Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of the third quarter SCA results. With me here today, I have President and CEO, Ulf Larsson, and CFO Andreas Evert. Over to you, Ulf.

Thank you for that, Anders, and also from my side to this presentation. When I summarize the second quarter, I can state that we, for the fifth quarter in a row, reached an EBITDA margin of 50%. We have a continued strong cash flow in the company, and by that we also finance all investments, not just our strategic investments, but also our current CAPEX through our operating cash flow. Last quarter I said that the big Obola project was on budget and ahead of time. That goes also now for the big PALP project, the CTMP expansion in Ortviken. That one is also on budget, but one quarter ahead of time. So we will start to ramp up this line in the fourth quarter. The new paper machine in Obola is now running 24-7 and we have started to deliver paper to our customers and we have also seen well boxes produced from this paper with good quality, which is, I would say, a real success. Sales was in line with Q3 last year. Volume wise, we've had a weaker market in solid wood products as we guided for already in Q2. We have also seen some negative impact from the ramp up in Obola, but that is more a lagging effect due to the fact that we are ahead of the time schedule. Otherwise we have seen a positive currency and price mix effect. EBITDA is down 7% in comparison with Q3 last year and that is due to already mentioned lower prices on wood products, somewhat lower delivery volumes and of course we are also hit by cost inflation and mainly in distribution and also we have seen price increases when it comes to wood raw materials. On the positive side we can note pulp prices and craft iron prices which both have reached record high prices during the third quarter and also we have had lower energy costs this quarter in comparison with last year. This morning we have sent out the press release saying that we will from 1st of January next year present renewable energy as a separate segment. And the reason behind this is that we are already today a leading producer of renewable energy. And we will continue to grow this segment. And you know that we have already today 20% of installed wind power capacity on SCA land. But from now on, we will start to invest our own money into wind power. And we also have a couple of ongoing projects within the field of liquid biofuels. So some KPIs. We did close to 2.5 billion on EBITDA level, which gave us an healthy EBITDA margin of 50%. The return on capital employed for our industrial operations, calculated as the average for the last 12 months, was 44%. And the leverage this quarter landed on 0.8 despite our large ongoing investment program. And as I said, we finance all our investment, not only these big strategic projects, but all our investments with our operating cash flow. Then I will say some words about each segment, starting with the forest. And in forest, we have seen increasing wood prices, especially when we compare the situation we have just now with what we had one year ago, as you can see in the bottom left in the graph. We have also seen increasing prices sequentially. So when we compare Q3 with Q2, especially for pulpwood, We have had a price increase of 50 SEK per cubic meter in softwood and 70 SEK per cubic meter in hardwood. We don't import too much wood as we have a high degree of self-sufficient in this area. But nevertheless, if we compare the price level today with what we had one year ago, for softwood we have gone from 40 Euro per ton up to more like 90 to 100 Euro per cubic meter. in birch from 50 up to 125 and we look into energy wood we've gone from 25 to 90 euro per cubic meter otherwise sales was up due to higher prices and same thing with ebitda we had a positive revaluation effect of our biological assets around 70 million sec and we have also this quarter harvested around 90 000 cubic meter more in comparison with last year and as said i mean we have also seen cost inflation mainly in the forest side due to higher fuel prices which have had of course negative impact in transportation but also for harvesting Wood. Well, I said already last quarter that we have a lower global demand in our wood business and by that also reduced deliveries. And the reason behind this is, of course, that we have uncertainty in the market due to cost inflation, due to higher interest rates and so on. And we have seen that not least the demand in DIY and building merchants has not been, that has been especially weak while new construction still is on an okay level. But of course, before new projects will be started, there will be people hesitating for that of course. On the other side we have also during this period now seen start to see curtailments and by that also decrease in production. The estimation from my side during the second quarter was that we should see reduced prices by around 25% in the third quarter in comparison with the second quarter. That was for SEA more like 20% due to the fact that we agreed on prices in the second quarter, but deliveries came in the third quarter, so some kind of lagging effect, but also a positive currency effect. My best guess for the fourth quarter now is that we will see another price decrease of 25%, which is equal to 600 to 700 sec per cubic meter. And by that, my best guess is that we have reached the bottom. so if we start on the top left we note that the stock level in sweden and finland is on a high level in relation to the average for the past 10 years in the bottom left we can on the other hand see that production has started to decrease and on the top right hand we can see the price development and this one is only updated until september i would say so as mentioned we will see another substantial price decrease in the fourth quarter but again by that i believe that we have seen the bottom in in solid wood products So turning over to PALP and as mentioned already, the CTMP project at Ortviken is on budget and ahead of time. So we will start up and we ramp up the new line during the fourth quarter, which is one quarter ahead of time. Very positive, of course. Sales was up as much as 25% during this quarter due to high prices and also due to a positive currency effect. EBITDA up for the same reason, but as mentioned earlier, we see now that we have a higher cost for wood raw materials. During the third quarter, we also started up a planned maintenance stop at Östrand, which had a negative EBIT impact of around 25 million SEK during the third quarter. If we start on the top left side, we can note that we reached record high prices in pulp during the third quarter. So the official European PIX price was around 1500 USD per ton for deliveries in September. Prices has started to normalize a little bit and we see that PIX prices for deliveries in October will stay at around 1480 USD per ton. When we look at the inventory level, we can see that for hardwood, it's more on the normal level, while it has increased a bit for softwood pulp. We can definitely now see less disturbances in the supply chain. And by that also, I think that we see increasing inventories. The stock of orders for SCA in this market is, to be honest, very good. again a lot of uncertainty from energy crisis in europe and also we see some effect from continued lockdowns in in china so in container board the obola craftlining machine is now up and running and it is now producing sellable products as already said the first products as the paper first paper has already reached customers and and We have produced well boxes with good quality, which is really nice. On the other side, the fine tuning will of course continue for a number of quarters now. But nevertheless, we will deliver as much volume in the fourth quarter as we've done in the third quarter. So that is a positive thing. We also in Container Board had a planned maintenance stop during the third quarter and that was in Munchsund and the negative EBIT impact of that was around 60 million SEK. Some words about the market in Container Board and also here we reached record high Kraftliner prices in the third quarter. Prices decreased in October-November for unbleached craft by €30 per tonne, while on the other side white top craft liner remained on the same level. Why? Well, one reason is that the OCC price has collapsed. In June we had a price of €185 per tonne for OCC. The price today is around 75 euro per tonne and we believe that we can come down another 25 euro per tonne, so reaching 45 to 50 euro per tonne in OCC. The price difference between Kraftliner and Testliner today is around 120 euro per tonne, which is on the narrow side, I would say. Demand, not the least in the retail business, has come down. But on the other side, we also know that production has started to decrease now. Nevertheless, we have somewhat increasing inventory level for Kraftliner as it is today. So last but not least, we have decided to start to report renewable energy as a new segment from 1st of January next year. And we believe that we are well positioned to capture growth in renewable energy. We think that we can contribute to the transition towards a fossil free Europe. And we also see that we will have a significant increase in demand for green electricity and renewable biofuels going forward. Already today, we are a leading producer of renewable energy. We have 20% of installed capacity of wind power on SEA land. We will start to invest our own money into wind power. We already today produce 12 terawatt hours of bioenergy and by that we are one of the biggest producers in Europe. And last year we also produced 1.4 terawatt hours of green electricity, which is around 1% of the total consumption in Sweden. So by that I hand over to you Andreas.

Thank you all and welcome everybody. I'll start off with the income statement for the third quarter and net sales declined 1% to 5 billion, where lower prices in wood was offset by higher prices in container board and pulp. EBITDA totaled 2.5 billion, corresponding to an EBITDA margin of around 50%. And this is, as Ulf mentioned, our fifth straight quarter with an EBITDA margin of around 50%. The EBITDA margin was 42%. We had an effective tax rate of around 20%, bringing net profit for the period just below 1.7 billion, or 2.3 sec per share. On the next slide, we have the the development by segment. And if we start with forest to the left, net sales were in line with the previous quarter at around 1.6 billion, where higher prices were offset by lower delivery volumes to our sawmill. EBITDA declined slightly to 623 million, which was due to seasonal lower harvest from our own forest. In wood, we've had several strong quarters since the beginning of 2021. In Q3, prices declined 20%, as Ulf mentioned, bringing net sales to 1.4 billion and EBITDA to 382 million, corresponding to a margin of around 27%. In pulp, we have had the steadily increasing prices throughout the year, and in Q3 we had record high prices. Sales totaled 1.9 billion, and EBITDA was unchanged at 865 million, corresponding to a record high EBITDA margin of 46%. And we started the maintenance stop in the end of the quarter, which had a slight negative impact on volumes. In Container Board, the prices have increased since the end of Q4 2020. In Q3, volumes were negatively impacted by the maintenance stop in Mungsund and the startup of the new paper machine in Obola. Net sales total 1.7 billion. We had an EBITDA of 733 million, corresponding to a margin of 43%. And as Ulf mentioned, the maintenance job had a negative impact of 43%. On the next slide, we have the sales bridge between Q3 this year and Q3 last year. And we start to the left. Prices increased 1%, where higher prices in pulp and container board were offset by lower prices in wood. Volumes had a negative impact of 6%, again because of a weaker wood market and the startup of PM2 in Obola. We had a positive impact from currency of 5% and a negative impact from exit publication paper of 1%. If we move on to the EBITDA bridge, again starting to the left, higher prices in pulp and container board was offset by lower prices in wood. volumes had a negative impact of 130 million again because of lower volumes in wood and the startup of pm2 in obla high cost of wood draw material and chemicals had a negative impact of 186 million we had a positive impact in energy which really shows our high self-sufficiency post our exit publication paper we had a positive impact from currency of 190 million And with a negative impact from higher fuel costs and startup costs of Ortviken, we now have the full CTP organization in place. In total, EBITDA declined 7% to just below 2.5 billion and again an EBITDA margin of 50%. On the next slide, we have the EBITDA bridge for the first nine months. And price mix had the biggest effect of 2.5 billion, where prices increased in all areas. And this was only partly offset by lower volumes and higher wood costs. Again, energy had a positive impact and a positive impact from currency and a negative impact from higher distribution costs. And in total, EBITDA increased 30% to 8.2 billion, corresponding to a margin of almost 52%. We continue to have a strong cash flow, almost 1.9 billion in the quarter and 5 billion for the first nine months. And this means we're continuing to fund our strategic capex with operating cash flow. Looking at the balance sheet, the forest assets increased to 90 billion. Working capital increased to 3.5 billion, mainly due to higher prices, but it was unchanged in terms of days. Capital employed increased to 98 billion. Net debt stood at 8.3 billion or 0.8 times EBITDA. This is a decrease of around 1.3 billion compared to the previous quarter. with equity of 89 billion and net debt to equity at 9%. And as Ulf mentioned, we will start to report renewable energy as a separate segment from the beginning of next year. On this slide, you have the pro forma effects for the first nine months on each segment. And if we start with forest to the left, unprocessed biofuels and wind power releases will, from the beginning of next year, be reported in renewable energy. and the proforma effect on forest for the first nine months was around 65 million, of which the majority came from the wind leases. In wood, pellets will be reported in renewable energy, and the proforma effect was 75 million, and currently we have high pellet prices. Pulp and Container Board sell tall oil to Renewable Energy for a fossil based price. And then Renewable Energy is responsible to maximize the green premium. This had an effect of 60 million in pulp and 45 million in Container Board. And in total, Renewable Energy had an EBITDA of around 240 million pro forma for the first nine months. And we will come back with more financial details in conjunction with our Q4 report. Thank you. And with that, I'll hand back to you, Ulf.