Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SEA's full year results for 2021. With me here today I have President and CEO Ulf Larsson and CFO Toby Lawton to go through the results and take your questions.

Over to you Ulf and Toby. Thank you Anders and also from my side a good morning and a warm welcome to this presentation. I will begin by summarizing 2021, where we delivered the best ever result for SEA. We had an EBITDA of 9.1 billion SEK and by that an EBITDA margin of 48%. When we're comparing our EBITDA level for the full year 2021 with the outcome for 2020, we can see an improvement of more than 100%. As well as a strong market with increasing prices in all business areas, we also delivered a good productivity level and also focused cost control, both of which contributed positively, of course. We can also see that the strong profit development was helped by a well-timed decision to exit the publication paper. Our turnover during 2021 increased by 2% compared with the previous year, despite the closures of the publication paper business in the first quarter of 2021, and also despite the divestment of our wood distribution operations in the UK fourth quarter of 2020. And the reason for that is, as already mentioned, increasing prices, better mix, and also a very good production level. During the year, we have also seen a continuing good trend in the market values for forest land and prices in our core area has increased by over 10%. During the year, we have had a net growth in our forests of more than 4 million cubic meters and we have also purchased a net of about 10,000 hectares of forest land, mainly in the Baltics. In total, the value of our forest asset have increased by almost 10 billion SEK from 75 up to 84 billion. And finally, last but not least important, I'd like to conclude this summary of the full year 21 by stating that our two major investment projects in Åbole and Ortviken are progressing on time and budget. So turning over to some financial KPIs. And as already said, we had a very strong year delivering 0.1 billion SEC on EBITDA 11. As also already said, best year ever. Our EBITDA margin reached 48% for the full year, which is substantially higher than previous year when we did 24%. Our industrial return on capital employed came out on 33% for the full year, while our leverage decreased further down to 0.9, and that is despite our large ongoing investment program. And I'm happy to say again that we continue to finance all our investments, including strategic projects with our operating cash flow. The board proposes an ordinary dividend of 2.25 SEC per share, an increase of 0.25 SEC or a little bit more than 12% compared to last year. And on top of that, one time extra dividend of one SEC per share due to the exceptional result in 2021. And finally, our earnings per share increased by almost three times in comparison with last year and reached 8.69 SEC per share. From now on, I will focus on the fourth quarter 2021. And as you can see here, our EBITDA level for the fourth quarter was 2.8 billion SEK, which is again more than double as much as the fourth quarter 2020. And that gave us a historically strong EBITDA margin of 59% for the quarter, which you also can see in the graph on the right-hand side. Our industrial return on capital employed reached 40% during the quarter and the leverage is as already mentioned 0.9. So I will now make some comments for each segment starting with forest. And we had another quarter of stable supply of wood to our industries. Sales was down due to low delivery volumes and we have also closed down our publication paper business and we also had a long maintenance stop in Östrand impacting the fourth quarter 21. EBITDA increased by 24% when comparing quarter on quarter and the main reason for that is continued increasing prices for forest land and by that the higher evaluation of effect of biological assets. As you can see in the graph on the bottom left, prices for saw logs have also increased. When we compare pulp wood prices quarter on quarter, we can note that they are on a rather stable level and this is mainly due to our exit from publication paper and by that reduced share of imported wood. Then we turn over to wood and the price levels for some wood products peaked in Q3 2021. They peaked at the historically high level, which you also can see in the graph on the bottom left. Average prices have dropped by just under 15% between Q3 and Q4. The seasonal low demand during the winter period means that prices are expected to drop further by another 15% during the first quarter. But then I think that they will turn upwards again in the second quarter 2022. And I'll come back to that. In general, we can see a lower level of supply during the autumn, mainly from Canada and Central Europe. Demand is still good. And we can see that in most markets, inventory levels is going down also for customers now. As for SEA, we had a good production during the fourth quarter and good delivery levels for the season. And that led to relatively low stock levels for us. As you can see from the graph, sales increased by 25% when we compare with the same quarter last year. And this is mainly due to increased prices, which also offset the effect of the sale of Wood Supply UK during the fourth quarter 2020. The profit level is still very good in SA Wood. EBITDA was up as much as 274% when we compare Q4 2021 with the same quarter 2020. And I can also just mention that SA Wood made nearly 3 billion SEK on EBITDA level during 2021 with a really strong EBITDA margin of 42% for the full year. Then some words about wood market development. And today's stock level of solid wood products in Sweden and Finland is in relation to the average for the last five years described at the top left on this slide. And we note that the inventory volumes are more or less back on a normal level. At the same time, the underlying consumption continues to be good, as I said, especially in the new residential building segment. As can be seen in the diagram to the bottom left, the Swedish and Finnish SOMIs production is also now on a normal level. Production in Scandinavia is now running at full capacity to meet stable and good demand. But as mentioned, production in Canada and Central Europe is somewhat limited. And that creates also maybe a rather stable balance in this market. So when looking at the diagram to the top right, we can see that the price peaked in the third quarter 2021, but the prices still are on a historically high level. And as I said, they are expected to rise again in the second quarter. Then we walk over to pulp and I will come back to Q4, but I'd like to start by mentioning that pulp business deliver its best result ever during 21. The EBITDA for the year was over 2 billion SEK, and that gave us an EBITDA margin for the year of 37%. And this increase in EBITDA is, of course, driven by higher prices, but also by lower costs. Sales during the quarter were up by 17% compared to the same quarter last year, and that is mainly due to significantly higher prices, and despite that, Also a long maintenance stop, which was also slightly longer than originally planned. EBITDA increased by over 300% compared with the previous year. And finally, I can mention here that our ongoing project to build the CTMP line at Utvikens industrial site, the one with a total capacity of 300,000 tons, is progressing on time and budget. The pulp market is stable, particularly in Europe, with a good demand and prices that have bottomed out on a relatively high level for the time being. And we peaked price-wise at the beginning of the fourth quarter of 2021. The official peak price at that time was 1340 USD per tonne. Since that point, prices have come down to 1260 USD per tonne in Europe. But the SAA has now announced the price increase up to 1300 US dollar per ton. And we should remember also that we have to face a slightly higher discount rate from 1st of January 2021 compared with 2020. Sorry, from 1st of January 2022 compared to 2021. So the demand in China and US has picked up again and we can now after substantial increase dip in prices, mainly in Asia, see more or less equalized prices between Asia, Europe and also U.S. On the negative side, we've seen sharply increasing transport costs, not least for deliveries between continents. And we can definitely say that the supply is heavily impacted by global logistical challenges. Inventors for hardwood pulp are on a normal level, while the level for softwood pulp is still a little bit in the higher end. And as you can see that you can also see in these two graphs here, but mainly relates to increased inventories in transit because of the logistical challenges. So then we move over to business area container board and I like to start by stating that our expansion project in Obola is progressing well on time and budget. Sales and EBITDA for the container board business are up 27% and 142% respectively in the fourth quarter 2021 when comparing with the same period last year. And this is again mainly due to increasing prices where we now have reached all-time high prices and that you can also see in the graph in the bottom left. And just to comment something about OCC prices, they have almost tripled now since the bottom in November 2020, and that affects the result negatively to some extent, but it also supports the price development for test liner, and thereby also indirectly, of course, for craft liner. The Global Kraftliner deliveries from Europe continue to increase also in the fourth quarter this year and we can see a stable long-term growth of European deliveries and we can also conclude that the demand for boxes has continued to be strong also during the fourth quarter. When it comes to inventories for Kraftliner, they are on an average level. We can see a seasonal increase in December, but that was expected. Since the prices bottomed out in the fourth quarter 2020, the price for unbleached craft liner has so far risen by approximately €350 per tonne, while white top craft liner has increased by €185 per tonne during the same period. And that includes also the December increase. And the latest price increase came in December, and that one resulted in a further increase of €50 per tonne for unbleached craft and 35 euro per tonne for white top. And this price increases will, as usual, successively take effect during the first quarter. I can also finally mention that with this present price levels, the delta between craft and test line prices is approximately 150 euro per tonne, and that is historically a rather normal level. So I think by that, Tobbe, I hand over to you.

Thank you. Ulf, and good morning, everybody. I will start by talking about the forest assets. And here on this slide, you can see the higher transaction prices we have for forest assets in our area. And if I start with the graphs on the right-hand side, you can see from the first graph that the market price of forest land in our region has increased from 291 last year to 324 this year. And that's an increase of 33%. sec per cubic meter, so more than 10% increase in transaction prices measured in northern Sweden. When we also add on the effect of the standing volume where we have a net growth in our forest of 4 million cubic meters this year, some 1.6% net growth in the forest land, net after harvesting, then we have an increase in the total forest asset of just under 10 billion sec from 74.9 billion sec to 84.5 billion And then of that increase of just under 10 billion, 9.6 billion, as you see on the left-hand side, we then report 1.8 billion, just under 1.8 billion in the P&L as a biological asset valuation change. And the remainder is mainly the change in land assets, which does not impact the P&L. So a significant increase in the value of the forest this year. If I take to the income statement, and there's a lot of figures here, but if I focus on the right-hand side, the full year numbers and the column for 2021, as I've mentioned, you can see the increase in net sales of 2% this year, despite the divestment of Wood Supply UK and the restructuring of publication paper, exit of publication paper, which impacted by more than 4 billion SEC in net sales. We then have an EBITDA of 9.1 billion SEC with a margin for the full year of over 48%. And that means when we go down to operating profit or EBIT, we have 7.6 billion SEC of EBIT or 40.6% EBIT margin. Then financial items, pretty stable. Net debt is also pretty stable. So it's a stable level, just over 100 million SEC in financial items, which we manage well. And then tax, here we have 1.4 billion of tax charge, which is an effective tax rate of just under 20%. I'm giving a net profit for the full year of 6.1 billion SEK. And then just to mention in the fourth quarter, then just under 2 billion SEK of net profit just in the fourth quarter. So earnings per share then 8.69, also as Ulf has previously mentioned, but the best ever earnings per share. And then when it comes to the proposed dividend, just a short recap, but we have a proposed ordinary dividend of 2.25, which is a 25 euro increase from last year. And then on top of that, an extra dividend this year of one sec. And you can put that in relation to the earnings per share, as I mentioned, of 8.69 for the full year. I'll then show some bridge of the full year result in terms of net sales. First, you can see the significant impact of improved price and mix in all segments of 28%, a small volume increase overall, and then a negative currency impact. So we were impacted negatively by the currency for the full year. And then we have the impacts of both divesting wood supply UK at the end of 2020 and then exiting publication paper, which we ended, exited publication paper at the beginning of this year in the end. When it comes to EBITDA bridge, you also see the significant impact of the higher prices, which add some 5.4 billion SEC in terms of full year result effect, a small effect from volume, We have, you can see, a positive effect on raw material, despite, I think, a quite inflationary environment in other areas, in other segments, sectors, and that's partly also driven by better productivity and better raw material sourcing through the productivity improvement. A positive on energy because we are balanced or a net seller, slight net seller in electricity. And then, as I mentioned, a negative currency effect And then a negative effect in other, partly here you see the inflationary effect, or mainly for us it's seen in logistics costs, where we have an increased logistics cost this year, and also some temporary costs related to the transition from publication paper and towards then growing in, particularly here in pulp, in Otviken. And then when it comes to contribution by segment, I'll start on the left-hand side here, the full year as well. You can see the forest division, the result has improved versus the previous year. A significant effect we have to remember here is driven by the revaluation of the biological assets, which comes in the forest division. The turnover you can see has come down a bit versus last year, and that's the effect of exiting publication paper and the lower wood supply through publication paper. In the wood division, we have grown the top line a bit despite selling Wood Supply UK, and you can see a fantastic result in the wood division of just under 3 billion sec in EBITDA or 42% EBITDA margin. So a very good result. And then in pulp, you can see the top line has grown with improved pricing and volumes, and then also a strong result on the bottom line, just over 2 billion sec or 37% EBITDA margin, which is a good result. EBITDA margin level in the pulp division. And then container board paper, you see on the top line the effect of the exit from publication paper that the net sales has come down to 5.4 billion SEC. And then on the bottom line, we have an improved result versus last year showing the improved pricing in container board up to 32% EBITDA margin and just under 1.8 billion SEC EBITDA. And then if I just switch briefly to the fourth quarter and just show the same bridge, it's a pretty similar picture, actually, that we had improved prices in the fourth quarter versus the fourth quarter last year of some 37%, again, in all product areas. And then smaller effects from a bit lower volume, mainly due to timing of maintenance stops here. Currency, again, negative. And then the effects of the divestment of wood supply UK and UK. exit of publication paper. When it comes to EBITDA, it's also a similar picture here and with a strong price increase versus quarter four last year. Then the small effects from the volume, raw material and energy, similar to for the full year, negative currency again, and a small impact from other as well. And logistics cost is the main item to mention here as well. And then just to do the same with the quarterly picture, And I'll focus here on the bottom graphs in the picture. And for the forest division, you can see an EBITDA of just over 900 million in the quarter. Again, remember here we have the revaluation of the forest asset, and in the fourth quarter we had a one-off higher item from the revaluation because we increased the annual revaluation in the fourth quarter. So otherwise we would have been more or less in line with the peaks in Q4-20 and Q2-21. Wood division, EBITDA of 850 million come down a little bit versus the high point in Q3, which is due to, as Ulf mentioned, the price impact coming down a little bit, but still a fantastic result and 46% EBITDA margin. In the pulp sector, we had a maintenance stop in the fourth quarter, so that's really what impacted both the top line coming down a bit and the bottom line, but 33% EBITDA margin in the fourth quarter. And then in container board, we had the maintenance stop here had a main effect in quarter three. So then you can see the significant uplift in the result in quarter four, also with an impact of the improving pricing in container board in quarter four versus quarter three as well with 44% EBITDA margin. A little bit on cash flow and I'll just hear our focus as well on the full year. First, we had an EBITDA of 9.1 billion as we previously talked about And we take away the effect mainly of the revaluation of biological assets and some other smaller non-cash items. We have an operating cash surplus of 7.2 billion. Then we have a small negative effect from change in working capital but still I think very tightly managed working capital given the increasing price environment which would normally drive an increase in working capital bigger than you see here. So some 300 million outflow in working capital, restructuring costs related to the exit from publication paper of just under 400 million, entirely according to plan, according to the provision taken last year. And then current capex of just over 1.2 billion SEC, meaning we've delivered an operating cash flow for the full year of 5.2 billion SEC. And given our strategic capital expenditures that we're investing in the growth of SEA and primarily Obola and CTMP and all tweaking of 3.7 billion SEC. We are financing all of those growth expenditures through operating cash flow again this year. And finally, just on the balance sheet to show you the balance sheet of SCA at the end of 2021, you can see the top line here is the forest assets where the value has increased, as I said, by just under 10 billion. And we now have a value of nearly 85 billion SEC in the forest assets of SCA. The working capital has 2.8 billion, slight increase versus last year, but less as a proportion of sales, which reflects the tight management, as I mentioned. And then when we include the deferred tax and the other capital employed, mainly related to the industrial businesses, then we come to a total capital employed of nearly 91 billion SIC. Net debt has been stable versus previous year, a small increase, but 7.752%. billion SEC in net debt and leading to a net debt to EBITDA at a very good level 0.9 times and then equity then of 83 billion SEC. All right and with that I will hand back to Ulf for some more comments.

So thank you Toby and I like finally to say some words about the future. SA has delivered a substantial part of the strategic project portfolio that we communicated following the split back in 2017. And this transformation has gone faster than at least I thought. And following the exit of publication paper, we are now 100% focused on growing markets. Our continued focus will still be on organic growth in our existing value chain and within our existing geography. We used to summarize our strategy for profitable growth in two components, as you can see here. And the first component is to grow our renewable forest assets. And we do this through significant investments in forest management in our existing forest land. And by that, successively increase the growth in our forest and thereby, of course, to create conditions to successively increase the availability of wood for harvest. In parallel, we also continue to acquire forest land where possible in the Nordics and Baltics. The second component for profitable growth is to increase the value of each tree that is growing on SAA land. And we do this by investing in our integrated value chain. And the coming focus will be on pulp, container board and wood. And in addition to this, we will also increase the focus on realizing the business opportunities that we have within renewable energy. On the next slide, I will take the opportunity to show you an updated project portfolio, just to show you how we will deliver our strategy. And I'd like to start with the base. We will continue to reinvest in order to secure our superior asset quality if we do not focus on maintaining assets then over time it costs a lot in terms of reduced availability increased cost levels and and lower quality and we don't like to see that as you can see on the left of the slide we have a number of ongoing strategic projects and we are of course 100 focused in completing them in the in the very best way Here we are talking about completing the big Obola project that is mentioned several times already, the construction of our new CTMP line in Nordtviken, finalizing the program to acquire 100,000 hectares of forest land in the Baltics, and finally to deliver on a joint refinery with ST1 to produce 200,000 cubic meters of biofuels. The right hand side shows the areas where we will deliver organic growth and from now on we have the ambition to actively invest our own money in wind power and that is a change if we compare with the past. There are a number of ways to grow in this area and we believe that the most interesting are the case of repowering. I mean where we can replace smaller turbines in existing wind parks, with larger and more productive turbines. Over time we will invest where opportunities exist to remove bottlenecks in existing production sites and in particular for the manufacture of pulp and container board and at the same time we will step by screw our production capacity in wood business area while of course maintaining the balance to the raw materials availability. We have seen a number of exciting development projects for renewable energy. And last but not least, we will continue to acquire forest land in the Nordics and the Baltics. And Toby, with that, I think I round off and open up for questions. So please.

Thank you. And if you do have a question, please press 01 on your telephone keypad and you enter a cue. Our first question comes from the line of Martin Mulberry from ABG. Please go ahead.

Yes, good morning. Could you indicate, say, the new level of ABTA from the forest segment after this last forest value write-up, including the revaluation gains to land on the ABTA for the segment?

Yeah, maybe I can take that. Obviously, as I've mentioned, the revaluation of biological assets is the part I think you're referring to in the forest, which is reported in the forest segment, and we reported just under 1.8 billion sec from the revaluation of biological assets in the forest segment. And going forward, we'd expect that level to be relatively stable. What we've done this year is... When we look at the total value of forest assets, which I think is by far the most important, we've seen obviously another good year of increase with increasing prices in forest land in northern Sweden. We value the biological assets according to another model, a DCF model, but we've seen the effect of the higher asset prices means that we've judged and we've seen evidence also that return requirements from investors in forest land have come down a bit and we've reflected that in a then a higher rate of increase also in biological assets. So I think going forward, you should expect this 1.8, roughly 1.8 level to be relatively stable going forward. Does that answer your question, Martin?

Yeah, but that is including one quarter. That is including Q4. And the value increase is forever. So what does that mean on the EBITDA in the normal quarter?

Yeah, so I think... Obviously, in Q4, we took in the effect of this increased valuation of the assets. So in Q4, you have the level increase due to that. And that's probably around 250 million in Q4 of that increase, which is from the one-time increase up to the full year level of 1.8. So going forward, you should expect around 1.8 divided by four every quarter.

Okay. Thank you.

And the next question comes from the line of Justin Jordan from Exxon. Please go ahead.

Thank you, and good morning, everyone. I want to do something unusual and just firstly say genuinely well done to everyone at SEA for a remarkable operational performance in a very challenging 2021. But moving forward, I've got two quick questions if I could. Firstly, Ulf, your reward for being visionary in terms of talking of coming together of pulp prices three months ago at the Q3 results, your reward for that is, clearly, I'm going to ask you again as to what your thinking is regarding outlook for pulp prices globally going forward in 2022. We've clearly seen, as you expected or outlined three months ago, some recovery in Chinese pulp prices and more of these in European pulp prices. And secondly, just speaking about container board, we've seen clearly some easing in OCC in recent weeks and months in Europe and North America, potentially because that negatively impacts test honor prices and therefore impact cost honor prices. But also counterbalancing that, clearly we've seen U.S. peers recently announce spring 2022 U.S. cost honor price hike. So I'm just curious about your outlook for cross-border prices for FTA in 2022. And then if I could be greedy and have one third question, can I just ask Toby just some initial guidance on strategic and current CapEx for 2022, please? Thank you.

Okay, thank you. We had a little bit of a bad, but I tried, starting with pulp. And I mean, it's really hard to say here. What we can see now is that we have more or less equalized prices in all continents. I mean, we have more or less the same net price now in Europe, Asia, and the U.S. And I mean, one reason for that is, of course, that we see big logistical challenges i think on the other hand we see some reports coming in now with a rather stable demand not the least from the from the tissue side and and i mean i don't like really to give you a forecast we we as i said i mean we see a rather fairly stable market for the moment being now in in europe and and we think the price will now for the time being, level out on this level?

I don't know if you'd like to say something more, Toby, or... I mean, yeah, I think, as you say, we've seen the prices more equalized between the different world regions, and, yeah, prices have come up from where they were in China, so it seems to be, as you mentioned before, it's bottomed out and stabilized.

Yeah. And when it comes to container, I'm not sure if I did catch your question, but I mean, the container board market is really strong. And as I said, I mean, from the bottom, we have now increased prices by 350 euro per ton for unbleached craft. And the last or latest pricing increase was announced in December, and that will successively be implemented now in the first quarter. And I mean, we still feel it's a very strong market for container board it's a good balance out there and and something we are quite confident for at least for for the coming coming quarter and coming quarters maybe and i think you've seen i mean we see a strong demand for the end markets in container board and obviously occ prices have an impact on on

Testliner, which has an impact on Kraftliner, and energy prices is the same. But I think you've also seen that there's a relatively stable gap between Testliner and Kraftliner, which we expect to see going forward as well. And then some words about investments. Yes, sorry, yeah. The CapEx levels, Justin, yeah. I can say, I think 2021 has been the heaviest year in the Obola project, so we expect the strategic CapEx... in the Obola project to be lower next year and overall strategic capex to be a bit lower next year. So probably we're guiding around 3 billion in terms of strategic capex. So we'll have a bit lower capex in Obola. We'll have a bit more coming from the CTMP project, the strategic capex there in growing CTMP in Ortviken. And we hope we are continuing our investment program in forest land in the Baltics as well. So depending what happens there, we might see some further investment there. So a total around 3 billion is, I think, all I can say now. And then for current CapEx, yeah, we do expect current CapEx to be a bit higher going forward than it's been in the past, around the 1.2 billion SEC level. I don't know if you mentioned a figure, Ulf, but, yeah, increasing somewhat over the 1.2 billion SEC level around, yeah, and depending what happens, but 1 or 200 million... higher than the 1.2 billion sec level we'd expect. Great. Thank you, Bob.

And the next question comes from the line of Cole Harton from Jefferies. Please go ahead.

Morning. Thanks for taking my question. I'd just like to focus in on the wood division. Normally, you give a little bit of guidance of where you see kind of construction pricing for the wood. wood market going quarter on quarter. And then looking to the second quarter, I know you mentioned that there might be some uptick there. What's driving that view of kind of recovery in pricing? You could imagine that the DIY market would probably soften a little bit in Europe as we kind of return to offices and, you know, the U.S. lumber futures while at a very high level is coming down. So I'd just love to hear your thoughts on that. what's driving the view on the second quarter uptick. And then the second question on container board. Are you seeing any increase in imports at all from the US players or not yet at this stage? Thank you.

Yeah, if we take the first one then, I mean, we feel that I think it's a rather balanced situation out there. And as I said, I mean, we continue to produce in Finland, Scandinavia mainly on a good level and I don't think that we can increase much more due to lack of capacity and that's been the case also for a number of quarters now. What we've seen is slightly lower production in Canada and also in Central Europe. We've also seen that log prices have went up rather substantially in these areas and That might be the reason. But the balance in the market is quite good. And as I said, I mean, we feel that especially in new residential building segment, we have a really stable demand here. And that's the case. Seasonally, we always feel a slightly lower demand in the end of the fourth quarter and in the beginning of the first one. So, I mean, what we see now is more an adjustment. Still, we have to remember that still prices are on a very, historically high level when it comes to container board no we don't see the answer is no we don't see volumes coming in from US I mean typically we have a couple of hundred thousand tons over but we haven't seen it for a while now and we don't see it for the moment being either thank you and then

Just a wider question on the EU kind of taxonomy environment. We've seen further updates and comments around voluntary carbon credit markets. Is there any update you can give on potential CO2 credits or even voluntary credits that SEA might have access to for your forest assets?

I mean, not really. As you know, I mean, we have, it is a discussion around LULUCF and what kind of harvesting level that will be possible going forward and so on. But I mean, for me, it's obvious. I mean, it is actively managed forest that can have a net, can tie up carbon levels. in a positive way and I mean so that we have to continue with and I mean from the fiber that you get from the forest you can also have a positive substitution effect where you replace as as I mentioned before where you can replace plastic with paper steel concrete with with solid wood constructions and and fossil fuels by biofuels and I believe that we we will we will see a continued positive development for the forest and for the forest industry. I mean, we are maybe the most important part of the solution in this area. And at the same time, of course, we have to take care of the biodiversity and do what we have to do there. And we can do more. And we are working also on that part. Like to add something, Toby?

No, I think only to add, I think, as you know, there's a lot of discussion on carbon credits and interest in that topic. But as of today, there's no real viable scheme that is relevant for our business. But, you know, of course, we'll continue to monitor it.

And the next question comes from the line of Oskar Lindström from Denske Bank. Please go ahead.

Hi, thank you. Three questions for me. The first one is on strategic projects. Toby, you mentioned strategic capex coming down in 2022. And, you know, although you still have a number of projects going on, they are nearing the sort of completion at the end of this year or beginning of next year. So my question is, I mean, you're making good money at the moment. Your strategic expansion projects are coming to an end. What other attractive growth opportunities do you see for you that could be of any more substantial size? I mean, are you looking at expanding existing volume or capacities in existing assets, byproducts, energy, buying things abroad? What are the main sort of avenues of growth do you see?

If we start with that one, I mean, I think, yeah, I tried to explain some of that in my last page. I mean, we will, again, we will be focused on organic growth. And, I mean, I said that we, from now on, we will start to invest money into wind. And we can do that in different ways. And also you have a slightly different time perspective in this area. mean how much and when and so on i mean depends a little bit on the opportunities that we can find in the market but we will be much more offensive in in this area as we always been we will be interested in buying more forest land and you know the big program that is ongoing in in the baltics and and we've done approximately 60 of that and we will continue to finalize that one if we find other opportunities in in in other Nordic countries, Sweden, Finland and so on, then we will be interested, of course. Then, of course, we will always look into possibilities to debot neck. And I mean, the definition that will be in pulp container board, but also in wood. So, I mean, I think that, again, we have really to focus now on finalizing our big ongoing investment projects in the best way. And it is, even if we are now in the later part of these projects, but I mean, we have to be 100% focused now. It's more important than ever to fulfill these projects in the best way. But then again, we have opened up for some things in the energy sector and so on. All right.

How far away is the biorefinery project? I mean, you mentioned in the report that it's on the design level. Does that mean that it's at least five years out before you can make a decision?

I mean, again, it's very hard to say because, as I said, we have the environmental permission in place, so that is done. In order to expand close to Öreström, we need to build some land, and that is... project over a couple of years and and that is a good project anyway because we always need land so that we will take i think rather soon then as i also said before i mean commercially no one really has the right technique but we are working on that and we have a big part of the resources in our research department on campus with mid sweden university working on that and and But it's too early to say. I mean, it's much better that we get this right than we get it fast. I mean, that is a long-term work. But we know that around Östrand, we have created a fantastic infrastructure. And, of course, we will do the best out of these possibilities.

I could just add, you should also remember our ongoing investment together with SD1 in a green – an investment in the refinery they have in Gothenburg to produce biofuels based on tall oil from our operations. So that's an ongoing investment which we expect to start producing at some point during 2023. So that's sooner in time. All right.

Thank you. My second question is on sand timber, and you all mentioned that there was weaker production in Canada and Central Europe. To what extent do you believe that weaker production is due to more structural changes in terms of wood supply in those markets? Is that going to get worse or what's the situation there?

It's hard to say. What we saw in Canada was that prices increased quite substantially and and we also heard that some companies they started to take curtailments because they they i mean they didn't believe that they could make good money out of the business if they have to pay so much for for the logs i mean that was maybe the main reason and i think that was also the main reason of course in central europe and behind that of course in canada you still still see negative effects from the pine beetle disease they had uh decades ago and and in central europe i suppose i mean you see some some negative effects from the spruce beetle disease they had one one and a half year ago so i mean that is i think the main reason how long will it last hard to say but again as it is also fundamentally in the business for But, I mean, the demand is increasing step by step, and I think that the bottleneck will be the supply of logs. And that will be – we will face a little bit different situation in different regions. But in that perspective, we are in a quite favorable part of the world in northern part of Sweden, I would say. All right. Thank you.

My final question is on forest land valuations. I think it was you, Toby, that mentioned that one of the main reasons why you're increasing the valuation of the forest lands here is because of higher transaction prices, which you use as a benchmark. Does that primarily still reflect the private forest land markets? And if so, what do you believe is the premium for larger corporate forest lands?

Well, our forest land valuation is based on the market values which we see from market statistics based on transactions that take place. And I mean, you're right, the majority of transactions are private transactions, but they also include other transactions, corporate transactions and so on. But I think... I mean, you're right in that it's dominated by private transactions. I don't think we can speculate on corporate transactions and what premium you would see, but I think we do agree that generally you see a premium based on the fact that there often are tax advantages, there often are companies can be interested in as a purchaser, and also that the average quality of the land is usually better for corporate transactions than private transactions. But... But I think there's no statistics or speculation, really, what kind of premium you could.

Personally, I think you have at least 40% premium, if you like my opinion. All right.

Thank you. Thank you very much. Those are my two questions.

The next question comes from the line of Michael Dougal from UBS. Please go ahead.

Thank you. I have a couple of questions, but before that, if you could, Toby, just repeat what you said about the current capex moving up by 100 to 200 million per year. What was the reason for that? Sorry, I didn't catch that one.

Yeah, I think you could say Ulf showed a slide earlier as well where he talked about the need to really maintain the superior asset quality that we have in our operations, and therefore we see that going forward – We've maintained at the 1.2 level for a number of years now, but we see that we need to increase that slightly to really make sure we maintain that underlying asset quality, which keeps our superior position and allows us to continue making productivity improvements going forward in our existing business. So that's really the reason.

Just to add, I think it's really well spent money into this area, and I think it's underestimated. the effect and the return you can get from this money. I mean, it's not just to keep the status. It's also to ensure that you have a strong productivity development, which we can also measure from year to year. So I think this one is really both. I think it's really underestimated to take care of what you already have.

That makes sense. Thanks for the clarification there. And I have two questions myself. So firstly, on the container board market, so you mentioned that there has been a very good demand there. Demand continues to be good, and the market seems to be quite tight. Do you see room for further price increases in Q1 of this year?

I mean, we have just announced the price increase in December, and that one will as I said, successively take effect during the first quarter. So, I mean, that is the first step now. We feel that it is a strong market. We feel that you have, I mean, the delta between, as I said, between craft line and test line today is 150 euro per ton, which is on a normal level. We have seen that the OCC prices has more, not more, but they have almost tripled. during a little bit more than a year now. So I think price development from now on might be, at least to some extent, related to the cost development for OCC. That's, I think, an important part of it. Okay.

Thank you. And then just finally on the pulp, You mentioned that the discounts had widened a bit into this year. Could you clarify that, how big of a change you see there, and what's the average discount you see in Europe right now?

I think we see on average discounts have increased, if we take 2022 versus 2021, by maybe 2% to 3% on average. So that's the level. But we... And I think if you want to judge the discount level, basically, you can look at the comparison between generally spot prices, which you can see particularly for Asia and Turkey and other markets, and the sort of official prices for Europe, which give you a pretty good indication.

But, Tobbe, am I right when I say I think we have more 3% in Europe and maybe 1% in the U.S. this year? Wow. So the average.

Yeah.

Okay.

Okay. That's very clear. Thank you very much.

And the next question comes from Delana Venus Larsen from SEB. Please go ahead.

Thank you very much. And a great congratulations to an extraordinary strong 2021. I'd like to come back to your slide with the project portfolio and you highlight own wind power. And it seems to me that you are slightly different changing your strategy from historically having mainly collected the lease revenues and having external owners and operators on your land? Is that right, that you are taking a more active role in the energy market in the north of Sweden, which are indeed very dynamic and exciting And if so, if you take whatever five-year perspective or something, how much wind power do you expect to own and operate?

The first answer on the first question is yes, we will take a more active role in this business. We don't – I mean, we can do it in different ways. And I said that what we can see now the most – awarding leg here is maybe the repowering leg and that will that will maybe be actual five year from now i mean when we start to see wind parks that i mean they still they they are built up on two megawatt turbines and and we know that the technique in five years will probably given give us an opportunity for 10 megawatt turbines and and that will give the wind park owner a substantial positive effect. And I mean, for that you need another permission, but we hope and believe that it must be much easier to get a new permission on an area where you already today have a permission for running windmills. So, I mean, we will take part of that. And as you know, we've said that as today we have five terawatt installed capacity on the sail end. 2023, we will have close to 10 terawatt hours. And in all these areas, we sooner or later will have opportunities in repowering. We will continue to try to develop new projects. And maybe in some cases, instead of selling these, we will try to develop them ourselves. And I mean, we will do this in different ways. But I cannot really give you a clear plan as it is just now. But it is a change. From now on, we are willing to put in our own money into this business.

I would just add, Linus, we're not new to the electricity markets and the power markets in northern Sweden. Obviously, we're active in wind power, even though we haven't put our own money in wind power so far. We're very active in wind power, and we produce some 1% of Sweden's electricity in our operations today, and we sell around half of that on the market. So we're not new to this area.

And we have created good possibilities for the future as we have 20% of installed capacity on SCA land. So I think that is not least important. But I think the time is right now to be more active in this field.

And are you looking to take over existing wind mills, wind parks, today operated by external... apart from the development of new projects, which is more, well, it's a slow process, it can be at least.

I mean, as you know, it's a much lower return on these kind of investments. But I mean, let us look into this now and to see what kind of opportunities we have. Let us spread them out over the time and see what's good for us short and long term. But I mean, just to buy and operate a windmill farm, that's maybe not the best choice for us.

Thanks. And then maybe just one final question on the pulp market. You've yourselves been out pushing for the price hike that you mentioned. What's the update on that? How has that been received in the market?

The one from 1260 up to 1300, I think, is – I mean, no one likes price increases, but I think that one is accepted in the market, if that was the question, was it?

Exactly, exactly. So that is sticking, you would say?

I would say so, yeah.

Okay, great. Thank you very much. Good luck. Thank you.

And we have one more question from the line of Harry Taitanen from Rodea. Please go ahead.

Yes, good morning. One more question. These pulpwood prices have continued to be surprisingly stable for a long time, but could you see any events that could possibly change the stability? I'm just thinking, for example, the potential Russian export restrictions, if that could be something that could drive the Nordic balance to somewhere or any other sort of events that could sort of shake or change the outlook for the pulpwood pricing?

For us, I mean, as I said, the most important thing for us when it comes to stabilize the pulpwood prices is to, what was the decision to close down Utviken and our publication paper business that was really good from many perspectives but not the least from this perspective and that means that we haven't really we have imported some pulp wood during this year because we have now a critical mass in the Baltics and by that we can also buy pulp wood in the cost efficient way so I think that is one reason why we have this channel open As it is just now, I think that this year will be very stable when it comes to pulpwood development. As you saw on the graph, we have had some smaller price increase in saw logs, and I think that level will remain during the coming year as we feel that the market can be quite good also next year. In pulpwood, we feel that it will be a rather stable development during at least short and mid-term. Okay. Sounds clear.

Thank you.

And as there are no further questions, I'll hand it back to the speakers.

Thank you. And that concludes the presentation of the full year results. And we welcome you all back on April 29th for the first quarter results presentation. Thank you.