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 Evertz 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 result 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 percent. And actually this is the fourth quarter in a row with an EBITDA margin over 50 percent. In the 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 an 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 percent 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 percent. 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 The CAA has based the valuation 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 percent or between three and four billion SEC. Last but not least important, I would like to conclude this summary by stating that our two major investment projects in Obolla and Oortviken both are progressing on budget. In addition, I can mention that the project in Obolla 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 Obolla, 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. As already mentioned, we delivered 3.1 billion SEC on the EBT-A level and that corresponds to 53 percent EBT-A 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 percent. Our industrial return on capital employed came out of 54 percent for the second quarter and calculated for the last 12 months 46 percent. 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. 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 SCA harvest around 50 percent of what we need from our own forest 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 the least for pulpwoods. When we compare quarter on quarter, EBTA has decreased 10 percent 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 of wood in the second quarter. Prices went up approximately as much as we guided for when comparing Q2 with Q1. Customers have decreased the 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 percent between Q3 and Q4. A seasonal load amount during the winter period pushed down prices by another 12 percent during the first quarter 2022 and during the second quarter prices went up again by approximately 18 percent but will now decrease during the third quarter by between 25 and 30 percent. We have had and still have 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 less. However, in the US 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 reduced Russian supply in combination with the need from customers to fill up inventories will stabilize the market during the autumn. As for SCA 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 the ABTA level and that was up 49 percent 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 is an example is 11 percent behind when comparing year on year up to May. 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 percent in the third quarter. During the second quarter we have delivered our best quarter ever in terms of result in business area. 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 percent and EBITDA increased by 44 percent during the same period. On the positive side we have seen increasing prices, increased earnings from renewable byproducts and also positive currency effect. On the negative side we have seen higher cost for pulpwood chemicals and so on. As mentioned already at the beginning our ongoing project to build up a CTP line at Oortviken is progressing on time and budget and that one will be that one will start up in the first quarter next year. The pulp market in Europe and US is tight today with a good demand and limitations on the supply side due to 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 US are our 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 PIX 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 1525 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 EBTA 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 effects 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 craft liner and the demand for boxes has continued to be solid and the demand has flattened out on a high level. Inventories for craft liner 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 craft liner has so far risen by approximately 400 euro per ton while white top craft liner has increased by 275 euro per ton 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 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 flow as well as an uninterrupted customer service throughout the whole expansion. On top of that we will have a higher production volume already next year in comparison to previous years. So by that I hand over to you Andreas.

Thank you 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 SES region increased by about 6% from 324 to 342 SEC per cubic meter. The valuation of SES 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 this sales increase went through to EBITDA. EBITDA increased to just about 3.1 billion corresponding to a margin of 53% and this is the fourth straight quarter as Ulf mentioned with an EBITDA margin of about 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 SES industries because of the planned maintenance stop in Oberla. EBITDA increased to 675 million mainly due to seasonally higher harvest from SES owned forest 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 943 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 byproducts 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 Oberla 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 effects on higher raw material costs was more limited due to our high degree of sales efficiency. 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 sales efficiency 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 48% to record high 3.1 billion SEK. We continue to have a strong operating cash flow, 1.9 billion in the quarter and over for the first six months, almost double compared to last year. This means we are 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 higher prices. 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 increase compared to Q4 last year because of the dividend but decreased compared to the previous quarter. Equity increased to 86 billion SEK and net debt to equity was 11%. With that, thank you and I'll hand back to you.

Thank you for that Andreas. Well, the summer again, we made the record result and I think structurally we have improved SEA by focusing very much on growth areas. The closure of our publication paper business is a very strong reason for us now performing as we are doing now. We also feel that we benefit very much from our strong supply chain. We've been talking about wood energy but not least I would say our logistical company that helps us very much to perform in a good way to our customers. Last but not least, our big project in Obolla is on budget but ahead of time. So by that I think we open up for questions.

The first question comes from Linus Larsson at SEB. Please go ahead.

Yes, good morning. Thanks for taking my questions. Maybe starting off on the wood division and you continue to guide very helpfully on the price aspect of the business outlook. How do you see the volume outlook in the third quarter and how are you planning to run your own operations please?

I can just talk for myself and for SEA and we have a normal stock level in our mills and the plan is to run our sawmills in the way that we normally do. We run our sawmills during the whole summer. As I said we feel now that the stock level among our customers are on the normal to low side and we also think that all customers did expect a price decrease in the third quarter which they also will see now. On the other hand we also know that from 8th of July we will see the full effect of the Russian sanctions. So I think we will have a rather balanced market from now on.

Okay, great. Then maybe quickly switching to container board. It's been a fantastic market for quite some time now. We're seeing some signs of normalization in different ways and recycled based container board price declines taking place. How do you see that outlook in the second half for craft liner, for your own business Did you try to describe the market outlook, price trends, order situation and so forth?

We see a rather stable market for craft liner and we came through with the price increases that we did announce in the second quarter. Maybe we haven't really seen the full effect of that up to now. I think that the development in underlying we have a good consumption. I would say that the stock level is more or less on a normal level and the price development will be very much dependent on the price for energy but also for OCC. Again, if we look at the OCC market we have seen that the price has as I said tripled in a rather short time and it is on a rather stable level as far as I can understand. I think you can judge maybe better than I can do the energy price development going forward because that will energy and OCC together will set the price for test liner and of course you know that we have a dependency between test liner and craft liner prices.

Yes, great and maybe finally on that note when it comes to the European energy situation and potential natural gas availability constraint even more than it already is going into the later part of this year. I mean as I have highlighted you don't have much direct exposure, you are highly self efficient on energy but when it comes to the indirect exposures how do you see A your exposure when it comes to suppliers in chemicals for instance and B exposure to customers in pulp and maybe other businesses as well where there might be indirect exposure risk of energy closures etc. later this year.

I mean that is very hard to predict. I mean I can just talk about our own situation as you say I mean we have 100% self sufficiency here and we are very happy for that and it's not really easy to foresee what's going to happen now during the autumn. I don't know if you would like to add something on the SOR.

No I mean we think the chemical costs have peaked now but we had a project where we tried to look at where do we have the most risk in chemicals and try to secure all those chemicals I think we have a good position to secure the supply.

Okay great that's helpful thank you very much.

The next question comes from Robin Santa Virta at Carnegie please go ahead.

Thank you very much good morning everybody first a question related to the input cost now you have a quite nice integrated setup which helps you a lot but still we can see when I put in the Q2 numbers in the model that you have some increases in cost per ton in your industrial operations what is the outlook when we go into Q3 related to the input cost and I think about wood raw material cost OCC chemicals and logistics.

In terms of pulpwood we see some continued price increases in Q3 in terms of soil logs we think that the prices will be quite stable also for OCC the prices will be quite stable in terms of chemicals I think the costs have peaked but you have some lag effects within the OCC hydroxide otherwise it's stable and some chemicals are coming down in transportation we also think that the costs have peaked but then we see quite volatile oil prices which of course will affect the transportation.

Thank you Andreas another question I have related to the wood segment which has been exceptionally strong now and then you guide for a bit lower prices now in Q3. The question I have is I understand there are structural trends out there supporting wood building and the usage of wood raw material in construction but isn't there still some risk that we go back to quite low levels isn't sort of the history supporting this a bit boom bust sort of pricing in this segment and certainly we have even an economic recession in your export market I would assume that construction activity and DIY activity would be quite low so how do you sort of see if we go into sort of 2023 a bit further out could you sort of could you provide some kind of reflections of where do you think the prices will essentially bottom out?

We will not give you a forecast but I mean again fundamentally we believe in wood long term and I mean we have a healthy growth in wood and we can also see that we gain market shares in wood in comparison with other materials so we believe that will continue but of course I mean short term the price will be set related to the supply demand balance and short term we feel as I said we feel still rather good demand out there even if we have to decrease prices now but interest rates and cost inflation and things like that I mean that might give for a short time a different situation in the market but I mean we have to handle that in a good way long term we believe in wood we believe that is a growth area and we will continue to invest in that business area we think it's strategically right to stay in wood of

course. I understand that thanks and final question I have is related to the ramp up of the machine the Crestline machine in Aalbola very well done on sort of even coming in before expected time the machine starts up now how should we model Q4 Q1 in terms of any additional costs and maybe perhaps sort of focus on Q4 which is closer now already on this side?

We will have quite limited impact on volume for the start-ups I think we will have similar deliveries to last year in both Q3 and Q4 so the effects will be quite minor.

And I mean that is the unique thing with this project I mean we are building up the new line in parallel with the old one and by that we can continue to run the production if something goes wrong I mean then we also have a possibility to swap over to the old machine again and by that we will have a strong positive cash flow during the whole ramp up period and we believe that already next year we will produce substantially higher volume than we do this year and we did the year before so I mean this is a really strong project.

Good thank you very much thanks.

The next question comes from Justin Jordan at BNP Paribas exam please go ahead.

Thank you good morning everyone clearly well done on a Reco Q2 and welcome Andrea to the new CFO room. I've just got one quick question that Lena's haven't quite covered just firstly on pop market outlook I think of you in your prepared months you talked about an additional US$14 a ton increase in August from 14.85 in July. Can you just help us understand I suppose your confidence in achieving that given and you quite rightly stated you know Chinese food prices look like they're easing and clearly Chinese food futures have been easing up late. Can you just help us understand how that's possible to get further price increases in Europe against that backdrop of easing Chinese food prices thank you.

We are as I said we are mainly focused on the European and US market and we feel that we have rather strong demand in this market it is actually it is a tight supply situation in Europe so I mean if we could then we could deliver much more pulp than we do today so I mean that's the reason why we go for another price increase in Europe and US. We have a slightly different situation in China and I mean that is maybe due to logistical challenges we have seen that some parts of China has been closed down for a while due to Covid and that might happen again in some areas we don't know but as it is just now I mean we have a super strong market in pulp in Europe and in addition we have seen some disturbances for other producers and that have also contributed to this I would say favorable balance as we have just now.

Great

thank

you and just one quick follow up probably for Andreas on FX you had a 179 million positive FX tailwind in Ipah Dahl in Q2 can you just sort of remind us where the key FX exposures are I am assuming it is probably in pulp is there some in container water as well and just how should we think about that given recent FX movements for the second half of 2022 please.

If we start with pulp I mean there we are the main currency is dollars there we have a large impact of US change in US dollar in container board the prices are mainly set in euros so that is euro in terms of wood I mean it is euros sec and British pounds on what segment but the largest exposure is in dollars and in euros in our report you can find we have hedged around 75% of our exposure in the coming six months we can find the figures in the report. Great thank you Andreas.

The next question comes from Martin Melby at ABG please go ahead.

Good morning my questions have been answered now but one on the forest side there we have some lower harvesting and higher costs yet prices are moving up to wood so how should that segment progress into the second half?

I mean the reason for harvesting less volume on our own forest is it is just let's say mix we have to harvest what we buy from small private forest owners and that has been prioritized now for the first half of this year but the balance will be as we have said on the whole year. Then I didn't catch maybe the second question was that about the price development or?

Yeah have you catch the price increase on wood in that segment in this quarter or is that yet to come in Q3?

Maybe but as Andreas said I mean when it comes to log prices we believe that the price will be rather flat in the coming quarters now and in pulp wood as you also saw on the slide you could see that prices have come up and will come up a little bit further in the third and fourth quarter that's the best guess we can have just now.

The next question comes from Oscar Lindström at Danske Bank please go ahead.

Yes good morning so three questions for me first off maybe I didn't hear quite clearly but on wood did you say that you expected the market to stabilize during the autumn and does that mean that we should expect prices to stabilize during Q4 as well? So that's my first question do you want me to go ahead with the other ones?

I take them one by one I mean what we have said is that we know that prices will come down 25 to 30 percent in the third quarter and what will happen in the fourth quarter I don't know and it's hard to say but what I was saying was that we have a rather the stock level is quite okay out there we believe that customers they have a rather low stock because they of course they did foresee that this price decrease would come in the third quarter I mean they are on the low side when it comes to the stock level and in addition we also know that the Russian sanctions will be valid from July and that will also have negative effect on the supply side but on the other hand as I said I mean obviously that interest rates they are coming up we know that the DIY sector has been quite slow this year in comparison with last year and I mean that will not recover in the fourth quarter of course as we feel professional building activities are on a rather high level but long term if we see a completely different interest level and strong cost inflation that might have an impact on building activities so I mean I think that you can judge that better than I can do but I mean for the third quarter we know 25 to 30 percent down and for the fourth quarter we don't know the price development for the fourth quarter but we feel at that time that the market should be more stabilized.

Alright thank you that's a clear answer. My second question is on investments and capital allocation I mean with Obula project coming to an end a little bit earlier than expected and Oortviken set to start up next year you have a strong balance sheet and at the moment you're making very good cash flow where do you see opportunities for attractive investments and where are your priorities I mean I know you're looking at you've talked about possible pulp de-bottle banking in Estran buying forest land in the Baltics, wind power, refinery

where

do you see these also in terms of timeline I mean are some of these more immediate others much further away?

Yeah. The main focus just now is to fulfill the investments that we have started up I mean you have Obula as I said that one will now be started up a little bit earlier than we thought but the Bolsta project a big project in the integrating mill in Bolsta which is the biggest pine saw mill in Sweden that one will also be finalized during the autumn I mean the safety and P project we have talked about that one and that will be up and running latest first quarter next year and then we also have the big project together with ST1 that is planned to be up and running in the second half of next year so I mean we have 100% focus on delivering on what we have promised in this area so that is absolutely main focus and then you mentioned I mean we have no really big projects that we are looking into just now but you mentioned some of the areas where we are interested and I mean we have said that if we see opportunities in wind then we will try to take them continuously we are buying forest land in the Baltics and we will continue to do that of course and we are also looking into some as you call them bottleneck projects and but short term we will not announce anything big in this field. Thank

you good and my final question also a bit of a general question is on the overall industry I mean the sector in Europe the overall pulp and paper sector in Europe has been hit by as you mentioned you know higher fiber and energy costs and something that you have been able to largely avoid I mean do you believe that the higher fiber costs especially for recovered fiber is a structural change and that this then in that case would sort of hold up or set a higher floor for paper and board prices in Europe even if demand weakens?

It's really hard to say that the only thing we can say is that this war will create I think different conditions for many years to come now and the first thing we have to do is to reduce the dependency on Russian oil gas and raw materials in general and that is what we can say and otherwise it's hard to predict those to see prices and so on cannot really do that.

Okay thank you very much.

The next question comes from Johannes Grunselius at D&D Markets please go ahead.

Yes hello everyone it's Johannes here I have two questions and the first one is on the value uplift on your own forest land because you have the mythology to roll three years transaction data in your relevant areas yeah have you now included your expectations of 2022 in that three year period or could you comment on that maybe I missed it before I am sorry for that in that case.

We have included the transaction that happened for the first half of this year so we have three year average applied on our total volume so this year the prices has gone up they have been quite small volumes but then we will see how it develops towards the end of the year but we have included a free average from the second half of this year and three years back.

Understood am I right that you are indicating a similar value uplift as things looks at the moment by the end of this year?

Yes I mean our changes in biological assets have been 900 million for the first half year and we expect something similar for the second half year.

Okay thanks for clarifying I was also wondering about the how high electricity prices are impacting your pulp division because you have this big long position there is it 500 gigawatts or 600 gigawatts or something like that did you see a positive delta here in your Q2 numbers can you comment on that and how should we think about Q3 Q4 let's assume you know electricity prices stays where they are or something for the sake of simplicity.

We have in our pulp division we are a net producer of electricity around 500 to 600 gigawatt hours so when the prices electricity prices in Q2 was fairly high so that give a positive impact in offsetting some of the other cost increases we saw in chemicals and wood raw material.

But how should we think about that in the dynamics are you exposed to market prices and should we then look at the sort of regional prices in northern Sweden and assume you are not?

We are fully exposed for next quarter to the market prices in the region north northern Sweden in that price region. Okay. But in terms of you look at entire SCA we are basically neutral in electricity so we fell higher prices in pulp benefits but then we have a higher cost of electricity and we are in total quite balanced.

Yes and the final question I mean you mentioned it yourself that it is a big positive to have your own logistics operations could you just remind us about you I know you talked about the long term contracts you have with sort of external parties when it comes to logistics should we assume that those long term contracts will simply continue for the next few quarters at the same levels or any uplift potentially on the new contracts calling or the renegotiated contracts?

They will be on the similar level.

Yes okay thank you.

The next question comes from Carl Hathorn at Jeffries please go ahead.

Carl

are you there please unmute.

Morning thanks for taking my question. When we are thinking about the wood products prices if we assume 25 to 30 percent decline does that take you broadly in line with the US futures prices for lumber?

Yes I would say so approximately I mean it is different products really so you cannot really compare them like for like but similar level I would say.

Just to follow up on the container board market you alluded to the recycled players getting cost support and energy and OCC how do you see the producers taking commercial downtime to kind of manage softer demand and inventory levels at the moment?

I mean it is always a question about cost curve and I mean

for

us with the investments that we have done and the status that we have on our mills I mean we are on the left hand side with a very low cost level. You have other producers which are not there and I mean they have at some stage they have to take some downtime due to profitability I would say. I mean we haven't really seen decreasing energy prices in Europe up till now we haven't seen decreasing OCC prices and the underlying consumption again is it is good for the industry and I believe the same for test liner and we look at the boxes I mean the demand is flat and dark but on a very high level so I think the demand is still there.

Thank you. And as a reminder it is 01 on your telephone keypad if you have a question. The next question comes from Harry Titanen at Nordea please go ahead.

Yes good morning. One question a lot of ground has already been covered but just sort of the SD1 project I remember you talked about alternative potential feedstocks with different technologies but just sort of if you care to give an update or if there is sort of development on that I mean crude oil versus solid biomass versus other potential raw materials is there anything you want to kind of highlight?

Well I mean what we are doing just now and building up in Gothenburg together with SD1 that one will be based on tile oil of course is perfect but you also can use cooking oils and vegetable and animal fats and things like that so that is the feedstock for that meal. When it comes to solid biomass I mean that we are talking about in the project that we have discussed in Östrand but again that one is further away so different techniques. Yes sure. Thank you.

And as a reminder it is 01 on your telephone keypad if you have a question 01. There are no further questions at this time please go ahead speakers.

Thank you very much and that concludes this presentation of the half year results and we will come back at the third quarter results in October.