Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SCA's first half year result for 2022. With me here today I have President and CEO Ulf Larsson and CFO Andreas Everts to go through the results and take your questions.

Over to you Ulf. Thank you for that Anders and also from my side a good morning and a warm welcome to the presentation of the results for the second quarter 2022. We have delivered another strong quarter in fact this is the best ever and our EBITDA reached 3.1 billion during the quarter and that gave an EBITDA margin of 53% and actually this is the fourth quarter in a row with an EBIT margin over 50%. In a turbulent time, we can state that we benefit from our unique control of the supply chain. And here again, I'm thinking about wood, energy, but also logistics. On top of that, we can just point out that we have had a very strong quarter for all our products during the second quarter when it comes to market. As already said, we have no operations of direct exposure from sales or purchasing in Russia, Belarus or Ukraine. Nevertheless, our product markets have and will continue to be influenced in different ways. Short term, so far, mainly positive. Long term, of course, big question mark. Sales increased 23% versus Q2 2021. Main reasons for the sales increase are generally high demand and of course high prices in all product areas. When comparing our EBITDA level for the second quarter this year with the outcome for the second quarter last year, we can see an improvement of 38%. Apart from higher sales prices, we have delivered a high level of sales to defined core markets. generating a good profit for us. With a high degree of self-sufficiency we have also been able to mitigate some of the cost inflation which has helped to build this solid profit. SEA has based evaluation of the forest holdings on completed transactions in the region and the market in this area continues to be strong. and during the first half of 2022 the value has increased another 4% or between 3 and 4 billion SEK. Last but not least important, I would like to conclude this summary by stating that our two major investment projects in Åbole and Ortviken both are progressing on budget. In addition, I can mention that the project in Obola is ahead of time and the startup of the new paper machine is now planned to be during the fourth quarter this year instead of the first quarter next year. The OCC line, which is needed to reach full capacity in Obola, is scheduled according to the original plan and that one will be up and running during the first half of next year. Then I turn over to some financial KPIs, and as already mentioned, we delivered 3.1 billion SEC on EBITDA level, and that corresponds to 53% EBITDA margin. And as I said, if you look to the right-hand side, you can see that this is the fourth quarter in a row where we reached a margin over 50%. Our industrial return on capital employed came out on 54% for the second quarter and calculated for the last 12 months 46%. The leverage went down to 0.8 despite a large ongoing investment program and by that we continue to finance all our investments including strategic projects with our operating cash flow. I will now 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 mainly pulpwood and wood chips will no longer come to Europe and that in combination with the fact that the Finnish strike now is over will generally put an increase in pressure on the wood supply As we in SEA harvest around 50% of what we need from our own forests, and as we also buy the main part of the remaining volume from private forest owners in our region, we are not heavily impacted by this situation. During the second quarter, we have had a stable supply of wood to our industries, and as you can see in the graph on the bottom left, prices have started to come up, not least for pulpwoods. When we compare quarter on quarter, EBITDA has decreased 10% in forest and the main reason for that is lower harvesting volume on our own forest during the second quarter. But we also see higher transport and harvesting costs mainly related to higher fuel prices. We have had stable deliveries from business area wood in the second quarter. Prices went up approximately as much as we guided for when comparing Q2 with Q1. Customers have decreased their stock levels during the second quarter because they did expect lower prices in the third quarter which we also will see and I will come back to that. 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. A seasonal low demand during the winter period pushed down prices by another 12% during the first quarter 2022, and during the second quarter prices went up again by approximately 18%, but will now decrease during the third quarter by between 25% and 30%. We have had and still have a turbulent market in wood. On the one hand, we all know that sanctions against Russia and Belarus have been effective from July. On the other hand, we can see increasing interest rates, cost inflation and so on. Nevertheless, we have during the second quarter seen a weakening market in all regions more or less. However, in the U.S., it seems, at least for the time being, to have bottomed out on a relatively good level when it comes to demand and price. Generally, we believe that a reduced Russian supply in combination with the need from customers to fill up inventories will stabilize the market during the autumn season. As for SEA, we have had a good production during the second quarter at the same time somewhat slower deliveries since we had a lower stock level this year in comparison with the same period last year. The profit level was very good in the second quarter and we reached $933 billion on EBITDA level and that was up 49% in comparison with the same period last year. In comparison with the second quarter last year, we have seen sharply increasing log price. On the other hand, for us, the negative effect has partly been mitigated by a higher raw material yield in the production in our sawmills. 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 now on a normal level. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmills production has been on the high side. On the other hand, Canada, as an example, is 11% behind when comparing year on year up till May. And we also know that the sanctions against Russian and Belarusian would have been effective since July. When looking at the diagram to the top right, we can see that the price peaked in the third quarter 2021, but that prices still are on a historically high level. But as already said, we believe that prices will decrease with 25% to 30% in the third quarter. So during the second quarter, we have delivered our best quarter ever in terms of result in business area pulp. We have seen a continued strong market with successively higher prices combined with a high demand and also strong deliveries. Sales were up during the second quarter by 23% and EBITDA increased by 44% during the same period. And on the positive side, We have seen increasing prices, increased earnings from renewable byproducts, and also positive currency effects. On the negative side, we have seen higher costs for pulpwood chemicals and so on. As mentioned already in the beginning, our ongoing project to build up a CTMP line at Tortviken is progressing on time and budget, and that one will start up in the first quarter next year. The pulp market in Europe and U.S. is tight today with a good demand and limitations on the supply side due to these logistical challenges, production disturbances, etc. On the other hand, we can see a weaker market in China. SEA has a very low direct exposure to the Chinese market as Europe and U.S. are core markets in pulp. Today we have a similar price level in Europe and US, but a slightly weaker price picture in China. As you might remember, we went into this year with an official European Picks price of 1260 USD per ton. We have stepwise seen higher prices, 1400 for deliveries in May, 1435 for June, 1485 for July and we have now informed our customers that our position for deliveries in August will be 15-25 USD per ton. As you also can see, inventories for softwood pulp have come down and by that we have a normal stock level for both soft and hardwood pulp. Turning over to container board and the sales and EBITDA for the container board business are up 32% and 84% respectively in the second quarter 2022 when comparing with the same period last year. And this is mainly due to increasing prices where we now have reached an all-time high level as you can see in the graph in the bottom left. The prices for OCC have almost tripled since the bottom in November 2020, and this affects the result negatively, but together with the large increase in prices for energy, it also supports the price development for test liner and thereby also indirectly for craft liner. During the quarter, we have performed the planned maintenance stop in Obola. Among other things, we have prepared the mill for the coming start up of the new paper machine. The negative result effect of the stop is calculated to around 70 million sec. We see a stable underlying short and long term growth in Kraftliner and the demand for boxes has continued to be solid and the demand has flattened out on a high level. Inventors for Kraftliner are on a higher level than last year. We continue to note lack of shipping capacity for deliveries outside Europe, leading to higher inventories, although this has had a minor impact on SEA. SEA has a balanced stock level and has only limited exposure to markets outside Europe. We have seen slightly increased prices during the quarter since the prices bottomed out in Q4 2020. The price for Unbleached Craftliner has so far risen by approximately 400 euro per tonne, while White Top Craftliner has increased by 275 euro per tonne during the same period. So, I said initially that the expansion project in Obola is on budget and ahead of time, and we have already delivered four sub-projects as you can see on this slide. The most complex and challenging sub-project by far is of course the new paper machine and that sub-project was scheduled to be finalized during the first quarter next year. We now see that we will be able to start up in the fourth quarter this year. However, the OCC line is needed to reach full capacity in Obola and that one will be built according to the original plan and by that be up and running during the first half of next year. With this early start of the new paper machine, we have, I would say, created extremely good conditions for a very successful project. As we are building up the new paper machine in parallel with the old one, this project will be unique in the way that we will have almost no downtime due to the project. By that, we will also have a strong cash, positive cash flow as well as an uninterrupted customer service throughout the whole expansion. On top of that, we will have a high production volume already next year in comparison to previous years. So by that, I hand over to You, Andreas?

Thank you, Ulf, and good morning, everybody. I will start off with the forest valuation. Forest prices in northern Sweden continue to increase, and the average three-year price in SCS region increased by about 6%, from 324 to 342 SEK per cubic meter. The valuation of SCS forest assets increased by over 3 billion to 88 billion. And of this, approximately 900 million went through the P&L in the first half year. If we move on to the income statement for the second quarter, net sales grew by 23% to 5.9 billion, mainly driven by higher prices and improved mix. And the majority of the sales increase went through to EBITDA. EBITDA increased to just above 3.1 billion, corresponding to a margin of 53%. And this is the fourth straight quarter, as Ulf mentioned, with an EBITDA margin of above 50%. The EBIT margin increased to 46%, and financial items totaled minus 5 million. We had an effective tax rate of around 20%, bringing net profit to 2.2 billion, or just above 3 sec per share. On the next slide, we have the financial development by segment. Starting with the forest segment to the left, sales decreased slightly compared to the previous quarter, mainly due to lower volumes to SCS Industries because of the planned maintenance stop in Obla. EBITDA increased to 675 million, mainly due to seasonally higher harvest from SCS-owned forests compared to the previous quarter. Both pulpwood and solar prices have increased the last couple of quarters, but effects have been offset by increased fuel costs. In wood, we have had several strong quarters since the beginning of 2021. In Q2, both price and volume increased compared to the previous quarter. Sales increased to 2.2 billion and EBITDA increased to 933 million corresponding to a margin of 42%. In pulp, the prices have continued to increase since the beginning of the year. In Q2, both price and volume increased compared to Q1, and sales totaled just above 1.9 billion. EBITDA increased to 866 million, corresponding to a margin of 45%. Higher income from renewable by-products has helped offset increasing wood and chemical costs. In container board, craft lining prices have increased since the end of 2020. In Q2, the planned maintenance stop in Obola impacted both sales and EBITDA. EBITDA was 756 million, corresponding to a margin of 43%. Adjusting for the effects of the planned maintenance stop of minus 67 million, EBITDA increased compared to the previous quarter. On the next slide, we have the sales bridge between Q2 last year and Q2 this year. Higher prices had the largest impact, 27%, and prices increased in all segments. We had slightly lower volumes, again, mainly due to the maintenance stop in container board. Currency had a positive impact of 3%, and exit publication paper had a negative impact of 3%. In the EBITDA bridge, we see the effects of our integrated value chain. we had a big impact from price mix of 1.25 billion, while the effects on higher raw material costs was more limited due to our high degree of self-sufficiency. The higher raw material costs related mainly to higher wood costs and higher costs for chemicals. Energy costs had a slight positive impact, which really shows our high self-sufficiency post exit publication paper. We had a positive impact from currency, and a negative impact from the planned maintenance stop and higher fuel prices. In total, as I mentioned before, EBITDA increased to 38% to record high 3.1 billion SEK. We continue to have a strong operating cash flow, 1.9 billion in the quarter and over 3 billion for the first six months, almost a double compared to last year. This means we're continuing to fund our strategic investments with operating cash flow. Looking at the balance sheet, the value of the forest increased to $88 billion. Working capital increased to $3.8 billion due to high prices. But in terms of days, working capital was unchanged. Total capital employed increased to $96 billion and net debt stood at $9.5 billion or 0.8 times EBITDA. The net debt increased compared to Q4 last year because of the dividend, but decreased compared to the previous quarter. Equity increased to 86 billion SEC, and net debt to equity was 11%. And with that, thank you, and I'll hand back to you, Ulf.