next slide, please. Profit decline versus last year was mostly due to lower volumes in Europe and Asia, FX headwinds, and also negative price development primarily for the market pulp. Year over year, the input costs were largely unchanged, with marginally lower pulpwood costs offset by higher energy costs in both of our regions. And now moving over to regions, starting by region Europe. Next slide, please. In Europe, Q4 was by far the toughest quarter for this year. And as we expected, the order books remained weak in the quarter, and also ample supply resulted in pricing pressure across most categories. As Ivar already mentioned, the pulpwood prices are coming down. and having a positive impact sequentially. And we do expect the trend to accelerate going forward. Heading into the first quarter, we do not expect the situation to change significantly in terms of market conditions. Order books in general look a notch better, but with ample supply, we expect continued pricing pressure. For the biggest category in the region, liquid packaging board, we have contracted volumes in line with the volumes for 2025. And now moving over to region North America. Next slide, please. Which continues with solid performance and excellent profitability. Now, despite slightly lower volumes, the profitability for the region improved compared to last year, driven by both lower costs and less pulp sales. The operating rates continue to increase and are now at 79%, clearly above the 68% where we were a year ago. And we expect these favorable conditions to also continue into the first quarter with both stable demand and pricing for graphic and label paper. And we'll also expect a slight increase in pulp prices in the first quarter. And of course, the focus on qualification of packaging rates remains a top priority for the region. And our efforts in the past year have built a solid foundation to continue this volume ramp up heading into 2026. Next slide, please. A few words on the input costs and our outlook forward. Sequentially versus the third quarter, We had a marginal input cost tailwind of 20 million, and that was primarily related to Nordic pulpwood costs. Now, the decline in pulpwood costs was offset by higher energy costs in both of our regions. And for the first quarter, we expect cost level to come down with Nordic pulpwood costs again as a main driver. And we expect total cost relief of approximately 130 million, most and foremost in region Europe, from both pulpwood and successful renegotiation of chemical contracts. The pulpwood cost decline is expected to accelerate into Q2 with full impact of the priceless changes at the end of the year here. And input costs in North America are expected to remain stable into the first quarter. Next slide, please. Now, as we've communicated in September, we are continuing to take decisive measures to strengthen our competitiveness. And our cost-saving program is on track. We have made a steady progress in our union negotiations and have now completed or are in final stages in our negotiations at all of our sites. This means that we're also on track to deliver the targeted savings of 500 million for 2026. And we will have 40 million impact sequentially into the first quarter and expect that to accelerate to 150 million in the second quarter. Next slide, please. As we've mentioned throughout the year, cash flow and also our working capital efficiency has been a focus area. And I'm very pleased with the significantly improved cash generation compared to last year. The absolute level of operating cash flow generated in 25 was in line with the previous year, despite 1 billion lower profit. And this will remain also our priority heading into 2026. And on the back of the strong cash flow, also our balance sheet remains strong with leverage that is well below target, and we enter 2026 with balanced loan portfolio. Now, we are also taking actions to protect cash flow by limiting our investments. We have maintained prudent investment level for 25 and reduced our capex below ingoing targeted level. We are now also making tough prioritizations on 26 investments and reduce the capex guidance to 2.6 billion. Finally, Ivar already mentioned dividend proposal. The payout of two SEC per share would imply a payout of approximately 500 million, and that would be made in Q2 following the AGM. And with that, I hand it back to you, Ivar. Thank you, André.

We have decided to exit our joint venture with Vigenskog regarding the BCSMP production at the Follum site north of Oslo. And simply put, this is due to both change market conditions since we started looking into this project some years ago, as well as a very lengthy political process around the environmental permit. We will have a 50 million set non-cash write-off in Q1, which will be classified as an item impacting comparability. I want to express my appreciation and thanks to Viken Skog, whom we've gotten to know quite well over the past years and enjoy the highly collaborative relationship. And we certainly aim to keep that relationship warm going forward and continue to explore business opportunities together. Next slide, please. So to round it up, going into Q1 in 26, we don't expect significant to change market conditions. North America is still going strong and we look towards a continued solid performance. For region Europe, we are still in weak conditions and we are seeing further pricing pressure across many of the categories. But having said that, top of prices in Nordic are in clear decline. and we will expect that trend to accelerate going forward. And as a reminder that Q4-25 was the last quarter of our pre-emission rights, but we'll have a slightly higher planned maintenance cost scheduled for Q1. So with that, I hand it back to 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 Robin Santavirta from D&B Carnegie. Please go ahead.

Yes, thank you very much, and good morning, everyone. First question I have is related to the volume performance you have in Europe. Looking at delivery volumes, they're down, what is it, 16% Q4 year-on-year and full year, essentially roughly 10%. What is your market share performance? Surely this cannot be underlying consumption of packaging and products that you sell. So does this reflect some market share changes? And if so, in what segments?

Yeah, good morning, Robin. I can try to take that. I think to answer that question, you will probably need to go a bit through different categories. I think also you know that in our sector, it's difficult to get fully credible estimate of market shares, but certainly you can get some estimates and some triangular calculation. If you start from board, it is no doubt that we have lost some market share to Asian competition. And I think in Europe, we're holding up really well, but it's certainly so that a portion of our historically exports to Asia has been reduced coming in now from, yeah, locally in Asia. We are pretty confident now that that is now bottoming out in Q4. And actually, from onwards, it's going to be quite a bit of growth instead on that category. For container board, it's a bit different. Flooding, we are holding up well. We have a pretty niche in our, you know, very strong performance on our floating proposition, and there we're holding up share. On liner, it's a bit of a mix. Don't call the liner. We probably dropped some share since that was some export going into U.S., which is now a bit more challenged through the exports. But on coated liner, we are holding up share well. On carton board, it's a bit mixed, but we are holding the share pretty flat is our view. A bit of a mix between the brown and white, but in general, holding up. As you know, we don't have a very significant share on carton board on our side. Second craft, our view is that you're holding share pretty well. Market is a bit down. in line with new demand. So, yeah, that will be my quick summary through the categories.

Thanks, Ivar. And can you share some thoughts about the order intake now early or in January? It seems you have some negative pricing going into the year. Sometimes what customers do when pricing is changing, they reduce orders and then they sort of order more when the new price list is out. So, any sort of color on the order intake now in January in Europe?

Yeah, good morning, Robin. I can take that. I'm just, you know, providing some background. Entering Q4, we experienced weak order books, which also, you know, materialized in lower sales. Now, as we enter the first quarter, the order books look a notch better. I think it is across most of the categories that we see in our European business. With that said, we do have still high uncertainty in terms of the underlying demand, but for now the order books look a bit better compared to Q4.

Thank you. And final one before letting others in. North American market environment seems to be much better. Could you share some color on the pricing outlook now for start of the year?

I can just start with a bit of market, and then Andre might jump into the pricing. But I think we have mentioned this before, and it continues to be a region that has quite a bit more confidence, if I can use that word, of continuing growth in the 26th. Certainly also confirmed by myself meeting a lot of customers early again in terms of outlook. But let's not forget, I think graphic paper is still in sector decline, and that will continue to be. But, you know, we have a very strong position there, so we feel good about, you know, the categories that the exposure into. you know, fueling the momentum we had built up over the last couple of years. But André, if you want to comment on the pricing specifically.

Yeah, and I can just add on the pricing side. I mean, we did, as you know, increase the prices for coated free sheet at the end of 2025. So we don't expect any additional pricing impact from our paper grades, either the label or coated free sheet. But we do expect slight uptick in pulp prices. due to index picking up. So all in all, we expect the region pricing to increase with 1% heading into the first quarter.

And can you share your expectation on European pricing similarly?

Yeah, for Europe, we are right now looking at price decrease sequentially with 2% to 3% into the first quarter, and that is mainly coming from liquid packaging work.

Thank you very much.

Thank you. We will now go to the next question. And the next question comes from the line of Oscar Lindstrom from Danske Bank. Please go ahead.

Yes, good morning. So my first question was on LPB pricing, but I guess you sort of answered that, so I'm not going to use time for that. My other two questions, the first one is on capital allocation. I mean, given the already low share price, your relatively strong balance sheet still, and, you know, lack of major capital investment plans ongoing, Do you see any opportunity for returning cash to shareholders sort of throughout the year through, for example, share buybacks?

Good morning, Oscar. It's natural that we have these discussions, you know, with the regular interval with the board. As I'm sure you know, this is the board, in the end, who will need to go for that. It hasn't been on the table yet, and it's certainly not something that we come today, but it will be continuously evaluated. I mean, focus for now is to strengthen the performance. And as you say, we have, I think, relatively well in the sector, a strong balance sheet. But yeah, for now, at least all of the focus that, you know, we put our priority from the management side is strengthening the underlying performance in cash delivery.

Thank you. My second question is on supply reduction in Europe, which you mentioned in the report as being something that is needed. Given that you're losing money in Europe, do you see any need or possibility to close any of your less efficient machines or even mills in Europe?

Yeah, I can also take that one. I think it'd be very strange if not everyone now in the sector are evaluating this from time to time. I think you also know that it's probably, you know, premature to look at this in a quarter, so you need to look at it in essence and maybe more relevant looking this in a forward-looking projection with a combination of, you know, future investment needs, what kind of earnings forecast you have, and how do you look at just in general the competitive strength. But I stand by that, what I also wrote in the report. Bored now in Europe, in the region Europe, is to be the sixth man in the packaging universe, and it's a significant overcapacity. It will take quite a bit of time with demand growth. You're kind of canceling this out, and often what's happening in the U.S., regionalization is a big theme. So before we get some significant volume out, you know, we will continue to be in a tough spot. The focus we have for the time being is on our, you know, three big board meals. Every focus is to strengthen our competitors further and build on, you know, the portfolio positions we have.

Yeah. And then finally, if I may, a third question. I mean, you've talked a little bit about Asia and sort of increasing competition from Asia. the European market, to what extent have imports from Asia contributed to the oversupply? And do you see anything that could change that? For example, import tariff initiatives. We've seen it in segments like steel, for example.

Yeah. I would say that I think the import into Europe from Asia is very insignificant for the time being. I would even call it non-material. That doesn't mean that it cannot increase in intensity going forward. And, you know, potential tariffs, if it will be at all, can be, but it's, of course, not on the table yet. So, for now, our view is that it's not disturbing the picture too much. But we are, of course, meeting more volume in regions outside of that, as Middle East. et cetera, maybe into Turkey. Those are markets for us that have some size but not significant. But in Europe, this is not a factor for now, at least.

All right. Thank you very much. I'm happy for now. Thank you. Thank you.

Thank you. We will now take the next question, and the question comes from the line of Linus Larsson from SEB. Please go ahead.

Thank you very much and good morning. Maybe continuing a bit on the variable cost side, did I hear you right saying that the European variable costs will ease 130 million Q1 on Q4 and so is that including everything, you know, inventory adjustments, etc. And secondly, what kind of Tailwind, are you talking about traditionally the second compared to the first quarter when you're talking about an accelerated wood price trend downwards, please?

Yes, good morning, Linus. We do expect approximately 130 million input cost relief heading into the first quarter, and that is primarily from the pulpwood, but we do have some We negotiate chemicals contracts. Also, that is part of it. But the absolute majority is pulpwood costs. And, of course, as Ivar also mentioned during the presentation, it takes some time before the new price list changes for the pulpwood are fully visible in our P&L. So the final impact, you know, from the recently announced Priceless changes will come or materialize in the second quarter. So we will see additional decline in the pulpwood costs in the second quarter, but we'll need to get back to exact guidance.

Yeah, because that's what I was a bit curious about. If you had some sort of magnitude, is that a bigger number than the 130 that you're guiding for Q1 on Q4? Is that how we should understand this accelerated trend that you're talking about.

No, but that's correct. We would expect a bigger magnitude on the popwood cost decrease heading into the second quarter at this stage.

And do you see some sort of continuation in the third compared to the second quarter? I mean, is this a trend for the rest of the year?

Well, I think... I mean, now we have the new price list for Europe, for Sweden, which is our biggest catchment area. And the impacts that we are talking about now are based on the recent price list changes. And then, of course, the price list changes might occur going forward. And right now, with the situation we have in the market, everything is pointing to accelerating reduction of the prices. But we will need to see how the prices move going forward.

Cool. That's fair enough. And then maybe just if I can squeeze in one last question, considering the weak volumes in the fourth quarter, how does your full year 2026, if you look on, say, European markets, wide volume development for year 2026 compared to 2025?

Yeah, I can take that. Good morning, Linus. I think I'm the first one to admit that it's tough to say at the moment since, you know, the sentiment changed during 25, and now, you know, we're starting the year on a bit of a lower note versus, you know, when we go back a year ago. But there is no doubt that, you know, we are expecting growth if you look at now what we have delivered in Q4. And, you know, we are certainly expecting, you know, to come back at least into the volume for the full year of 25. And clearly, that means we would need to see some sequential increase over the coming quarters. But yeah, that's the best I can say. I mean, if you look at the run rate on Q4, it's certainly lower. And that's not where we either expect to be and also, you know, tagging onto what Andre said, order books look a bit better. But I will refrain from giving any more specific number for full year, but that's at least the view we have right now. Great.

Many thanks.

Thank you. We will now take the next question. And the question comes from the line of Cole Harthorn from Jefferies. Please go ahead.

Good morning. Thanks for taking my question. I'd just like a little bit of color on how the cost savings plan, the half a billion is going to phase through 2026, just if you could give context of how much you expect into Q1 and Q2, just the timing of that. And then just following up on the pulpwood questions, I'm just trying to understand the quantum moving into the second quarter, just considering there is a three- to six-month lag before it impacts your P&L. You know, how material could it be into the second quarter? I mean, are you already saying that we'll see a further, you know, $100 million, $200 million sequential cost relief into Q2 and further into Q3? Just some context of that would be helpful on the cost. Thank you.

Yes, good morning, Cole. In terms of our cost saving program, I mentioned, so 500 million is the savings ambition for us for full year 2026 compared to the previous year. And the first piece is coming now in quarter one, which will be 40 million. And then we expect that increase to 150 million in the second quarter. And we expect, you know, slight uptake from those 150 million for the remaining of the year at this point. So that would be, you know, our estimate for the timing of those savings. In terms of the pulpwood cost for the second quarter, as I said before, we expect those to accelerate, and at this point, We would expect costs for 26 to be significantly below 25. We are now looking at, you know, price lists that are around 100 sec per cubic meter lower on the pulpwood. And, you know, with our purchase volumes, that is a significant amount of, you know, 900 million.

And then maybe just to understand the key moving parts into 2026, am I right in understanding that, you know, the price pressure that we're seeing now, you know, this is, you talk about mostly liquid packaging board, but we've still got kind of the carryover effect of kind of some container board prices that fell through the fourth quarter. We've still got some kind of stack and specialty craft that kind of drifted down, impacting Q1, but do you feel that this is effectively the pricing trough? Are we at the point where the market's just under too much pressure on the cost side, that that's the bottom on most of those categories? Just trying to understand if Q1 is ultimately going to be the pricing trough.

Yeah, I can comment on that, Carl. So this is what we expect now heading into the first quarter, the 2% to 3% in total for the region. Again, majority of it is liquid packaging board. And we had, you know, as we commented, pricing pressure in the fourth quarter. But we feel that, you know, the pricing pressure will be pretty limited on most of the categories. But, of course, liquid packaging board is, you know, heading into with new contracts. Thank you.

Thank you. We will now take the next question. And your next question today comes from the line of James Wyman from Pressure. Please go ahead.

Thank you very much, and thank you for your presentation. I've got two questions, if I may. The first one is the decline in demand you're seeing in Europe seems very much out of kilter with what you would expect underlying demand to be, especially in things like construction and food, where I think that the decline in underlying demand is quite small. So are you seeing destocking in any of these areas? Because that's often the cause of these large gyrations in volume. And then secondly, in the U.S. market, you talk around moving sales from coated paper into packaging. Could you give us some idea of, in 2026, what sort of scale you're expecting this move to be and exactly what product lines you're going into? Thank you very much.

Good morning, James. I can at least try to start, and Andre might jump in if there's anything else. I think, you know, in Europe, I think you need to look at this, as I said, per channel. And if you go through, you know, our exposure, we have a very sizable chunk into, you know, food and drink. And I mentioned this a bit earlier, but, you know, food, if you package it, for instance, it's relatively flat. on a global basis, but with quite big regional differences. I mean, as an example for us, we know that China is down in the market, and China is a very big export market for us, while, you know, other regions like, you know, U.S. and Latin America is more up, and that's not really where we are too present. So you will find some regional differences there. But it is so that, you know, food and drink tend to be more resilient, And, yeah, you can say stable. We have seen the trend, and that's also confirmed when we talked to some customers that, given that disposable income for many households has been under pressure, they are tearing down, moving from branded to more private label, moving more from, you know, supermarkets, hypermarkets to discounters, et cetera, where the more predominant packaging space is on either fossil-based package on a more simple or lower level of packaging material. So it's a bit of a mixed impact there as well. We don't see, I think, any signs that 26 will be worse on this. And, you know, it feels like we're coming through the bottom of the curve on this. Hard to say, but I think, you know, this is at least our view. Constructions, we don't see much. I think an optic at the moment, it's still pretty soft, and it's been soft. certainly in Europe, but, you know, we have pretty good activity on the brown sack in Asia and also in Africa still. So that's that. Luxury, you know, carton board is just very tough, and it has been tough for some time being. And, yeah, we don't see any signs so far that this is coming up, and clearly the market there is quite a bit down as whole for the last couple of years. Yeah, and I think for U.S., I already mentioned to you, But, you know, it's more of a sector decline, and we've held up really well through market sharing, you know, on local propositions. So, again, mixed bag, but I think it's, you know, in many ways comforting that we have a good position in food and drink, but you have also seen some moments there, at least for the last couple of years, which, again, should destabilize it. I think the U.S. journey we are undertaking, or we are certainly into it, In many ways, you start from scratch, and that's been some of the last 18 months of trying to get some of the technical qualifications ready and moving those into customer dialogues and test and trials and qualification. Our target is exceeding 50,000 ton packaging materials now in 26, you know, with a more lower target of 300,000 ton when we come towards 2030. And that's certainly what we're aiming for. And, again, we will continue to update you on that journey and start reporting this from Q1 and onwards. There's first and foremost two items that they are into its quoted liner that we are naming or selling that under the tribute proposition we have, and then it's low-grammage carton board on the Voyager. So those are the two things we're focusing for now. Okay. Many thanks.

Thank you. We'll now take the next question. And the question comes from the line of Martin Melby from ABG Sundal Collier. Please go ahead.

Yes, good morning. A couple of follow-up questions. First, on liquid packaging board, could you indicate what is the price decline, and is that equal across all the key customers or one specific contract? Second question, you previously talked about inventory changes on pulp wood. Is that a factor to think about for Q1? And also, what about energy costs for Q1, please?

Hey, good morning, Martin. I can take the first, and maybe Andrei can take the second. No, I mean, I'm just repeating what had already been stated. It is the 2% to 3% pricing, you know, quarter of a quarter, where most of that comes into liquid packaging. And I will refrain from, you know, commenting further on any specific customer, and I hope you have understanding for that. But it is a slightly different mechanic now than it used to be. It's shorter kind of discussions a year. So, you know, they tend to come all at the same time. And yeah, it's always a bit of a, you know, mixed bag in terms of, you know, the priorities and the dialogues. But in general, I can confirm that the 2 to 3% is first and foremost on liquid packaging.

Yes, good morning, Martin. And I can continue with your two second questions. So in terms of the pulpwood, of course, our production costs are heading now, heading down in the first quarter, and this will imply some negative inventory revaluation. We don't expect the magnitude to be significant. We are talking normal variation, and we would expect somewhere around 20 million negative. And for the energy costs, we do expect pretty stable situation into the first quarter compared to the fourth. Thank you.

Thank you. We'll now take the next question. And your next question today comes from the line of Alexander Vival from Pareto Securities. Please go ahead.

Hello. Thanks for taking my question. It's actually a follow-up on this discussion on liquid packaging board. If you could elaborate a little bit on this sort of average contract length regarding price and how big a share of your liquid packaging board volumes are actually repriced as of the beginning of this year compared to Q4?

Good morning, Alex. No, I can confirm it's 100%. All of the volume now pretty much sits on one year. You can call it the term. So everything is being discussed or has been, yeah, over discussions during the last months.

Right. And those new contracts are also valid for the entirety of 2026? Correct. Great. And just a quick follow-up on that. Are there any, have you seen any sort of mixed changes with regard to geographies regarding your LPG or LPB sales during?

Yes, we certainly have. And if you do it simple, we have the two big regions for us is Europe and Asia. And Europe is the biggest by far, and there the situation is much more stable, if you may, or our deliveries are in many ways not as impacted from the decline you're seeing. There is a chance for sure, and I already commented on this, which we have felt through more intensified competition in Asia. So that's first and foremost where the decline has been related to during the year. But having said that, then we look now at Q4 in particular, we will be looking for you know, growth from that forward and onwards. And that should be also what we see for the coming quarters.

Right. Great. Thanks a lot.

Thank you. Your next question today comes from the line of Johannes Grunzelius from SB1 Market. Please go ahead.

Yes. Hi, everyone. It's Johannes. I have two questions. The first one is on what's happening regarding the free emission rights. You have been provided those for free, obviously, for years. They will come now from 2026. Is this in line with your own expectations? And what about the rest of the industry? Are all other players having the same sort of outcome in this? Thank you.

Yes, good morning, Johannes. I can start. So as we communicated before, we will lose all the allowances for free emission rights that we have received in the past. And this is due to our mill sites being more than 95% fossil free. There are, you know, facilities within this industry, not within billers, that still are below that and that, you know, most likely will continue to receive. But for billers, we do not expect to receive any emission allowance going forward.

Okay. That's helpful. And maybe I missed this information, but could you sort of remind us about the CAPEX plans for this year and potentially also if you can indicate what level you see, 27, 28 as well, please.

Yes, Johannes, so for 2026, we expect a total CapEx of 2.6 billion. That is slightly below what we, you know, previously planned for. And it is divided into maintenance CapEx that is around 2 billion, and then strategic CapEx targeting our evolution program that Ivor talked about in North America and most of the remaining 600 million there. Now, after 26, the evolution program and the CapEx program we have there is coming to an end. We might have a small add-on in 27, but that should be minor. And right now, it is really around the maintenance CapEx that is planned, and there it is between 2 and 2.2 billion.

Okay, got you. Thank you very much.

Thank you. As a reminder, if you wish to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. We will now go to the next question. And your next question comes from the line of Cole Hawthorne from Jefferies. Please go ahead.

Thanks for taking my follow-up. You mentioned in the release, because Europe's facing a challenging situation, that you expect an acceleration in capacity rationalization. And we've seen a number of listed bonds. We've seen debt investors get more aggressive on companies, let's say. I mean, from Billerud's perspective, you have taken action on headcounts, which is commendable. But when I think about your volumes, volumes are quite low. If those volumes come back, you should get really good operating leverage performance. But how can you you know, change your asset base or how can you kind of maximize that operating leverage on the upside? How can you kind of maximize your footprint to kind of reduce the fixed cost effect on your footprint? Do you need to take any action on your production volumes?

Yeah, I can try to take that. It's a good question, I think. And I guess the answer is that, I mean, in many ways, there's no shortcuts or easy ones you can do, but certainly there are some We have to go even harder after, again, fixed costs as we are doing, and also be even more aggressive on variable costs, and that includes no holy cows. You look at, you know, formulation, and you look at setup where you can just be smarter, where you can try to trim out some, you know, inefficiencies. And, you know, that's ongoing, but I think, you know, there's been an amplified focus also on our side now going forward. You always have leverage to try to expand the flexibility on the machine to do more grades on the one asset you have. That, of course, frees up more flexibility also to try to find niches that you don't necessarily have been playing with. That's not easy, but that's also certainly possible. But we are still on a, you can call it, you know, capacity utilization, you know, which is north of 80%. That should be possible to make money on that. But you need to then have a very strong competitiveness and cost control, and certainly we are doubling down on this. But it is, I mean, it is tough, as I think, you know, we have conveyed. It's tough for everyone. But I think, you know, we have a relatively good starting point on our side. that we have to really accelerate both the flexibility on our assets and also to get costs down, and that goes across the board, both fixed and variable.

And then maybe just a final clarification point. Historically, I always thought the 4Q was slightly weaker from kind of a volume perspective, just from seasonality. And this year, we also got a number of players in liquid packaging board on the converting side, kind of not taking their volumes to hit their volume rebates. Should we still expect a sequential improvement in volumes in Q1 versus Q4, just because of some senality effect and just starting the orders for the year, or is that not the case? Should we think about volumes similar level on Q4 versus Q1?

Yeah, Cole, I think what we see right now, again, is somewhat better order books heading into the first quarter. I think the typical pattern we also see in the fourth quarter is customers, of course, managing their working capital and inventory levels. It is always difficult to quantify the exact magnitude of it. But at this point, we do expect some uptick in volumes heading into the first quarter. Thank you.

Thank you. There are currently no further phone questions. I will hand the call back to Lena.

Okay, so that was all questions. This conference has come to an end. Thank you for participating and welcome back when we publish the interim report for the first quarter and that will be the 28th of April. Thanks and goodbye.

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