Nordic Paper Holding AB (publ)

Good morning and warm welcome to this Nordic Paper presentation on the Q3 results. My name is Henrik Essén. I'm head of investor relations. And today, the Nordic Paper CEO, Anita Sjölander, and CFO, Niklas Eriksson, will present the report. And as you heard, the presentation will be followed by a Q&A session. With that, I leave the word over to Anita.

Thank you, Henrik, and thank you all for attending today's presentation. As Henrik said, my name is Anita Sjölande. I have the privilege of being CEO of Nordic Paper since 2019. I spent almost 30 years now in this industry, and my reason for that is really the passion I have to work with a product that really can make a difference when it comes to replacing fossil-based materials and also the way it is supporting our everyday life. It's present in our everyday. As you probably know, the private equity strategic value partners launched a public offer for all their shares in Nordic Paper, and that Shan Ying, the current owner of 48.16%, has already accepted the offer. So for us right now, we are in a waiting mode until this part of the sales process is finalized. And as a management team, we do not have more to share today on this topic. So today we will solely focus on the quarter three report and as usual, give an outlook for the coming quarter as well. And that takes us straight into today's report with the headline, stable performance at a high level. We're really proud to report a very stable result at a continued high level. And in fact, our net sales reached a new record level when it comes to a quarter three period. It has increased by approximately 2% in local currencies compared to the same period last year. Our sales prices have increased by 3% compared to Q3 2023, and EBITDA and EBITDA margin is in line with last year. Our margin is on 9.6%, which is slightly lower than last year. And we have in this quarter some negative impact from higher costs in connection with the maintenance stock performed in Beckhamma in the craft paper segment. And we will come back to that later in the report. And our natural resource segment continued to report healthy margins. The net depth to EBITDA is up somewhat. And that is also according to plan as we are performing investments currently in Beckham Hall. However, it remains on a healthy level at level 1.4. I mentioned a new quarter three record for net sales. So let's look into the development for net sales and EBITDA on the next slide. I said net sales is up 2%, and the new Q3 record level is 1.1 billion Swedish crowns. And the key drivers for the increase is the 3% higher sales prices. We have 2% positive volume effect, while currency contributed negatively by 2%, and also we have a reduction of the net sales when it comes to mix with 1%. but altogether an increase by 2% on net sales. When it comes to the sales prices, we've seen a good trend throughout 2024, but actually this is the first quarter in this year that the prices are higher than the same quarter last year. As you can see in this graph, you see the seasonality that we have in our business on net sales and margin. And the reason for that is that we perform our maintenance for all the production units in quarter three. And this year, we have a larger than usual effect on the margin. And I will talk about the numbers and how that's affected when we come to the crop paper segment. Maintenance stop, those require a shutdown of the production that we normally run 24-7. But still, we supply the customers with paper during these weeks. On the next slide, we will look into the sales volumes and how they are developing. And here you can see that we have the same sales volumes as we had 43 last year. It's a healthy demand in the market. On the group level, they are on equal size. The slightly lower sales volumes in craft paper are compensated by an increase by the same magnitude in the other segment, natural grease proof. The sales volumes increased in Europe, and mainly that is from the craft paper segment, while natural grease proof increased more in Middle East and Africa. So, sales volume, net sales, EBITDA and margin on the same level as last year, a very stable performance. But I would just like to give a little longer perspective on the development. So, on the next slide, this slide, we will look into a longer time period, the EBITDA for the last five years for Q3. As you can see, it is a significant increase in the last years. And it has been a great work done in the company to achieve this positive development. We've been working with our sales prices, volume increases, and also a better product mix. And that combined with a good control on the cost side and our addition to support by currency, we have achieved this great performance development. I already mentioned the two segments in the report and some different developments in these segments. It's time to look into the development, and we will start with the cross-paper segment. With a good demand, we saw in quarter three where we increased our net sales by 4% compared to quarter three last year. Higher sales price, product mix, and sales volumes all contributed positively to net sales. while currency had some negative effects. Net sales increased in the main market Europe, a little bit slower in Asia, and all the other markets were stable for the craft paper segment. However, towards the end of the quarter, we noticed some signals of a slowdown in the craft paper market. The increase in the sales prices, 2%, That compensated in full for the slightly higher raw material prices. And what we're seeing during the quarter is continuing higher prices for pulpwood and lower prices when it comes to energy. EBITDA decreased down to 26 million, corresponding to a margin of 4.5%. And the main reason for that is the cost when it comes to the maintenance stock in Beckhammar. And if we were to exclude the effect from the maintenance stops, we would have had a result on EBTA level of twice the level. That's the impact we have seen from the stop. And just to give some background to the cost development in the maintenance stop, we perform these stops on an annual basis, and they are really thoroughly planned based on the knowledge we have, what the work we're going to carry out, But some inspections can only be carried out during the stops and we sometimes then can identify additional needs for maintenance work that we previously were unknown of. And that was the case this year with the maintenance stop in Bäckhammar and that's also the reason for the increased cost. That was the result of the craft paper segment and the next segment, the other segment, natural grease proof. Another strong quarter with a net sales increase by 2%. Sales prices increased by 3% compared to last year, and the good demand increased the sales volumes by 4%. We have a negative impact from product mix and also from currency. but on total level, an increase by 2%. Sales were stable in North and South America, but increased in all other markets, and percentage-wise, the biggest increase was in Middle East and Africa. The market price for pulp has continued down, but still, if we compare to quarter three last year, it is higher at that point. Energy prices have continued down. And in total, what we are seeing is that the raw material prices are unchanged compared to Q3 last year. EBITDA increased to 78 million Swedish crowns with a corresponding margin of 14.2%, higher than last year. And this good result is really given by the higher sales volumes and the higher sales prices. but also in combination with lower than previously estimates for the cost and lower also than last year cost for the annual maintenance box performed in this segment, natural grease proof. Natural grease proof paper, we are sending that globally to customers all over the world. The largest markets are Europe and North America. Not as big, but also important is our customers in Asia. And I recently had the privilege of visiting some of our customers in Japan. One of the strengths in this Nordics paper is really the long-term relationships we have with our customers. And relationships with the Japanese customers is yet another proof of this. And relationships is essential for the business in Japan. And we have been serving our customers there for decades now. And the business have been growing to current level, which is corresponding to approximately 3% of the net sales in natural grease proof. They're also selling some craft paper, but we are mainly selling high quality baking paper that goes into both the retail and the professional end uses in Japan. High quality is extremely important for the customers in Japan. And here also the visual appearance is equally important as the grease proof properties and the strength properties. I think it's also encouraging to see how the awareness and the importance of PFAS-free grease proof paper is increasing in this market as this is one of our selling points for our high quality grease proof paper as well. And with that, I would like to hand over to Niklas to guide you through the quarterly and year-to-date development for net sales and EBITDA.

Thank you, Anita. And I will talk you through the financial bridges when we compare 2024 with 2023. And we start with the net sales. And Q3 is the quarter when we have our maintenance stops in all the plants and that reduces the production in the quarter and affects the sales volumes compared to the other quarters. Compared to Q3 2023, we have the same sales volumes and slightly higher net sales, mainly because of the higher sales prices. We have a total positive effect from volume and product mix because of the slightly higher sales in natural greaseproof. Currencies have been slightly weaker towards the Swedish krona in Q3 compared to the same period last year. We move to the EBITDA. The EBITDA for the quarter is at the same level as for the same period, 2023, 106 million compared to 108. The positive price effect we recognize from the net sales bridge. Variable costs give on total level no effect on EBITDA, but the input material have developed different. And prices for both pulp and pulpwood is at higher levels compared to the same quarter last year, but this is compensated by lower cost for energy and freight. Fixed cost is higher compared to the same period last year, to the main part related to the higher costs in connection with the maintenance stops. And currency finally gives a positive effect today, since we have had positive results from realized derivatives this quarter compared to negative results from realized derivatives last year. When we move to the year-to-date figures, we can see on the net sales, we can see that in this quarter, the prices have been higher compared to the same quarter last year. But year to date, the sales prices are still on lower level compared to year to date 2023. The lower prices are compensated by large positive effect from the higher sales volume as well as positive product mix. And currencies have in total been at the same level as last year. Looking at the FTA for year to date, We disclose slightly higher EBITDA compared to the same period last year. The negative price effect mainly related to quarter one is largely mitigated by the higher sales volumes and lower variable costs. And the variable costs are at total level lower than year-to-date 2023. The positive effects are related to lower costs for energy, freight, and chemicals. And we have had higher costs for fiber since the average market price for pulp have been approximately 15% higher compared to year-to-date 2023. And the pulp would have continued to increase in price. And fixed costs are higher compared to year-to-date 2023 and currencies gives a positive effect mainly related to the realized derivatives. Looking at the working capital and cash flow, the working capital has decreased compared to the previous quarters in 2024, which is the normal development for Q3 when both the production and sales are seasonally lower because of the maintenance stops. During the quarter, we have reduced the inventories of finished goods also a normal seasonal effect in the quarter three. The working capital in relation to net sales measured on rolling 12 basis, rolling 12 month basis is on a very low level, but also affected by that account payable since Q4 2023 are higher than normal because of the invoices related to the investment in that camera. Cashflow for the Q4 quarter continued to increase after the unusual low level that we saw in Q1 when we had a large buildup of accounts receivables as an effect from the good net sales we reached in Q1. The higher compared figures for 2023 were affected by the weak market with decreasing accounts receivables as a consequence. We take a look at the CapEx situation. And in Beckhamar, our investment in a new boardroom and the electrostatic filter is proceeding according to plan. And now a large part of the building work is done. The investment projects are planned to be finalized in the autumn of 2025. And we expect that investments will deliver approximately 100 million of everyday improvements with full effect from 2026. And the other investments in the company have been performed at the normal level. We have seen in quarter three that we have well continued the Beckham investment project, but we have still decreased the net debt compared to what we had at the end of Q2. And the balance sheet remains strong and robust. The net debt to EBITDA relation has increased to 1.4 compared to 0.9 last year. But this is due to the investment in Beckham, of course. The leverage, the net debt to EBITDA margin is with good margin inside our financial goal to be below 2.5. And that concludes my look back at the figures for the quarter and year-to-date, and it's time for an outlook.

Yes, time to look forward and to look forward to quarter four. As I previously mentioned, we saw some decreased demand towards the end of the Q3 in our cross-paper segment, and that's something that we expect will also continue in quarter four. We assess that the average sales prices will remain unchanged compared to the quarter three that we just reported. And in total, we expect that the effect from the changes when it comes to pulp prices and pulpwood prices will have a marginal effect on our result. And then in quarter four, we will have an effect of the maintenance stop in Bekama that was performed in quarter three and the later start up that resulted in. And that will negatively impact the sales volumes in quarter four. So that concludes the reporting and the outlook. And we are now, of course, happy to answer any questions you might have.

Do we have any questions?

There are no registered questions at this time. Let me give the instructions for the audio questions. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handset when asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Einar Christensen with Hikaru's respect. Please go ahead.

Yeah, thank you. Thank you for a great quarter and a great presentation, as expected now. I just have a question regarding the new owner. Do you have any related relationships with them? I mean, are there any intersections at all?

Now, of course, that's part of the process that is carried out right now to make sure that there are no such connections. And to our understanding now, there is no impact on the relationships between ourselves and SVP.

Okay, thank you. Thank you for your answer. And just keep on the good work.

Thank you very much. Thank you. Thank you for the support.

Once again, to ask a question, please press star and 1 on your telephone. There are no audio questions. I would now like to turn the conference back over to Nodik Peipa.

Thank you very much. Then we proceed with a handful of written questions that we have up here. First one relates to CapEx. I guess it will be for Niklas. How much CapEx have you spent on the Beckhammer project as of now?

As of now, we have spent approximately 350 million.

Thank you. Second question to Anita. Can you please elaborate on the profitability difference between craft paper and greaseproof paper results that we see in the report?

Yes, as I mentioned, especially in this quarter, craft paper segment is affected then by the increased costs for the maintenance stop in Pekamma. And of course, we've seen higher margin levels of the craft paper segment previously. And right now, I'm really proud that we have achieved a new level for the grease proof segment. We had the opposite question, or I guess that's the background that on the grease proof segment, why are we not achieving better margins there? And I think we've done a great work. We have now a different level for this business segment. really we're back to one of the strengths in in the Nordic paper here that we have two segments that move differently in a business cycle currently the the pulpwood price that have increased is hurting a bit in the cross paper segment of course and the degrees per segment is then thriving a little bit on their situation so I'm just like to come back to the strengths that we have in the company with two to segments moving differently, and that is really what we're seeing right now as well. So good question, but I think it is one of the strengths in the company we have.

Thank you, Anita. And with that, we conclude the Q&A session, and I will hand the word over to Anita for a summary.

Yes, I would just like to conclude today's report and reiterate the main messages and outlook that we have shared. Net sales increased by 2% compared to Q3 last year to 1.1 billion Swedish crowns, which is the highest ever for third quarter. Sales prices increased by 3% compared to Q3 last year, and we reached an EBITDA in line with last year, 106 million. And the outlook we have shared for quarter four is that Demand will weaken somewhat primarily in the craft paper segment while average sales prices for the group remain unchanged compared to this quarter that we have just reported Q3. And that concludes the reporting and the outlook and our summary and we thank you for listening in today.

Thank you and goodbye. Thank you.