Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of the SCA 2022 first quarter results. With me here today, I have Ulf Larsson, President and CEO of SCA, and Toby Lawton, CFO of SCA. With that, Ulf, I give the word to you.

Thank you for that, Anders. Good morning also from my side and welcome to the presentation of SCA's results for the first quarter 2022. It is impossible to summarize this quarter without mentioning the Russian invasion of Ukraine. First and above all, this is, of course, a humanitarian disaster. Anyway, our product markets have and will be influenced in different ways. Short term, I mean, then we see a very positive climate for the business. Long term, it is, of course, a question mark. I mean what will happen with inflation, what will happen with interest rates and related to that what will happen with future consumption and so on. I can also state that we have no operations or direct exposure from sales or purchasing in Russia, Belarus or Ukraine. We have delivered another strong quarter. Our EBITDA was 2.6 billion SEK on EBITDA level, which is corresponding to an EBITDA margin of 52%. One big and I think very important reason to that is our unique control over the value chain. And here I'm thinking about wood, energy and also logistics. And Tobbe will come back and show you some interesting data around this. On top, of course, we have had a fantastic quarter with increasing prices, stable prices for all areas. Then comparing EBITDA level for the first quarter this year with the outcome for Q1 2021, we can see an improvement of 92%. Sales increased 20% versus Q1 last year. and that is despite that we finally now have closed down our publication paper business. The main reason for the sale increase is of course higher prices in all products and markets. Last but not least important, I would like to conclude this summary of the first quarter by stating that the two big investment projects in Obola Nordkviken both are progressing according to time and budget. And we are just now getting closer to the startup. Turning over to some financial KPIs, and as already mentioned, 2.6 billion on EBITDA level, which is corresponding to an EBITDA margin of 52%. Our industrial return on capital employed, calculated as the average for the last 12 months, is 40%. and for the quarter 42%. The leverage is stable on one despite our large ongoing investment program and I'm happy to say that we continue to finance all our investments including strategic projects with our operating cash flow. So I will then make some comments for each segment starting with forest and due to the Russian invasion of Ukraine between 8 and 10 million cubic meters on yearly basis of mainly pulpwood ships will no longer come to Europe. And that in combination with the fact that the Finnish strike is now over will generally put an increase in pressure on the wood supply in our region. As we, SEA, we harvest 50% of what we need from our own forests. And by the main part of the remaining volume from private forest owners in the region, we are not heavily impacted by this situation. And during the first quarter, we have also had a stable supply to our industries. And as you can see in the graph on the bottom left, prices have also started to come up now, not least for saw logs, but also for pulpwood. EBITDA increased by 35% when comparing quarter on quarter and the main reason for that is continued increasing prices for forest land and by that also higher revaluation effect of biological assets. Turning over to wood and also business area wood is impacted by the Russian invasion. Normally, we see about 10 million cubic meters coming over to Europe from Russia, Belarus, and Ukraine. This flow is now, for different reasons, stopped. In the short term, that will, of course, create very positive momentum for producers. Price levels for solid wood products peaked in Q3 2021 at the historically high level, which you also can see in the graph on the bottom left. Average prices dropped by just under 15% between Q3 and Q4. We had a seasonal low demand during the winter period, and that pushed prices down by another 12% during the first quarter. Anyway, we now, and I think I also said that last quarter, now we expect prices to increase by at least 20% during the second quarter. We feel that we have really strong markets in Scandinavia, in UK, Japan, and also in the Mediterranean area. China is a little bit weaker, and we believe that's mainly due to the lockdowns that we see now due to COVID. As for SEA, we have had good production during the first quarter, and we've also had good delivery levels for the season. And as you can see from the graph, sales increased by 36% when comparing with the same quarter last year. And this is mainly due to increased prices, but also, as I said, due to higher volumes. The profit level in SA Wood is still on a very good level. EBITDA was up as much as 105%. And if we compare quarter on quarter, And we reached well over 600 million SEK for the first quarter. Today's stock level of solid wood products in Sweden and Finland is in relation to the average for the past five years, described at the top left on this slide. And as you here can see, we are now back on, let's say, a normalized level. And as you also can see in the diagram to the bottom left, the production is also more or less at normal level and and the situation just now is that in scandinavia we are now running production at full capacity just in order to meet the good demand and when looking at the diagram to the top right we can see that we price ssl peaked in the third quarter 2021 we had decreasing prices for two quarters but as i said we expect now prices come up by at least 20% during the second quarter. Okay, pulp. I mean, we have no direct effect of the Russian invasion in terms of stock deliveries of pulp from Russia over to Europe, but we have seen indirectly that war causes logistical disturbances. We see also lack of chemicals in the system, and that will, of course, have consequences have an impact in pulp sales were up during the first quarter by 21 percent compared to the same quarter last year and that is mainly due to significantly higher prices and every day also increased by 59 during the same period and also here our ongoing project to build a ctmp line at the weekend the total capacity will be 300 000 tons That one is progressing on time and budget. The net contribution to the market will be 200,000 tons when we are up and running in Ortvik and when we close down the old line at Östrand. We feel that the pulp market is very tight for the moment being. We see a good demand and we also see clear limitations on the supply side. That is, as I said, due to logistical challenges. but also lack of chemicals, et cetera. Today, we have more or less the same price level in all regions in Europe, in US, maybe a little bit higher in China. We also feel that we have a very tight spot market for the time being. As you remember, we picked price-wise in the beginning of the fourth quarter 21, and the official picks price at that time was 1,340 US dollar per ton, Prices decreased down to 1260, has now risen again, and the official European Picks price today is 1346, if I remember right. And I believe that we will see another price increase in short. SEA has announced 1400 for deliveries during May, and we have also announced 1450 for deliveries during June. Inventories for hardwood pulp are on the normal level, while the level for softwood pulp still is a little bit higher than average, as you can see in the graph, but mainly relates to increased inventories in transit because of logistical challenges. So, to summarize, the pulp market is tight. Then, finally, moving over to container board. Typically, we have 300,000 tons of container board coming over from Russia to Europe, 25,000 tons per month. Due to the Russian invasion, that flow has now stopped. The sales and EBITDA for the container board business are up 36% and 144% respectively in the first quarter when comparing with the same period last year. This is mainly due to increasing prices, where we now have reached all-time high prices, as you also can see in the graph in the bottom left. During the same period, also see prices have almost tripled, and the effect of that is, of course, negative. But together with rampant prices for energy, it supports the price development for test liner, and that indirectly supports price development for craft liner. And finally, I'd also like to underline that our expansion project in Obola is progressing well, and we are on time, we are on budget, and we have managed challenges related to COVID, to the Russian invasion and so on. Craftliner deliveries from Europe continue to be on a high level in the first quarter this year, and here we see a very stable long-term growth. We can also state that the demand for boxes has continued to be solid on a high level during the first quarter. Inventories for cropliner are on a higher level than last year with a seasonal increase in December. Nevertheless, we see that they are trending down now during the first quarter. We note also here lack of shipping capacity in the system and That, of course, causes some problems for deliveries outside Europe. That is a minor problem for SEA, as we are very much focused on Europe as a market for Kraftliner. The ban of Russian deliveries of Kraftliner to Europe is expected to gradually tighten the market further, but has also short-term increased the Russian producer stock of Kraftliner in Europe, and that is also what we can see in the statistics. We have seen stable prices during the first quarter and since the prices bottomed out in the fourth quarter 2020, the price for unbleached craft liner has increased by €350 per tonne and for white top craft liner by €185 per tonne during the same period. The CA has now announced another price increase for both unbleached and white craft liner from April and we expect these price increases to be successfully implemented during the second quarter. So by that, I hand over to you, Tobbe. Thank you.

Thank you, Ulf. Good morning, everybody. I will start off with a new slide, which we have, which shows about a bit of detail on our integrated value chain. and why we have, through the integrated value chain, a good level of control of both our cost base and our supply chain in SCA, and especially relative to others in the sector. And if I start off on the left-hand side of this slide, we have our wood sourcing where we annually source around 11 million cubic metres of wood per year, and around half of this, 50%, comes both from our own forest and the wood chips from our own sawmills. And then the majority of the rest comes from local private forest owners located in the SCA region where we have a big network of harvesting operations. And we usually have also contracted volumes two or three years in advance. So we have a high level of control of our wood raw material sourcing, which is by far the biggest raw material for SCA, of course. And the second box here is the electricity usage where we are almost neutral in terms of electricity. The biggest part, we have our own production which is used externally at the bottom. Then we have a significant chunk of electricity which we generate and sell to the grid which offsets our exposure also from the electricity we then buy back from the grid in other mills. And then we have a significant offset effect also from our wind leases where we have leasing contracts for wind power which are partly linked to electricity prices. Altogether our 1.7 terawatt hours of electricity usage is pretty much offset from our own production making us neutral on electricity. By far the biggest energy category for SCA is solid biofuels where we have 12 terawatt hours of exposure and we are a net seller here and this is biofuels produced primarily from bark and sawdust which goes to make pellets. and other biomass residual products from the forest. The biggest chunk is that which we produce ourselves and use internally in our operations. We have then a significant sales externally of primarily pellets and we also sell district heating also in the areas where we have our mills to heat the local communities around the mill. Fourthly, we have our own logistics company where we We have around 40% of our total logistics sourcing is run through our own system, basically in the terminals that we have and the ships and vessels that we have and long-term agreements securing other ships. And that's pretty much the most critical 40% for the logistics operation as well, having a reliable delivery performance to our European markets primarily. So we secure 40% of the logistics through our own operations. And then when it comes to transportation fuel, we also, in all our operations from the forest and out to delivery to end customers, we have around 100,000 tons of transportation fuel. And around 45% of this is offset through tall oil, which we produce and sell today, which is a product which has a price closely correlated to the price of transportation fuel. And this is the part also which we expect to grow through our joint venture investment with SD1. to convert tall oil to HPO as well. So altogether, I think that demonstrates this high level of self-sufficiency means we have relatively less exposure from cost pressure, and we're also very much able to have a reliable delivery performance to our customers, even in a tough environment like we have today. All right. If I move on, show first the income statement here, and here you can see On net sales, we grew net sales 20% in the quarter from just over 4 billion to just over 5 billion this year. And last year we did have, it was the last quarter where we had net sales of publication paper of any size. So we had around 400 million of publication paper sales in Q1 last year and of course nothing this year. EBITDA margin has increased from 32.8% in Q1 last year, which I think we felt was a pretty good level in Q1 last year, but now Now we've had three quarters in a row with an EBITDA margin over 50% and 52% this quarter. Then EBIT margin 44% this quarter after we take off depreciation and financial items very stable on a good level, 15 million SEC in the first quarter of net financial cost. Effective tax rate around 20%. So we have a tax charge of 448 million and then net profit for the period is just under 1.8 billion, which means we have an earnings per share this quarter of 2.51. If I move on and give a little bit more flavor per segment, starting off on the top left in the forest segment, the top line in forest grew this quarter. We've had price increases as showed in pulpwood and especially in timber. but also we've had a growth in volume because we haven't had any major maintenance stops in the first quarter. We had a significant maintenance stop in first round in the fourth quarter. In terms of EBITDA in forest, you can see a drop from the fourth quarter. The biggest effect here is the revaluation of biological assets. We had a one-time effect from increasing the level for the whole year, 2021, which we took in Q4, which means around 250 million of the difference is related to biological assets. We also do have a seasonally lower harvesting of own forest in Q1. And then we have a positive effect from the higher price environment in forest as well. And going into Q2, you would normally expect to see a higher seasonal effect from own forest coming through in Q2 where we harvest more of our own forest. In the wood division, you can see we've had three quarters with price declines, which explains the drop in net sales value from Q3 last year to Q4 last year, and then also into Q1 this year. And that also is the explanation for the lower EBITDA level versus the peak of Q3 last year. But I think you can see it's still, price levels are still on a historically high level and a good level. And EBITDA margin is the same with 37% EBITDA margin for the wood division. In pulp, you can see the net sales increased, primarily due to the higher volumes and the maintenance stop we had in Q4, and you can also see the effect on the EBITDA, where the EBITDA increased, and now we have a margin of 39% in Q1. And then finally, container board, and you can see the growth in net sales in container board, two quarters in a row, which is largely driven by the price, where we've seen price Net price increases two quarters in a row now, steady improvement, and that's also driven the improvement in the bottom line where we now have an EBITDA in the first quarter of some $782 million and an EBITDA margin of 40%, 45%. And if I just then show some of the bridges from Q1 last year to Q1 this year, of course you can see on net sales it's by far the biggest impact is The price impact of some plus 30%, which is in all areas, wood, pulp, and container board. We have slightly lower volumes. We did have some high delivery levels in Q1 last year, slightly higher than we had in Q1 this year. And then we have a 9% impact from exit publication paper, and that we should not see going forward now so much in future quarters because it was much lower after Q1 last year. Then I think this is a very interesting slide where you see the impact on EBITDA and you see really the big impact from price mix of some 1.3 billion, but a very limited impact on the cost side, which is related to the high level of control over the supply chain and value chain as I showed on the first slide. So really all of that price mix effect comes through in improved EBITDA. So very limited effects from volume, raw material cost, energy cost currency or other items. And this is also helped by the fact in 2021 that we took significant cost out of the business following the closure of publication paper as well. When it comes to cash flow, we have a strong cash flow again this quarter, 1.1 billion sec of operating cash flow, which again, as I've mentioned, means we're funding our strategic investments entirely from operating cash flow. We are investing in working capital as the prices increase. So we see an outflow in working capital, which is an effect of the increased pricing environment. But despite that, we still demonstrate, as I said, a strong operating cash flow. And if I finally flick on to the balance sheet, you see here the forest assets now in the balance sheet at 85 billion SEK. Working capital, again, as I say, increased due to the pricing environment. It's not increased in terms of number of days, just due to the price impact. And then total capital employed on just under 93 billion. Net debt increased here up to 10.2 billion, as you see, and that's due to the payment of the dividend. We had a 2.3 billion payment of the dividend at the end of the quarter, and that's the reason that the net debt has increased. And that means that net debt to EBITDA is now increased slightly to one times EBITDA. And then net equity is just 82.6 billion and 12% net debt to equity. So yeah, with that, I think I'll finish off and back to you, Ulf.

Thank you for that, Toby. Well, to summarize, I mean, we benefit from our controlled value chain with a unique degree of self-sufficiency in the wood, energy, and logistics. We deliver 52% EBITDA margin, and we have announced price increases in all product areas for the second quarter. So with that, I think that we can open up for questions and maybe start in the room if we have some questions here.

Thank you. If you have a question, please press 01 on your telephone keypad and you'll enter a queue.

Starting off with would the outcome between peers have differed somewhat and and there may be different reasons for that maybe the geographical mix might be one one reason so maybe if you could update us on your geographical mix within wood and then also from your customers perspective there's been a lot of disruption in and uncertainty and presumably supply concerns. What's the latest there? How is availability for your customers within Wood? And maybe a third question relating to Wood and what I'm asking about. How are global flows now changing? Is it so that Russia is rerouting what used to go to Europe, to non-European countries like China, and things will kind of resettle. And are you already now seeing that dynamic taking place?

I mean, for us, the geographical mix, I mean, we are mainly based in Europe. I mean, our main market is Scandinavia and the UK and so on. And... What we have seen now in the beginning of this year, I think, is a very strong market in the U.S., and some companies will benefit from that fact because the setup is to produce products for the U.S. market. We always, I think we put around slightly less than 100,000 cubic meters per year to U.S., but we do it in good times and in bad times because, I mean, we utilize the I would say the unique quality that we have in our forest in the northern part of Sweden for the products that we over time can benefit most from. I think that's the reason why it differs a little bit between different suppliers. That is what kind of strategy you have. We stick to our... I think we manage well in the competition, also in the first quarter. Availability among customers, I think that we, I mean, as I said, we will increase prices by 20% now during the second quarter. I think that is a sign that customers, they are, I wouldn't say afraid, but I mean, they feel that it is a very tight market in Rudolfs this year. And of course, that is impacted by the Russian invasion. No doubt about that. Then, over to your third question, I mean, no volumes is coming now from Russia or Belarus or Ukraine over to Europe for obvious reasons. It's not too easy to move them east to China because the logistical system is also, I mean, occupied by the war, of course. So, I mean, we don't see too much Russian... goods in other areas either. But as I said, I mean, one thing too, one question mark is maybe the Chinese market because they have, as you know, closed down Shanghai and there is at least some talk about closing down Peking and Beijing. That will, of course, have a negative impact globally. But as it is just now, we feel that it is a very strong

balance in the in the second quarter prices will come through we will increase prices by at least 20 percent and and that is what we can foresee us now thanks thanks very much it's kristen kopfer from handelsbanken uh firstly on on wood product markets on wood products obviously developing very well as you said there and in q2 Am I right that you are looking into potential capacity increases in your sawmills?

That was the first question.

We always do.

But again, to run a sawmill, you must be aware of the fact that 75% of the cost is related to the raw material, to the saw logs. You have to control the saw logs, otherwise you will not be long term very profitable in this business and step by step we try to be more efficient in our sawmill operations but as you know we have reduced the number of sawmills during a number of years now from 11 to 5 and by that we have among the biggest and most effective sawmills in Europe but they are all located in close connection to our own forest because we like to work in this integrated value chain and we like to control that we can get out of that i mean if we can buy more capacity within our let's say core area we will do that of course but we will not go outside our core area for for more capacity okay so you are considering it but you have not taken any decision yet obviously I mean, we are always working on this issue and just now we have an ongoing investment in Bolsta, the biggest pine mill in Europe. I mean, we are investing just now slightly less than one billion SEK in the grading mill and also in the CT scanning, sorting equipment and so on. I mean, we invest a lot in our saw mills and we will consider every possibility in our core area.

So, I mean, on the wood sourcing side in Sweden, I mean, you said that it will become probably more tight going forward because of Russia and so on. And when I talk to some private forest owners, they are indicating to me that it is not so big potential to increase harvesting. So how do you feel? I mean, you are ramping up in Ostviken, you are ramping up in Obola. Other industries are running at very high profitability. They are probably trying to ramp up and squeeze out a little more capacity all the time. So, I mean, how do you see the wood market? Will it really be enough wood for the industries, you know, for the next or for the long term?

I mean, it's always a competition, but I think we are absolutely in a very good position. We have 50% of what we need from our own forest. We have decided to increase the harvesting level by 25% step by step in five years' time now. We are buying the absolutely remaining part from local private forest owners in the region. We are well invested. We have a good capability to pay for the raw material. I think we will be very competitive in this area. That is one part of our controlled value chain. I think a lot of other players are in a very strong position. So we're not afraid about that. That can even be positive for us.

Okay. And then finally for me, on the biorefinery, you have it in your potential projects, making biofuel out of lignin. So how does that look right now, the project, and how are you viewing the market?

I mean, we have the first step now will be to build land, and I think that decision will come quite soon. because this mill will be located close to Östrand. Otherwise, I mean, we are running our feasibility studies and we are doing some work together with some, let's call them strategic partners. And as I said, also in the past, I mean, commercially, we are not 100% sure exactly what kind of technique we will use. But I mean, sooner or later, we will be there. So, but it's... Still, nothing is decided, but we have the environmental permission, as you know, the first one, and we are preparing for building land now.

Right. You mentioned there's one track based on lignin, but there's also a significant part of the track based on solid biofuels, so solid biomass. Yeah, so there's those two potential tracks.

But we are just now, as you know, I mean, we are, I didn't mention that one, but we are just now running a big project together with ST1 in a new biorefinery. And I mean, that will give substantial contribution already next year.

But is it fair to say that you expect to take a quality investment decision in the next one to two years for the other options?

First, we must be very, very sure of what to do, and then we take the decision. That's the way we work. Okay, sounds great. So then we can open up, I think, for the line. Questions from the operator. Thank you.

I remind you that if you want to ask a question, please press 01 on your telephone keypad and you'll enter a queue. We have a question from Justin Jordan from Anson. Please go ahead, sir.

Thank you. Good morning, everyone. I've got two quick questions. Firstly, on container board cross-lanner, from memory, I think on March 14th, you announced a 100-euro ton cross-lanner price increase. I believe something like 50 was recognized by FastMarker's receipt in April. Do you believe the residual 50 will be successfully achieved in May? Secondly, thank you for the color on the wood pricing dynamic in a plus 20% in Q2 over Q1. Essentially, are you saying now that wood prices will go back to almost like their Q3 prior peaks? And thirdly, just one slightly geeky one, on FX, I've noted clearly that the U.S. dollar has strengthened significantly in recent weeks. Should we think about that being a tailwind, particularly to perhaps your pulp business in Q2? Thank you.

Well, I maybe take the first question too, but you can take the other one. I mean, yeah, we will see further improvements price-wise in Kraftliner. And I think the main driver here is, I mean, the market is tight. We were talking about logistical challenges in all areas. We know that 300,000 tons of Kraftliner on annual basis will not come over from Russia over to Europe, and that will have a substantial effect in the market. We also see that for test liner producers now, OCC prices, as I said, they have tripled now since late 2020. At the same time, we see that energy prices in, not the least in the southern part of central Europe, southern part of Europe, they have increased dramatically. And by that, test liner prices will continue to come up. And that means that also cross-liner prices will continue to come up. I mean, what we see now is the negative effect of being totally dependent on Russian oil and gas. And fortunately, we are not in that situation in the northern part of Sweden here.

Yeah, and I could just add on FX, Justin. I mean, a stronger U.S. dollar is positive for the pop business. We do hedge some 70% of our currency exposure here. or a bit more now, 70% to 80% of our currency exposure for U.S. dollar for the next six months. You can see that we describe the rates also in the quarterly report. So we have relative stability in the rates for U.S. dollar, and U.S. dollar is mainly, our pulp business is the part that's mainly exposed to U.S. dollar. So, yeah, I won't speculate on where that would go in the future, but I think it's absolutely true that a stronger U.S. dollar is positive for pulp, of course.

Thank you, Toby. And then just on a personal level, Toby, clearly thank you for all your help and professionalism and patience, frankly, in dealing with all the analyst questions over the years and best wishes in the next chapter.

Thank you, Justin.

Thank you. Our next question is Ko Ho Han from Jeff Bees. Please go ahead, sir.

Morning. Thank you for taking my question. A longer term question on availability of raw material supply in the region. If you're thinking about a five year view or a five to ten year view of potentially building a new pulp mill or a new saw mill in the region, what is the feasibility of this now that Russian pulpwood and saw logs have been removed from the market? is it going to be more challenging to potentially build any pulp capacity in the Nordic or Central Eastern Europe? And the same question on the sawmill side, which would argue for better value if you've got a low-cost asset in those regions. I'd just like to hear your thoughts there. Thank you.

I mean, first, it's very hard to predict what kind of impact the Russian invasion will have long-term. I mean, obviously, just now you have these sanctions, and I cannot really see that that will change in the near future. As I said before, we are not dependent at all directly on Russian raw material or log supply. For us, we are not really focused on building brand new mill capacity in our region, either in pulp or in sawmill. We will step by step increase capacity, but just now we will be more focused on, as I said before, energy. We will continue to buy land, forest land. Generally, of course, 10 million cubic meters per year that is substantial volume but that will directly mainly affect the finnish producers i also think that the birch will be the is the main part was the main part from from the flow from russia maybe 50 of the flow and that will impact certain product areas of course if you like to come

The only thing to add is I think over a longer period, you've seen basically the volume of wood going into publication paper has reduced. And of course, we've taken away that volume and we exited publication paper and we're increasing in Oberlin, in Craftliner and in CTMP. So it's a kind of, over the longer term, it has been a switch between the different markets. But I guess if you're looking further down the track, it depends what will happen in publication paper going forward as well, to some extent. but we also see increased growth from our own forests and I think from other forest owners as well. Steadily is an increased availability.

We will not take any investment decision without feeling that we can control the raw material supply situation. That is the way we are working. We base our industry on the safe fiber supply, I would say.

And then just following up on the wood market development, is there any comment that you can give on kind of construction demand or outlook? I mean, I understand that the market is quite tight and there's been supply removed from Russia, but a little bit more color on the demand trends would be useful. I mean, have you seen any impact or slowdown there? Thank you.

I mean, just now, as it is just now, I feel that the professional market is still there, and it's strong, normal, and it has been strong for a while. We don't know exactly yet what will happen in DIY, and I mean, the season is not... Yeah, it has started to come now, and maybe it is a little bit slower than it was last year, because last year was fantastic. I mean, the main driver just now is the... reduce the limitation in supply of wood into the system. So, I mean, short term, it will be a very strong balance. Long term, I think it will be more dependent on, as I said, cost inflation. I mean, what kind of development will be seen in terms of interest rates and things like that. That will have an impact on building activities and consumption of wood. BMP development, as always. Thank you.

Thank you. Our next question is from Robin Santafieta from Carnegie. Please go ahead, sir.

Thank you very much. I have a question related to the new Obola Craftliner production line. We know the timing and the budget and the capacity expansion, but could you shed some more light about the process related to the results impact we should expect in 2023? And how is it, I mean, it seems you have a new OCC line there, and then you will apparently expand on that. on on the power plan and you have a brand-new I'll croft liner machine how do you ramp up something like that I do you need to sort of have a long maintenance shot that's at some station can you can you run now run the the machine and ramp up in in in parallel just more information on that would be appreciated thanks me this is a unique project I mean we will

we will run obola with a very strong positive cash flow during the whole ramp up period which is quite different to some other projects i mean the reason for that is of course that we are building a new line in parallel with the old one we have to close down for maybe two weeks in order to move the pulp flow from the old paper machine over to the to the new one but more or less a normal maintenance stop maybe a little bit prolonged um the volume already next year will be higher than this year and we've said that we've reached at least 500 000 tons already next year and i mean then how we in details manage to ramp up i mean that depends of course where we find out bottlenecks and and i guess we will have some disturbances during this process it is a new paper machine of course but I mean we foresee a very minor effect here we will already next year produce more than we do this year and that will continuously give us a positive cash flow I understand thanks and could you just shed some light on the fiber mix will be the same as before and what has it actually been is it one third

recycled fiber and the rest virgin.

We will not give you the recipe, but we will deliver 100% premium craft liner.

I understand. And then a final question related to what Cole was trying to sort of ask, maybe in a bit different way. Let me try. So we understand that the demand of sawn timber is actually quite strong, at least here in the Nordics at the moment. But is that true underlying demand for construction activity in the summer and in H2 or is that in fact in inventory sort of build up because everybody knows prices are going up and will be probably very high in the summer. So the point I'm making is do you think there is a risk that we see inventory building now in the professional sort of segment and and then potentially quite significantly weaker demand in the second half of the year if construction volumes, in fact, would stagnate.

I will not judge the situation for the second half of this year, but what we feel now is that we have a strong underlying demand. Of course, as you say, the balance is an important part of the pricing, but we feel that the underlying demand is good. Professional building is... on a good level. We haven't really seen what's going to happen with DIY. I mean, during the COVID and the closed down period, I mean, people, they have spent a lot of money in their gardens, building verandas and all other projects. And it might be so that we travel more this year and spend less money into our own houses and things like that. But I mean, it's again, it's a question of balance and the balance is super strong as it is just now. And long term, and then I mean maybe not the second half of this year, but I mean long term, we know that inflation, interest rates, and things like that, that will have an impact on building activities, of course.

Of course. Thank you very much.

Thank you. There are no further questions at this time. Please go ahead. Oh, sorry. There is a follow-up question from from Jeffy. Please go ahead, sir.

Thanks for taking my follow-up. Just following up on the softwood pulp market, I mean, the question I was alluding to earlier was if I think about where you can put in a new global softwood pulp mill, I mean, putting it into Canada is going to be very challenging considering what's happening to the forest there. I don't think people are going to be allocating $3 billion into Russia. So it only really leaves the European markets or potentially the southern states of the U.S. With that kind of more limited supply in softwood coming on stream in the future years, does that argue for the divergence or the premium of softwood pulp being above hardwood pulp? longer going forward? And does that mean that if you've got a low-cost global software pulp mill, it's effectively more valuable? I'd just like to hear your thoughts on that. Thank you.

I think it's hard to say. What we know now is that we have a Finnish project that will come on stream in a couple of years, two years. And that one, I suppose, will be and that will be a very competitive meal, of course, the medicine meal. Otherwise, I don't know anything about further plans for capacity expansion, at least not in Europe, and I don't foresee it in North America either. If no capacity will come on stream, if you continue to have an underlying strong demand from the tissue business, as we also saw already now in the first quarter, I mean, then, of course, the balance will be more beneficial for us and for other MBSK producers. I don't know, Toby, if you'd like to.

I mean, it does come down to the availability of the raw material. So I think, yeah, you don't have unlimited supply. I think also on the hardwood side, there's not unlimited availability of good raw material at good prices. low cost level in hardwood either, so perhaps a bit more. But I think you do see that softwood expansion will be probably below the level of growth of the overall market for softwood going forward.

Thank you.

Thank you. There are no further questions at this time. Please go ahead, speaker.

Thank you. And that concludes today's presentation of the first quarter results for 2022. Thank you for listening and watching.