Holmen AB

Good afternoon, everybody, and welcome to the year-end report presentation for the Holman Group. It's me, Henrik, and Stefan, as usual, now I must say. Thank you. You're most welcome to listen to us. We do the presentation, then we're happy to take all your questions, and we are especially happy that you take your time on a Friday afternoon like this. So let's start. I think if we just make a very quick summary of the year, it felt like we were a bit optimistic in the beginning of the year, but after a while it changed into... geopolitics tariffs and also cautious consumers not really spending and also construction business that didn't really take off but we come back to that a bit late Despite challenging market conditions, we were able for the full year of 2025 to deliver close to 3.3 billion Zinc, which we consider as fairly good. Also in the fourth quarter, but I think in the fourth quarter we'll come back to it when we go through the different business areas. It makes more sense. If we then take our industry, which means our right now loss-making sawmills and board and paper, we've been able during the year to deliver return on capital of employed of 15%. And based on our performance and also our financial position, We had a board meeting this morning where the board of directors decided to propose to the general annual meeting to increase the ordinary dividend from SEIK 9 to 9.50. And just to remind ourselves what we have distributed to our shareholders. The last five years, in total, $13 billion in dividends and buybacks. And given, as I said, our financial position where our debt-to-equity ratio is at the current moment roughly 10%, we are in a solid financial situation. All right. Then a few words about the wood market, and we come back to forest and forest evaluations a little bit later. And if we start with the fourth quarter, of course, and then we will also comment on the storm a little bit, which happened in January. But what we saw in the fourth quarter was that the industry is running at a bit lower activity and also a little bit slower demand for pulpwood. And prices have come down a bit. And price lists have been adjusted. But what you see here, remember, this is delivered to our meals, both pulpwood and saw logs in the fourth quarter, meaning it includes also logistics and administration costs. On the saw log side, however, we see that prices were largely unchanged. Most driven by the sawmills. We see that most sawmills, almost all the sawmills in Sweden, still have been running at more or less full capacity. And you can see that in the statistics, which we will also come back to when we go through the sawmill operations. This is the situation we had when we ended the year, and then came the heavy storm in mid-Sweden in January. To start with, it has limited effects on Holmen, but just to give a figure on what this is, this is roughly 10%, or 10 million cubic meters is roughly 10%. 10% of what we normally harvest in a year in Sweden in total. In our case, a bit more than 300,000 cubic meters in this area is also roughly 10% of what we in total in Holmen forest land harvest in one year. And in this area, where we have now 300,000 cubic meters laying down, it's roughly one third of a yearly harvest. What will happen to that is, of course, that that will be more local supply and exactly what kind of effect on the local market in terms of pricing for pulpwood and saw logs. That's a little bit early to say yet. But Stefan, before you talk about the result, will it cost us a lot of money to take care of the trees now laying down?

In general, looking back at what the costs have been with previous storms, we see that the added cost for taking care of these kind of volumes is approximately a bit more than 100 Swedish kronor per cubic meters. So for the next year, maybe 30 to 40 million Swedish kronor. That will increase costs in the forest division. Looking at the result for the fourth quarter, that amounts to 403 million Swedish krona. It was heavily negatively affected by a write-down of failing rights of some 160 million Swedish krona. The forest division in Holmen is not only responsible for the management of our own forest, but also for the supply of wood to our industries. The breakdown that we did in Q4 refers to felling rights concerning the sawmill operations, and as you will see later on in the presentation, the financial conditions for the sawmill are really challenging for the moment. That also meant that we needed to adjust the value of these felling rights. Underlying performance in the forest division was good in Q4, if we exclude this write-down. The result increased by some 25 million Swedish kronor compared to the third quarter, and that is mainly due to higher harvesting volumes as we harvested a bit more than 800 cubic meters in Q4. Moving over to the updated valuation of our forest holdings. As you know, we usually do this exercise every fourth quarter every year, so also this year. We own 1.3 million hectares of land. Approximately 1 to 1.1 million hectares of that is the productive forest land and it is that part that is included in this valuation. 65% of our holdings is up in the northern part of Sweden, as you see from the map to the right. 25% in the middle part and some 10% in the southern part of Sweden. Our holdings consist of more than 4,000 individual forest properties with an average size of close to 250 hectares per property. The valuation that we do is based on transactions with forest properties in the areas where we own forests. We include transactions from the last three years in our model. And as you can see from this table, that means that we have included close to 1,000 transactions in the valuation model. The average size to the right in the table of the market transacted properties is 100 hectare per property, while ours are two and a half times the size of that, and I will come back to that later on. Looking at the historical development of property prices in Sweden in general, we see that it has been quite a steady increase over time. And from 2005 up until today, the annual increase in price has been 4.3%, which is a bit more than two times the inflation during the same period. To that, of course, we should add the cash flow, etc., from the owning of these properties during this time to get the full financial result. Historically, property prices have tracked wood prices quite well. What we have seen the last couple of years is that the increase in wood prices has not yet at least been reflected in the property prices. Coming back to our forest, the value based on this updated valuation is 57 billion Swedish krona. That is a small decrease by 2% compared to the same period last year. And the decline in value is due to the fact that we this year does not include the year 2022 in our valuation model. And that particular year, prices for forest properties were higher than normal. We also do a reference valuation every year. This year it was in Västerbotten up in the northern part of Sweden where we have 370,000 hectares of land. The outcome of the external valuation were on par with our own model. There is although a size premium in the market, meaning that larger properties trade at a higher price than smaller ones. We don't include that in our model, and it has not been included in the external reference valuation either. But if we would have included it in the external valuation, prices would have been 8% higher.

Correct. But we do not take into consideration that we own forest land based on company-owned forest land either, which normally goes at a substantial premium.