Holmen AB

Good morning, everybody, and welcome to the Interim Report presentation for Holmen. It's me, Henrik Sjölund, and Anders Jernhall. We'll go through the presentation, and then we take any questions you might have after the presentation. So let's start. First of all, a comment on the result, which was 980 and a bit more millions in the second quarter, which is actually a good result. We think, given the market conditions we have and the economic situation we have, And particularly happy about board and paper, actually. And if we look at our industry and how we have performed, and we include also wood products and take a look also back some years, we can see that, well, in the first half year of this year, we performed some 16% return on capital employed. And if you look at what we have done over the last 10 years, we have reached an average of 18%. If you then look at our financial position, we have a very strong financial position also after having paid 1.8 billion SEK in dividend in the second quarter. And we have a net debt of 6% of equity or 3.3 billion SEK. Given the strong financial position, the board of directors in Holmen have decided to execute on the authorization from the AGM to buy back some shares up to a maximum of 3 million shares. And you might comment on that a bit later. Changing subject a little bit from financial position to our different divisions, starting with the forest. Or let's talk about the wood market. And we have had a situation now when it comes to the wood market in Sweden where simply supply hasn't been enough to meet demand from the forest industry and the energy sector. We have seen prices going up for wood for some time, and also during the second quarter, prices continue to go up. We also see a difference between northern parts of Sweden and southern parts of Sweden, which is bigger than normal. It's actually a historically big gap between these two areas in Sweden. And one can ask, can we pay, or can the industry afford to pay these high wood prices? Well, if we look at... the margin between the market price for wood products and pulp and the net cost for pulp wood and timber for the sawmills. We can see that if you look at the sawmill industry, first of all, Well, the margin is more or less on a normal level, helped a bit by the pulp mills paying fairly good prices for wood chips and also for other residuals for energy purposes. If you look at the pulp side, well, the pulp mills actually also at these pulp wood prices have a pretty good margin or margin. When you compare pulp price versus net log cost, the margin is as big as it has been historically, not when we reached the peak, but not on a bad level at all. So Anders, we are talking about our forest division. Higher prices for wood means also higher revenues.

Yes, these price increases that we have seen in recent years have increased cash flow from the forestry operations, from harvesting. We are at the level which is roughly 60% higher than we were three years ago when taking down the trees and transporting them to the industrial activities. And looking specifically at the second quarter, we always seasonally have a lot of harvesting of timber logs in the second quarter, which in the current pricing environment means that we get a boost to profitability of the forestry division. We do also, and you can note that we have a bit higher change in value in our forest. It's the higher wood prices that is translating into a higher change in value in our P&L. Next slide, Henrik. We can conclude that the... Wood prices has risen or doubled over the last 20 years. If you take out the inflation component, it means that wood prices have increased on average 1.6% per year in real terms, which is almost twice as high as the inflation rate has been. And just an illustration of the nature of the assets we have, it has increased 0.6 per year, the volume of trees we have standing in our forests. And these two factors illustrate the real nature of our forest assets. Back to you, Henrik.

Thank you. So higher prices, higher revenues, and also support the value of the forest itself. Let's move on to renewable energy. If we take a look at the market, we can see that after a quite cold winter actually in Sweden and high prices in the first quarter, prices in Sweden, both in south of Sweden and in north of Sweden, came down to relatively low levels. In Germany, well, we have a lot of solar, we know that, so daytime sometimes prices are even negative. But the cost for producing energy during nighttime based on quite high cost for fossil energy made that the gap between Swedish prices and German prices actually widened again in the second quarter. You will come back to what electricity prices means for the financial impact. We'll go through one more thing. You know that we are working hard to get environmental permits for wind farms on our own land. This is just an illustration to a little bit better explain where we are in the different stages of getting the environmental permits. Right now we have two wind farms up and running. We have one under construction. We have one more permit that comes up for decision next year. And we have a number of projects in different phases. We also made a screening of our total forest land to see the potential, which is on the left hand side of the slide. It's a huge potential, but as always, it depends on environmental permits to be able to take them to an investment decision. We have a couple of them up and running, as we said, same time as electricity prices are not that high. But what we have with the potential when it comes to the projects, that's a potential to long term be able to support emerging green industry we at least see coming in sweden the question is when exactly it will come and to what extent this is the best forecast we have at the moment but in a few years time of course it should be a different situation with a lot more green industry coming into place okay anders electricity prices and revenues