Holmen AB

Good morning everybody and welcome to the interim report presentation for the Holmen Group. My name is Henrik and together with me I have as usual Anders and we are going to go through the presentation and after that we are happy to take any questions you might have. First of all, Despite quite challenging economic situation in general and also soft market conditions, we were able to perform a really good result also in the third quarter, which we're really happy about. And we will come back to a bit more details when it comes to different business areas as usual. But just a reminder when it comes to our balance sheet. Today, if you look at the forest and energy, it actually makes up to some 80% of the balance sheet. And then we have during so far this year, we have distributed quite a lot of money through an ordinary and extra dividend. We also bought back shares. And we have invested actually quite a lot in our industry as well. So let's go into the different business areas, starting off with forest. Or not so much the forest, maybe more the wood market as it is right now. And what we see is a couple of phenomena, first of all. And if we start with timber or saw logs for the sawmill industry. First of all, Sweden and the Nordics is normally the place to go to to find or to have access to raw material. Right now, we have the feeling that... Or feeling, we see that... The sawmills in Sweden, they are producing as much as they can, but they cannot really get hold of enough timber to run at 100% utilization rate. And that's something we normally do not see. When I said that normally you have access to fiber, we also saw other people coming in and investing in Sweden, like foreign investments, both when it comes to a couple of different sawmill companies in Sweden. and on the timber side there is pressure it's not easy to get hold of the timber if you look at the pulp side however it's not as tight on the other side on the other hand it's a lot of new capacity coming We have Östrand, we have Obola, we have the Chemimil, we have Russia being out of play for the moment. And that all together, even though it's not as tight as the timber situation, we see this as a structural challenge going forward. You can look at the prices and you see that they've been going up also during the third quarter. It was pressure on prices upwards. And where we are right now, we are roughly 30% higher than the long-term trend. But if you look at it from a 20-year perspective, I think we are more in line with inflation on this. And higher revenues from the forest means normally it translates into a better result also for the forest divisions.

Yes, indeed it does. The profits go directly. All the costs have increased a bit. We now earn some 100 million per quarter more than we did just two years ago, thanks to the quite steep price inflation. This year we have not had any forestry sales, which we had in the past years. That's why the step up in earnings is lower than this 100 million SEC. What you could note is that Q2 is normally a seasonally strong quarter from a harvesting perspective and it goes down in Q3 while we have been able to lift our profits in Q3 and that's thanks to us lifting log prices but actually we have been able to increase pulpwood prices to our external customers more despite as Henrik mentioned that this market is a bit more balanced right now. But people are prepared to pay more for the pulpboard to be able to run their mills when they can.

Exactly. Thank you. I didn't mention that we have a feeling that most of the customers we have, they never give up any positions, even though the market is not as tight as the timber market. Okay, moving on to paperboard. What we experience right now is demand down some 20%, which is something we are not used to see. It's destocking amongst customers or end users, but it's also, I guess, for most players, quite high stocks also on the production side. This is something that we... The big question for us is to understand the underlying demand and what the underlying demand will be going forward in a bit longer perspective. Right now it's down quite a lot and it's affecting everybody, also us. We are not running at full utilization rate. We take some market-related downtime, which has an effect also on demand. Sometimes on efficiency in the mills. And the question is, if we go back some time, we saw that the demand increase was roughly 1 to 2% per year. And then during the pandemic, most people thought, well, maybe 2 to 3, maybe 4% is the new normal. Now it's very difficult to know exactly what it will be. And after having coming down some 20 percent, of course, it will bounce back. But we will see a bit later on what the real new underlying demand will be. If you look at the pricing situation in the market, remember that when it comes to our products, especially the solid bleach board, it's an odd product going a bit different than the rest of the products in the market. We saw that, for example, Whiteland Shift, Craftliner, Testliner went up a lot. During the pandemic and at the end of it, we did not increase prices as much. And when we look at the situation right now where there is some pressure, the same goes for especially solid bleach board and to some extent also fallen box board, that it's not moving as much. Our prices are largely stable. Also remembering that the cost pressure is there. It's not the same cost as before. We have both the cost for pulpwood. We also see that chemicals, they are not really coming down. Not much, at least. A little bit, but not that much. So, not running full, Anders, means... It translates...