Holmen AB

Good morning everybody and welcome to the year-end report presentation for the Holmen Group. It's me, Henrik Sjölund and Anders Jernhall. We will go through the presentation and then as usually we take your questions after the presentation. So let's start. Well, in the fourth quarter of 2024, we were able to deliver a bit over 700 million SEK. It's, as you know, a bit slower in the fourth quarter. It was a bit slower also in the fourth quarter for us this year. Bit slower maybe than normal. And we had two stops. And as I said, the market a bit softer. Still a good result. And if you look at the full year of 2024, 3.7 billion SEK, it's in a historic perspective, a really good result. If you look at our industry, we were able to deliver 16%. And if you take it in a historic perspective, we've been able to deliver actually return on capital employed of 19% over the last 10 years. And to be honest, in 2024, we didn't have any contribution from wood products. So if you look at board and paper, we were actually a little bit over 20%. We have had a meeting in the board of directors in Holmen and given the good result, our business model and the outlook in our financial position, the board of directors have decided to propose to the annual general meeting an ordinary dividend of 9 SEK and an extra dividend of 3 SEK. Our position is strong, as I said. And just a reminder what we have done the couple of last two years. We've actually distributed to the shareholders six billion SEK through dividends, extra dividends and some sharebacks, buybacks. Changing subject totally, Anders, before we go through the forest valuation, a few words about the wood market. I think I've been standing here for a couple of years now, at least talking about wood prices only going up. And that was the case also in the fourth quarter, especially timber became more expensive. And as we stand today, pulpwood is maybe slightly better balanced, not as much pressure as it is on the saw log side. You can see also here that there is a spread between the average cost for us, in this case, between saw logs and pulpwood. And it's in south of Sweden where the timber is extremely expensive. And also in the case of us, we are, especially our saw mills down in the south, are in the area most affected by spruce bark beetle infestation, which we'll come back to a bit when we discuss the wood products business. But this has been going on for a long time, and this is a challenge, especially the big difference between the different parts in Sweden now. If we then look at, and this is our own calculation, to see what's left after you have sold wood products and pulp and paid for the wood. If you look at the wood product side, the sawmills operations, well, there the relationship between what you pay for the wood and what you have left is fairly normal. But if you look at the pulpwood sector, still there is a quite good margin, isn't it? It's not bad. So as it looks right now, yes, the pulp mills can pay the high price for the pulpwood in the market. Higher cost for wood, bad for industry, good for the forest.

Good for the forest owner, yes, Henrik. We've seen that these price increases that have been going on for three years now have increased our cash flow from harvesting by 80%. And if you look at specifically the third quarter, we've seen that profit went up a bit due to seasonally normalizing level of logs, which is low in the third quarter. and as usual in the fourth quarter we update our book value for the forests and they this year we are arrived at a figure close to 58 billion sec an update on how do we do this as you can see on this map our assets are spread over the country and there's a price differences what you're prepared to pay for properties where you are located from north to south. But there's also a difference if you're close to the coast, which normally is where you have production facilities, or if you are up towards the mountains where the trees grow a bit slower and you have a longer transporting distance to the wood-consuming entities. And to take this into consideration when we do the valuation, We look at the transactions that have occurred during three years and to get three years worth of... And the reason for that is that individual assets or property sales have a bit too much influences on one year transaction statistics. So we need three years or our assessment is that we need three years to get the accurate valuation methodology. We use three ones. We use two price statistics that are delivered by Svefa and Ludvig & Company. And it's from their databases on how they have compiled all the transactions that have occurred in Sweden. And they slice it a bit differently between them. And then we have our third methodology, which is based on all transactions that have occurred during this three years period, where we take into account which part of a county that you have traded it in. Some of these countries are huge, like Västerbotten, and they have both coastline and inland. And we take into account how much trees are standing on the forest properties that have been traded and how fertile the ground is. And by using these three methods that have slight differences between themselves, we arrive at a value that actually this year was within plus minus one percent of each other. So it's a very narrow range of this close to 58 billion SEK. and it's also and i want to highlight we don't value one million hectares we value 4 000 properties or a bit more than 4 000 properties we own across sweden average size of this is a bit more than 200 hectares and you can compare that to the market statistics over the last three years We have traded a bit more than 900 transactions in these areas and the average size of that has been around 100 hectares. And just a reminder on forest properties, this is a 20-year history that shows the average price expressed per cubic meter in Sweden. And that has been quite a stable development. And this is one year transactions for the whole of Sweden. And so when you see the headlines that prices have moved up or down a lot, you have to take that with a bit of a grain of salt because prices don't really move that quickly. They are affected to a large extent, which population you use and compile for a year. Normally, you have a good correlation between selling prices of wood and the price development for forest properties. But the last year you can see that wood prices have clearly outpaced the price development of forest properties. After these reflections, Henrik, back to you.

Well done, Anders. Yes, let's say a few words about the renewable energy market and electricity prices. It's quite a strange situation we have right now, where we see that prices in Germany when it comes to electricity and energy, for that sake as well, are really high, about 100 euros per megawatt hour. And in Sweden, not only do we have in north of Sweden, where we happen to have most of our production, an extremely low price. It's been below 15 euros per megawatt since the summer. But it's also spread, as you can see, between north of Sweden and what we call SC3, say mid-half south Sweden, where we have our paper mills, where you can see the prices are 40, 50 euros. And this is a situation in which you know what the discussion is in Germany, how the industry is struggling to survive, and simply because energy is extremely expensive. And what we see now is that in Germany, they are a bit scared of, well, how much gas actually there is and if they need more. So when they send a signal to the market, buy more gas to fill up the storage, Prices go up. And to make the calculation, just to understand electricity and gas, well, you need two megawatt hours of gas to produce one megawatt hours of electricity. And a gas price of roughly 50 euros, that means roughly 100 euros. And then you need to buy a bit of emission rights as well, so you land above 100 euros, as the situation is right now. It doesn't help us much that it's expensive in Germany, Anders, but on the other hand, the difference between Germany and SE3 is still, it's a good base for cost competitiveness when it comes to our paper production. But as we're talking about our energy division now, it's the blue line, SE2, where we have most of our production, and it's very difficult to make money when prices are that low. However, at least we've been able to actually get some premium when it comes to the production we have made. And we have got roughly 30%. But as the levels are as they are when it comes to the price, difficult, isn't it?