Holmen AB (publ)

Good afternoon, ladies and gentlemen, and welcome to the year-end report presentation for the Holmen Group. We are again the usual suspects from the Holmen side. It's myself, Henrik Sjölund, CEO, and Mr. Anders Jernhals, CFO of the Group. We will guide you through the presentation, and after that, we are happy to take any questions you might have. This has been a quite strange year. Everybody has been affected by the pandemic we have had, but now when we are standing here, we can summarize what has happened. We can say that we have had a rather, I would say we came out through the year in a good way and then operating profit for the whole year, which is close to 2.5 billion SEK, which is a good result. Partly thanks to better efficiency within paperboard. On the other hand, we also had a lot of headwind when it comes to our paper business. And later during the year, we also had quite big help from increasing prices for our wood products. We also ended the year in a fairly good way. And again, with help from really good prices from wood products and despite that we had a quite big maintenance stop at the Iggesund mill, which we carried out, by the way, in a really good way, we ended up the year earning 595 million SEK. And also in the fourth quarter, we had a very tough situation when it comes to paper and especially the prices were under a bit of pressure, which we come back to. If we go back a little bit and summarize what has happened during the year, it's clear that also we in the beginning of the year and especially during the springtime, we didn't know what to expect. We only knew we had a new situation with a pandemic. We thought for a while that maybe we can't keep our business going. We didn't know whether we could keep our mills running, etc. And after a while, we saw that things will not be that bad. Still, we were a bit afraid because there was a lot of security. We decided not to give dividend first. And a bit later, after having taking measures like postponed investments to some extent, secured long-term financing, And also, we made sure that all people we have could go to work in a fairly safe way. We also carried out a couple of really big maintenance shots, which the hundreds of people. But of course, we were quite scared that this could go wrong, especially in the middle of the pandemic. But it worked out fine. And now, at the end of the year, or beginning of the next year, we are standing here and looking at a good result in 2020, much better than we expected for a while. We came to the conclusion last year that we could give dividend of half what we planned from the beginning. But now when we look forward and we see the result we had in 2020 and also the financial situation we have, which is strong, despite that we have also acquired the Martinsson Group. We had a discussion today in the board of directors and came to the decision to propose to the annual general meeting to decide about an ordinary dividend for 2020 of 7.25 Swedish krona per share, but also an extra dividend of 350. Moving on then to our forest. I said last time when we had a quarterly report that we saw some imbalance in the wood market. That situation came from quite high demand for saw logs, but not the same demand for pulpwood. saw mills have been running full I would say all throughout the year since late spring or the summer time and we still see a really high demand for saw logs in the market but the paper business has been a bit tougher we know from our own mills that we have not been running full but also some other ones which are not been running full we also see from some neighboring markets that it's difficult to run even the saw mills cause it's tough to get rid of or to sell the pulpwood that comes with the harvest when you go for the saw locks So the market has stabilized. We don't see the same imbalance as before or is about to stabilize. So the situation in the wood market is a bit better. But Anders, it's also nice to see that still there is a lot of people who think it's nice to own forest and they are prepared to pay more.

Yes, we've seen a great interest the recent years and especially the recent year in acquiring forest assets. And as you are all aware, we last year introduced the new accounting methodology where we book the forest assets based on assessment of the market value of it, based on the forest transactions in the areas of Sweden where we have our forests. And at the end, we made an update of this valuation, and it's based on the three last year's transaction prices in those areas where we have forests. And that meant that we increased the value by 5% up to 43 billion SEK. And this is an increase of close to 2 billion SEK. 600 million of that increase is by the accounting recommendations to be going through the P&L. Once the rest is actually not passing P&L, it's a profit that actually goes straightly to equity. So if we take the next slide, the full year result of 1,367,000,000 for the forest division and almost 600 million of that profit is due to the change in value of the trees, you can say, and the rest is cash flow from the forest activities. The increase compared to a year ago in profitability is due to this new accounting methodology. Looking at the quarter, we have a pretty normal result for the forest divisions just north of 330 million SEK. Back to you, Henrik.

Thank you very much. Then moving on to the paper board. Also here in the beginning of the pandemic, we didn't really know what to expect, but quite soon we found out that people do spend money and buy things that need packaging. When we look at the demand situation in Europe during last year and where we are today, we have a slight increase, not big, but a slight increase, which is nice. And also when it comes to our own performance in terms of deliveries, we said a couple of years ago we should reach a running rate of 550. It has taken some time. It has been some bumps, I would say, on the road, on the way. But looking at where we are today, that's roughly what we deliver at the current state. And we have now a 12-month running level of roughly 550. It's also nice to see that the investments we have made lately, we spent quite a lot of money, especially at the Iggesund mill. It actually pays off. And when we look at the mill today, we see that there is higher efficiency, well done by our people. And as I said, the targeted capex we have spent has especially lowered the cost and maybe not so much production capacity, but hopefully that is soon to be also materialized. This has also an impact on our profitability, Anders.

Definitely. The investments that have been targeted to the pulp mill have had a very positive impact on our production cost, as Henrik mentioned. And that's the main driver behind us coming back to a profit level where we should be in this business. We have also, despite the pandemic, seen a very good development of the product mix that we have benefited from. And as Henrik mentioned, were able to increase volumes, which added positively to the result for the full year. Looking at the quarter, it's of course a decline compared to the very high level last quarter. This quarter, we had a big maintenance stop, well executed, as Henrik said, but we were somewhat balanced by a bonus revenue for the green electricity that we produce in Workington. of roughly 40 million SEC. So the underlying result in the Q3, if we take out the bonus revenue and the stop, is 230 million SEC. And I, of course, mean the Q4 results.

It's the first time we're standing here and we are happy to say that we had the maintenance shot that costed 110, isn't it?

Yes. We have, as we have mentioned, we have two major maintenance stops upcoming this year, one in Workington in Q2 and another one in Iggesundsbruk in Q3 that together is expected to cost us roughly 250 million SEK.

Yes, thank you. Moving on to paper. As I said in the beginning, in paper we really had headwind. And you can see from the next slide that demand development has been really harsh. It's tough to be in this business. It's like 20% drop in paper consumption. And as we speak, prices are under pressure, which is also seen from the chart we have here. On the other hand, we have some products which are doing better than the market. But as a player in this segment, of course, we're also affected by the general development, especially when it comes to demand. We have our products based on virgin fibers, and we try to produce products where they really make sense. And we do compete with especially recycled fibers in some segments, not in all that in the market we see now. Big changes when it comes to fiber supply to different regions in the world, which is it's too early to draw any conclusions yet. But if you look at the price prices right now, actually, it's even tougher in Europe than in Asia, where there is a lack of fiber. And we will see what that will take us. In our case, we have been really keen on not building stock during this time. We have also taken market-related downtime as the rest, I would say, in this market. And even though we are... producing a little bit and delivering slightly better than the last two quarters, we are far from running full, which is also seen in the result.

Of course, if you can't run full, it's difficult to get a good result in this business. We have lost more than 400 million SEC in profitability compared to last year. Two-thirds is due to declining prices and one-third is due to us not being able to run the mills full. Q4 was turned into a loss-making quarter. We had some extra maintenance stop in Q4 that burdened the result. But I think you should look at Q4, Q3, Q2 together to see. We are in these market conditions that prevailed during 2020. We were around at a zero EBIT level. but clearly positive EBITDA level.

Correct. Thank you. Moving on to something which I would say is a little bit easier to handle today, wood products. We have upgraded our total production capacity from 1.5 to 1.6 million cubic meters. But what we have done, of course, is that we have grown organically through the ramp up and the investments we have done at Braaviken. It's not too long ago, and we said we will be adding like 150,000 cubic meters, and we are on our way to do that. And then it's the acquisition of Martinsons, which is a rather big step. And I think for us as a company, also a very important step in the right direction. Looking at what we have now, we have five sawmills. and in all of these sawmills i would say especially maybe at bravik and but we are also looking at we have a program for the igson sawmill we'll see what that will take us but a good mix and also a good mix of products going forward because what we did when we acquired martinson is also that we broadened our product offering especially with the cross laminated team glue laminated beams and also some exterior panels that together with what we already had gives us also a better offering towards the builder merchant segment in the business What we discuss mostly, of course, these days, Anders, that's not that. That's the price. And we have been in this business for a long time. So we know that the prices, when they go up too much, they soon go down again. But this time it will be totally different. Of course. But what we have seen lately, it's not only that. It's good demand because the demand is good. But it's not good in all parts of the world, especially the do-it-yourself and sector is doing well. We see a lot of new starts in North America. And we also have the supply side of the business. which is lower than normal when prices are like they are right now. We see Canada not coming up in production levels like we thought they would, and we also see sawmills in Russia, Baltic states, etc., where they simply cannot get rid of the pulpwood, which means that they have to restrict a little bit the volumes they produce out of the saw logs. So it's a situation where a specialist is doing fantastically well, which is also seen in the results.

Yes, definitely in the result. Full year result was clearly higher than last year, but last year was a bit lackluster. We have seen higher prices throughout the year and actually low costs if you look year over year are on a lower level still, but they are on the rise. Q4 was a fantastic result, 70 million SEK higher than the previous quarter, which was a good result in itself. And it's driven, of course, by price increases, but we have a fair contribution from actually ramping up the Braavik and Soil mill. So the add-on on revenue, as you can see in the graph, you actually have 100 million sec in organic growth in the Q4 based on ramping up our own facilities. And we, as Henrik says, we have potential to ramp up actually at all five sawmills. And in the Q4 result, of course, the acquisition of Martinsson's added positively to the result.

Yes. Then moving on to renewable energy. Here we've been standing the last few quarters and we've said that it's not of so much interest because the electricity prices are in general low, which means that we do not earn as much money as we would have liked to when it comes to our hydro and wind power. However, the last few days I've been in media and said the prices are far too high. So how can we draw a conclusion from that, Anders?

Are you telling the truth, Henrik? It has been a strange year. The full year 2020, there was an abundant supply of hydropower at the same time as consumption was lower than normal, partly due to the COVID situation. And then we had the effect in that the Nordic system didn't really work the way it should due to problems with the cables. And that has pushed down the prices for electricity for the better part of 2020. But since just the days after Christmas, this ample supply of hydropower has turned into a maybe more normal situation, which means and that we have had cold weather. And so we are back to a normal situation where the Swedish electricity prices are determined by the fossil fuel costs. But if we take the next slide, the 2020, when we look backward, we were negatively affected by the low prices in the Nordics for the hydropower division. If you take out the one-off positive effect we had last year, the profit went down by 40 million SEK year over year, and that's due to lower prices despite the high production level. Q4, we did not experience the normal upturn in profitability. It was quite a muted result in Q4 due to the low prices. But as you mentioned, the situation has changed quite dramatically now in Q1, where prices have gone up a lot.

Which is a different question. In Sweden, we have an energy system which is fossil free. If you look at the situation in the rest of the world or in Europe as such, it's not the case. And one can't help thinking of the decisions now being taken by the European politicians to increase the ambition a lot when it comes to how to decarbonize Europe. where the aim now is to reduce CO2 emissions, where the base here is 1990 to 2030 by 55%, coming from 40%. Looking at the mix and thinking about the future, it's quite clear that over time, if we're going to get even close to achieving those targets, it will be more costly to emit fossil CO2. And I think it's a rather good idea to actually be close to, for example, in our case, when it comes to wood products, close to products like concrete and steel when they have to pay for the real climate cost. Most probably the prices will go up. Another thing which makes sense for us to think about is also regardless how this is going to be made, we will need in Europe a lot more of green electricity as we see part of the solution is definitely to decarbonize through electrification. And many people also think about, especially in Europe, and European politicians point at hydrogen as part of the solution. And hydrogen to make sense over time means a need of green electricity. Maybe it will be natural gas over a number of years to make it realistic. But over time, we will need a lot more green electricity. And again, for a company like us, I think it's more a question of timing when it makes sense to actually make use of the potential we have to expand when it comes to green electricity. In our case, it's wind power. And the same goes, I think, for wood products to be close to concrete and steel and to, in that case, more follow the cost for those products. We cannot save the world by producing houses and homes out of the wood, but I think it could be a rather nice ride. Looking at that, We are a climate-positive company. We are soon to finish our Yale report for 2020, where you, among other things, can read about our climate benefits. We store a lot of carbon in our growing forests. That's no news. But we also... Store and especially with substitute the substitution effects from the products coming from the forest is rather big we have acquired Martinson that adds on to wood and wood products wood products both store carbon in buildings and they also substitute other products like concrete and steel, which we talked about before and And also paper and paperboard makes some sense, even though it's slightly different than wood products. It's more that it actually replaces fossil fuels in a bio boiler somewhere. We also have, of course, the positive effects from our hydropower and our increasing wind power. As we have cables to other countries as well, most of what we produce, if it's not consumed in Sweden, it will substitute coal-fired boilers or energy or gas in other countries. And we do have some fossil emissions also in our industry, even though we work hard to reduce. And we have reduced our emissions by roughly 85% during the last 10 years. which gives us a quite impressive figure of 6 million tons in the case of Holmen of positive climate benefits. That actually concludes our presentation in a slightly different way than we usually do. But I think this makes sense because it's about sustainability in the long run. And we have to start thinking how to materialize on that when we go forward. And by that, we're happy to take any questions you might have.

Thank you. If you wish to ask an audio question, you may do so by pressing 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Once again, please press 01 on your telephone keypad if you wish to ask an audio question. Our first question comes from Johannes Granunis from Kaper Shavuot. Please go ahead with your question.

Yes, hello. It's Johannes Granunis here. Hope you can hear me.

Please go on.

Can you hear me? Yes, we can hear you. Okay, great, great. Yeah, I... i was wondering about electricity because we all seen that prices have spiked and you andric actually said something about this in in the daily press could you remind us about i mean i of the 3700 or so uh electricity consumption you have in terms of gigawatts how much of that is holman paper and can you give us an update on how much you're hedging and also on the electricity you're producing yourself. How should we see that? Are you selling that on long contracts and so on?

You're lucky we have the expert here.

Ninety percent of our consumption is within the paper division. We have hedged two-thirds of our exposure for this year and next year, and to a slight degree the year thereafter. The electricity we produce internally, two-thirds of that that we produce and sell externally, two-thirds of that we have hedged against the paper division. So one-third of the energy division's exposure is to spot prices. Yes.

Because it sounded quite dramatic what you said in Dagens Industri that you have shut down paper production because the hedging should offset this short-term volatility, right? But how are you thinking there?

No, but it does not to the full extent, and it doesn't make sense to try to hedge all the consumption we have. I think the big thing is when it comes to the electricity price running process industry, and in this case, electricity intensive industry, that industry is not made for running it with one hand on the handbrake. When you have too many spikes, too often, and you have to reduce or stop the production, sooner or later that costs money.

Yeah. Are you able to sort of run the paper business in a flexible way here and have control over variable and fixed cost, or is this impacting your operations right now to a bigger extent?

Yeah, it does have an impact. Every time you have to take a shot, you will incur extra costs. But when the prices are that high as they are during peak hours, only the electricity cost for producing the paper exceeds the revenues from selling the paper. So you can't produce on those hours.

It's an easy decision to try to stop during these hours. Also, we are becoming experts in starting and stopping, of course, but that's not the idea with the process industry.

Okay, I have a second question and that's on the new forestry value. I think I've read in your report and compared that to the annual report that the net growth of the forest, standing forestry is just below 1%. Am I right there? So the main uplift is coming from market prices and not the net growth. Can you comment on that?

Yeah, it is based on market prices, the bulk of the uplift in value.

Okay, thank you very much. Thank you.

Our next question comes from Robin Santaveta from Carnegie. Please go ahead.

Yes, good afternoon. Regarding the paper division, What is the price outlook now when you go into 2021? And could you also shed some light on the buying span, maybe the average time span you have on the price agreement, so we get an idea when we look at market prices and your price development?

You know, when it comes to pricing, we do business every day. And you saw the statistics that I think that gives a pretty good idea roughly of what has happened when it comes to price decreases because they are a bit lower now. But we are also currently negotiating prices. But it's also quite a big difference between different product segments one should remember. And then when it comes to how long contracts do we do? Well, in a situation like this, we try not to do yearly contracts or long contracts. We try to keep the door open for new business as the year proceeds. But as we don't know what will happen, that's a bit of speculating, of course.

All right, thanks. And then maybe, I mean... I hear what you say, Henrik, about prices, about cost of production in the paper business and about demand. Now, you have previously said that it's not topical for you to look at capacity shots, but now it seems even more sort of rational to do something with your capacity shots. Anything you're looking at at the moment related to the capacity or conversion, a shutdown or something like that?

No, it's not. But if you look at the level we are running our business currently, you see that we do take quite a lot of production curtailment as well. In order to keep our inventories on a healthy level, et cetera, and then to follow what will happen in the market and work on what we have and what we believe is our comparative advantages when we do the business. But no, we have no idea. We have no ideas to close down capacity at the moment.

All right, thanks. And then a final one on the energy part. That certainly looks quite attractive long-term and even this week. Could you just give an update on the projects you have going on, Blaubar's lead and some other ones And could you also provide an update about the production cost of a wind farm, for example, in Brobant-Venkava Tower?

That product is running well according to time plan and according to budget. We expect the first electricity to start producing after this summer and fully producing in the fourth quarter. Nothing has changed in terms of the cost of production. And then we are working on the permits for other projects. But as Henrik said, it takes time to get permits, environmental permits in Sweden. So it takes some time.

Not only in Sweden.

Around the ballpark production cost, what is it? Is it 100 sec per megawatt hour?

You think about the variable cost?

Yes.

If you include grid connection, et cetera, et cetera, yeah, that's where the ballpark figure is.

All right, thanks. That's it.

Thank you. Our next question comes from Christian Koppel from Laudier. Please go ahead. Okay, it appears Christian has dropped out by accident. Our next question comes from Linus Larsson from SEB. Please go ahead.

Thank you very much, and a good day to everyone. You had a strong... RESULT IN PAPERBOARD LIKE YOU SAID IN SPITE OF THE MAINTENANCE STOP AND JUST NOW BRIDGING INTO THE FIRST QUARTER IF YOU COULD JUST SPEND A MINUTE MORE ON THAT SO THE BONUS PAYMENTS IN THE UK THEY THEY DROP OUT TO ZERO IN THE FIRST QUARTER IS THAT RIGHTLY And then also on the maintenance guidance for the full year, why so high? Why would it be 250 million? It sounds higher than you normally would have, even though you have two stops in 2021.

Should I start with the market situation? If it comes to paper board, first of all, I didn't mention perhaps, but our order books are fine and prices are stable.

And then the bonus. Yeah, this is an exercise that is done in the UK every fourth quarter. And it's happening every time it can be zero or it can be 70 or it can be 40. But it will we will we will not have any bonus in the first quarter. And the maintenance, it's actually working on a maintenance shot that is, as you point out, it's much bigger than we normally have. And it's because we have to do an inspection on the boiler. That is the first inspection we've done since we started up the boiler that is of this scale, and it's eight years ago. And we have to take down the boiler for more than a month. And that's the reason for the hefty maintenance cost in Q2. And it's actually attached with a bit more of insecurity on that number than we normally have in our maintenance.

But we don't close down the whole mill for a month?

No, but the boiler.

I see. And if you break that down... the Iggesund and the Workington stocks respectively?

They are about the same size.

Okay. All right. Okay. And just on the bonus payment in the UK, could you please remind us how big that was a year ago in the fourth quarter 2019?

Roughly the same. And 40 million is the normal value of that bonus. That's what the government is aiming at. But they don't always succeed. So that's a normal value. It's a quasi-market political-based system.

Exactly. Great. And then just one more question, if I may. division has a very strong fourth quarter. And just to understand the various parts, on an EBIT level, how much did Martinsson contribute to it?

Roughly 30 million SEC.

Okay. And how is that business developing? I understand it's very different from the other parts of wood products that you that you own from from before it's not as volatile as what we do at braviken for example so it normally a little bit more stable over time so no that's pretty as you go into 2021 that should be relatively stable you think

The Martinsson business is much more based on sales in Sweden, more wholesales that have a more stable pricing picture than the production we have especially done in the south and part of Sweden. And as you can read out from our figures, the margin is lower on Martinsson than on the remaining, the old timber business, but it's a more stable level.

And then we just bought it. We need to learn a little bit as well.

Sure.

Thanks. That's very helpful. Thank you. Our next question comes from Christian Copper from Nordea. Please go ahead.

Yeah, thanks, operator. Just a few follow-ups from my side. Firstly, it's on the forest valuation side. One of your competitors, I don't think I need to say who it was. And I don't know if you can comment so much about it. It's just that it seems like they took up the forest value per cubic meter much more than what you did. So just, I don't know if you can comment anything on the market trends, you know, if you have been a bit conservative on your valuation or something like that.

And it's difficult to, I can only speak for ourselves. We base it on the market prices in the areas where we have our forests and it's not completely the same composition as the other peers, our peers have. And so we might have a slightly different composition in price development. Right.

And on the wind power project, I know that you previously, if you look at the project Blister Liden, I think you previously thought that you expected environmental permit by the end of 2020. And it seems a little bit delayed. Do you have any guess on when you expect the permit?

It will not be as bad as a nuclear reactor in Finland, I can promise you. But no, you're right, it's a bit delayed. And if we knew, we would tell you. But if this year, late this year.

But we don't expect to get it to take an investment decision this year on that wind farm. We will not manage that.

Right. And if you look a little bit more longer term on the wind projects, it's fair to say that you will probably focus more on projects in the southern parts of the country because electricity prices are typically higher. And if you have any news on how those projects are progressing,

You are right in the sense that as things are today in Sweden, we are a bit concerned about the transmission capacity between north and south, even though I know a lot of people are working on that. So for us, it makes sense, yes, also to make use of all the land we have in the south and try to... realize a rather big wind farm or farms down south but it's the same there it's environmental permit is a very important part of it we are working on potential wind farms but we have not applied for a permit as we speak but we have ideas yep

And then finally for me, we can clearly see that pulp prices are coming up steeply. And just wondering if you could see some upward price pressure on paperboard. You said, Henrik, that you see the prices are stable, but in general... Would that be positive or would you just see the increased pulp prices more neutral on the paper board market?

No, that's in general positive, I would say.

But please remember that paper board prices hardly move. No. It takes years for them to move.

But Christian, you know that a number of producers are not fully integrated. They have to buy the chemical pulp. And when the pulp price goes up, costs go up, and it's not so much room for at least price decreases then. So that way, indirectly, I think it's good news if pulp prices move up a bit.

Yep. Okay. Thank you very much, guys. Thank you.

Thank you. Just as a quick reminder, if you wish to ask an audio question, please press 01 on your telephone keypad. Once again, please press 01 on your telephone keypad if you wish to ask an audio question. Our next question comes from Martin Melbrine from ABG. Please go ahead.

Thank you. Regarding the sawmilling business, what kind of price change do you see in Q1, quarter over quarter? SDA was talking about 10%. Is that right?

It's quite a big difference between spruce and pine right now, but at least prices are moving up.

But recall that we've had a very strong pricing momentum as you see from the graph. So historically strong pricing movement towards the end of 2020.

Maybe you saw from the graph that it's quite big difference between Spruce and Pine as well. We don't know where it's going, but...

Okay, and then one question about the CO2 effect. So you have 6.4 million tons of CO2. I can see that you benefit indirectly via product substitution effect, but do you benefit in a direct way in any way from surplus allowance sales, etc.? ?

Yes, but that's a small thing. You know, we hardly emit any fossil fuels when we produce our products. And we do receive a free allotment from the EU based on the best in class level. And we have excess CO2 allowances. that we sell on the market there is a new regime starting 2021 where the allowances will be reduced but we don't know by how much until this summer okay could that be a meaningful number or is it flat given the price increase

Difficult probably flat I would say best guess Thank you, thank you next question comes from Oscar Lynch Yes, I have three sets of questions and I thought I'd start off with maybe the easier ones and then we take the more difficult ones towards the end, if that's fine with you. The first set of questions is on the forest products. Oh, sorry, the wood products side. You mentioned Martinson here and that you just bought it and that you said you need to learn that business. What kind of synergies can we expect from this acquisition, and when should we expect to see those synergies? That was my first question.

I think you should remember that we bought a very nice company, good, well-run company. So there aren't that much of synergies. But what we do see is that some of the products Martinsson's produced, now us, together with what we had and what we have been building up when it comes to investments we've done, for example, at Braavik. And that combination could perhaps over time give us some better market share, for example, in the Nordic countries. But it's no big things when it comes to that part.

Maybe I can add that the major synergy is that we actually use our own timber in these sawmills, which enables us over time to develop the sawmills to their full potential because we have a better ability to supply them with the timber that adds most where they can add most value in the production process but it takes time to to a number of years to realize that full potential of the soils thank you that's what i was thinking mainly about the the um the wood sourcing i mean would you care to sort of uh sort

put a number on that? What kind of value could that amount to if you look at it longer term?

It's not possible to put a value. You have to recall that running sawmills, if you're really good at that, that's actually attention to details nitty gritty that over time will create value. But it's very difficult to in an Excel spreadsheet calculate the value on that.

But the position on the wood market, as Anders says, has become stronger. And part of what we bought was not only sawmills and production units and building systems. It was also a forest organization, which we believe is crucial for us going forward, having good control of the raw material and also being able maybe to alter a little bit how we feed the sawmills.

Absolutely. All right. My second question here is on forest valuation. We saw some transactions for corporate forest lands towards the end of last year at what seems very high valuation levels, a significant premium over the mainly private forest land transactions, which are the basis for your book valuation. What do you believe that premium is? Should there be one long term or is this just something that we're seeing right now and this should come down? What's your view on that, on the premium for corporate forest lands over private forest lands?

I think we should refrain from speculating how big the premium should be, but that there is a logic behind it. Yes, it's difficult to buy bigger forest land. It takes time. It's cumbersome. It's quite costly. So if you have the opportunity to buy a bigger plot of land, and that's often in a legal entity, it makes sense for you to pay a premium. And then if you're really big forest owner, then you actually have the ability to add value like establishing wind farms on your land that you as a small forest owner can't. So there are arguments to support the case that larger forest land should be valued higher than smaller plots.

So just taking that comment, I mean, I can understand it's difficult to know what the premium is, and I'm not sure, and that's why I'm asking you. But I agree with you that there is probably some premium to large forest land holdings. I mean, do you see any logic for incorporating that in setting your book value? Because, again, the book value is supposed to reflect the market value of forest land.

You're correct, but you don't have statistical evidence on that. You can have an opinion on it. You can have view, but you can't support it by hard facts. So that's why when we do our book valuations, we actually look at all the transactions that are... in the areas where we have our forests and look purely at the transaction values. And we have not taken into account the factor if there is a legal entity or a private individual selling or buying. There's too few transactions to make that such conclusion and be confident about that conclusion.

Fair enough. My final question is also on forestry. There's a bit of a renewed debate about biological diversity of forests and the impact of even sustainable commercial forestry on this and in the Nordic region. And I realize this is not a black or white issue, but it's a scale.

I don't know.

Do you believe this is a relevant debate and are you in your forestry at the right point in that scale or do you see a logic for you to

shift a little bit going forward no i think we if you look at what we do in the forest today it's so different from for example 20 30 40 years ago and also so much better and so much more sustainable it has changed a lot but also when you look at um how we treat the forest and how we manage the forest, we also have to sometimes be able to lift and look at sustainability in a broader view. And yes, I know there are people who think that we shouldn't touch the forest at all. When we look at the climate effects of the forest, we see that it's clearly better to manage the forest because the substitution effect is quite much bigger than having the forest as carbon sink only growing. And over time, it won't grow in any way more than to a certain level. And then you have a zero-sum game. So we have a lot of... programs where and we also have a legislation in Sweden and they have corporations etc where we follow we are also certified according to PFC and also FSC and we follow that of course and we believe we do make use of the forest in a very sustainable way there has always been different ideas what to do with the forest But we are convinced based on facts and also our own experience that it makes much more sense to manage the forest in the way we do. And don't forget to look at the substitutional effects, all the good that is coming from the products coming out of the forest. For example, houses and hopes being built out of wood. subsidizing concrete and steel also paper and paperboard to some extent replacing plastic and finally bio becoming bio biofuel and you also when it comes to the forest we what do we do we build wind farms on the land it also makes sense so well yes the forest should be managed rather more than less thank you yeah thank you thank you

Our next question comes from Johannes Cornelius from Clapper Chevron. Please go ahead with your question.

Yes, hello again. I just want to come back to the paper board division and the outlook. I understand you have a very stable pricing outlook, but can you talk a little bit about the mix for Q1 and possibly other quarters? When the market is now very strong, I can imagine you're selling more inside Europe and not so much the overseas market, and it's just having a positive effect on margins.

Thanks. Actually, Peter Ward is the odd man in this industry. First of all, pricing, as I would say, they're stable, which is unusual in our industry. And second, Paperboard, at least the paperboard we sell travels well. So we do have good margins on selling outside Europe because we have found those pockets that pay well. So there is no, we don't have those kind of big shifts in our business. It's a bit boring, you can say.

And shifting geography is minor as well. It's when we increase production, of course, we look at where best to offset those new volumes.

And referring back to our comment throughout this year that we have had a good product mix, we have changed the product mix to the better during the year. And the ambition is, of course, to sustain that improved product mix, to improve it further. That's a challenge.

Where are you on operating rates, by the way? Your operating rate must be quite high now, or as you want to have it.

I think if you look at it, we are fully booked. We produce as much as we can. Okay.

Yes, yes.

And then we can always hope for more, but that's efficiency, not operating rate in that sense.

Okay. Good to know, good to know. I also have a question on CapEx. What do you foresee for this year? And perhaps you can also touch upon maybe 2022.

Excluding our wind farms, it's at the normal level, which is around a billion a year. That's sort of what we foresee in the coming years. Then you always have delays and changes between the years. And relating to the wind farm, it's some 800 million SEC being paid this year.

Okay, okay. On paper, how's the order book situation there? How should one think about volumes playing out for the coming quarters? Is it possible for you to show any sort of growth as you see it now for this year compared to last year?

Remember, in paper, we are not running full. We do take production curtailments and market-related downtime. So, yes, the aim is to run more full than we are right now. But where we will be, it's impossible to say at the current moment. Remember, paper is really affected by the pandemic.

Of course. But you showed an uplift in volumes in the fourth quarter in paper. Having said that, very easy comparables in Q3. But do you foresee to do more volumes in Q1 versus Q4?

We hope so, but I cannot guarantee.

Okay, okay.

Thank you very much. And remember that the paper business is very much affected by the lockdowns that still persists predominantly in Europe. So it's like putting a wet blanket over the paper business.

Hmm.

Okay, thank you.

Thank you. There appears to be no further questions registered, so I'll hand back to the speakers for any other remarks.

No more questions? Sorry. Ben, thank you very much for taking your time, especially as it's now almost 3.30 on a Friday afternoon. So it's been good and interesting questions. Thank you and have a nice weekend.