Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SEA's year-end results 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 Anders and good morning also from my side. Warm welcome to the presentation of the results for the full year but also for the fourth quarter 2022. When I summarized last year I can state that we have delivered the best year ever. We reached 10.2 billion SEK on EBITDA level and by that the 49% profit margin. We have had a strong demand and high prices for all our products in combination with good cost control. We have also benefited from a high degree of self-sufficiency in wood, energy and logistics. And together this has created a strong cash flow from which we have been able to finance all investments including strategic. Our two major investment projects in Åbolla and Nortviken have both started up during last year. Approximately one quarter ahead of plan and we are now in an exciting startup phase. The new OCC line which is needed to reach full capacity in Obola is scheduled according to the original plan and will be up and running during the first half of this year to meet the planned startup curve. In addition, I can also mention that our reinvestment in a new grading mill at Polstad sawmill is finalized and the trimming phase has started according to plan. From 1st of January this year, we will start to disclose our new segment, renewable energy. And the reason behind this is that we already today have a leading, we are leading producer of renewable energy. And we annually produce 12 terawatt hours of bioenergy. We have 20% of installed capacity of wind power on SCA land. And we have a big ongoing investment in biofuels that will start up Q4 this year. And as we've said earlier, we have the ambition to grow this segment further. And we also recently announced that we have acquired our first wind farm in the northern part of Sweden. The capacity today in Skogberget, which is the name of the wind farm, is approximately 200 gigawatt hours. But after repowering, we expect the capacity to double or triple. The price level of forest land has continued to rise and when we follow our described model based on transaction prices in our region for setting the market price, we can state that the total value has increased from 84.5 billion the 31st of December 2021 to almost 98 billion same date 2022. Finally, EBITDA increased 12% in comparison with last year due to higher selling prices and the stable cost base and sales increased during the same period by 10% due to higher prices. Turning over to some financial KPIs related to the full year 2022. As just mentioned, our EBITDA increased by 12% in comparison with last year and reached 10.2 billion SEK for 2022, and that corresponds to a 49% EBITDA margin. Our industrial return on capital employed came out on 40% for the full year 2022, which is 7 percentage points higher than 2021. The leverage is stable at one despite our almost finalized large ongoing investment projects in Obola, Ortvik and Bolsta and so on. And we continue to finance all our investments including strategic projects with our operating cash flow. The proposed dividend for the AGM to decide is on its 250 SEK per share and this is in line with our aspiration to give a stable and increasing dividend. Last year we gave 225 SEK as an ordinary dividend and then an extra dividend of 1 SEK. And last but not least, earnings per share went up by 14% in comparison with 21 to 9.61 SEK per share. This slide will give you an overview of KPIs for the fourth quarter 22. And when we compare quarter on quarter, we can note that our EBITDA reached close to 2 billion SEC during the fourth quarter 22, which is 29% lower in comparison with a very strong Q4 2021. This gave us an EBITDA margin of 41% and an industrial return on capital employed of 24%. calculated as the average for the last 12 months and the leverage is as already mentioned stable at one so then i will make some comments for each segment starting with the forest during the fourth quarter we have had a stable supply of woodrow materials to our industries In general and also in our region we can note a high demand of wood raw materials and by that also increasing wood prices as you can see in the graph in the bottom left. When we compare the fourth quarter 22 with the same quarter 21 pulp wood prices have increased by almost 20 percent and corresponding figure for saw logs is around 15 percent. On the other hand, we can see that pulpwood prices in the Baltics have now started to come down from an all-time high level. When we compare quarter on quarter, EVTA has decreased 15%, and that is mainly driven by lower revaluation effect of biological assets. We have also seen cost inflation in transportation and harvesting, and that is driven by high fuel prices. On the positive side we can note a high harvesting level in our own forest. Finally we can note the continued high interest of purchased forest land in Sweden and in the Baltics and Andreas will come back to some data around that. Turning over to business area wood and in general we have seen a low global demand during the fourth quarter last year. Anyway, in most markets, customers have finalized destocking and started to buy again. Building activities remained on a more or less normal level, but housing stocks decreased during the end of last year. For SEA, we have maintained normal deliveries during the fourth quarter. Price levels for solid wood products, as expected, hit the bottom in several markets during the fourth quarter last year. and I did communicate a price drop of 25% between Q3 and Q4 and that was also realized. As you can see in the graph bottom left prices on solid wood products have come down substantially while on the other hand solo prices have gone the other way. My best guess for the coming quarter is that we will see more or less unchanged prices. Sales and EBITDA was substantially down due to price and cost of wood raw material when we compare quarter on quarter. 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 inventory volumes are on a somewhat high level. Anyway, SDA, as mentioned, has maintained normal deliveries during the fourth quarter, and by that we have a balanced stock at the end of the year. As can be seen in the diagram to the bottom left, the Swedish and Finnish sawmill production has been on the low side. Most producers in Scandinavia also announced production curtailments during the fourth quarter. When looking at the diagram to the top right we can see that the price peaked in the third quarter 21 and that was on a historically high level. Prices have come down substantially since then and as I mentioned at the same time prices for saw logs has increased with the major negative effect on the profitability. Then some words about PALP. And comparing quarter on quarter, all fundamentals like price and currency were better in the fourth quarter 22 in comparison with the fourth quarter 21. The result for the fourth quarter 22 was up 36%, but it was negatively impacted by a planned but also an unplanned production stop, which reduced both the volume and the energy production during the period. The estimated impact on EBITDA level is approximately 260 million SEC when we compare quarter on quarter. 138 million SEC, although that is related to the unplanned stop. And we will have a negative impact from this unplanned stop also in the first quarter this year, ascending to approximately another 140 million SEC. And the reason for the unplanned stop is significant disturbances in the fiber line and the recovery boiler at Östrand. And there have been difficulties with the process conditions in the boiling process which in turn has caused instabilization and leakage in the recovery boiler which led to this unplanned stop. Now we are up and running again. The CTMP line at Dortviken is now on the ramp up, one quarter ahead of plan. Still, we have, of course, a lot of fine tuning left, but our goal is that the production should reach at least 150,000 ton during this year. Full capacity achieved in 2025 will be closer to 300,000 ton. We see a weakening demand in the pulp market, mainly in Europe and also in China. The European PIX price peaked in September, October last year, and that was close to $1,500 per tonne. Since then, we have seen declining prices on all markets, and the price for deliveries to Europe in January is $1,410 per tonne. But then one need to keep in mind that discounts in Europe have increased by approximately two to three percent. While on the other hand discounts in US is on an unchanged level in comparison with last year. Today we have a better net price in the US in comparison with Europe and China. And one reason might be that we note the weakening supply from competitors in Canada. We have seen announcements of curtailments and that is mainly due to lack of fiber but also the cash cost situation for Canadian mills. Inventors for both hardwood and softwood pulp is as you can see in the graphs on a rather normal level. Finally container board and the new craft line of paper machine in Obola has started ahead of the time schedule in the last quarter last year. The successful startup was affecting the production volume and costs negatively in the fourth quarter in comparison with the fourth quarter 21. But of course long term this will create a good foundation for a highly successful project. And as mentioned before overall this is a unique project also based on the fact that we have delivered a strong cash flow throughout the whole project since it started. The new recovered fiber line which is a necessity to reach full capacity in Obola is progressing according to plan and that one is planned to be ready in first half of 2023. As earlier communicated we expect to reach full capacity in Obola in 2026. Sales was up quarter on quarter due to high prices, while EBITDA was down by 13%, mainly due to defects of an early startup, causing lower production and delivery volumes for Q4 2022. Also, of course, higher energy costs had a negative impact on the result for Container Board. After a long period of increasing prices for Kraftliner with a peak in Q3 last year, we have now started to see decreasing prices. One can note some reasons for that. And if we start with the demand, it has declined in the fourth quarter mainly related to lower retail sales, which has led to lower demand of boxes. Europe is facing a double-digit inflation and that will of course lead to reduced purchasing power. Deliveries of Kraft Liner have decreased significantly, 8% in the fourth quarter 2022 compared with the fourth quarter 2021. And that is by other words similar to the box demand. Secondly, natural gas prices have come down sharply from the peak in August 2022 and that released the cost pressure for test liner producers. and at the same time availability of OCC is good and demand lower due to reduced production of test liner. Anyway, availability of OCC will gradually decline when lower box consumption is translated into less availability of OCC. Today's price for OCC is around 65 euro per tonne and that is more or less 120 euro per tonne lower than the peak price in July 2022. The price for unbleached craft liner has decreased by 90 euro per ton in the fourth quarter 22. Test liner prices have decreased somewhat more and the price gap between craft liner and test liner today is around 155 euro per ton which I think is a rather normal gap. During the same period the price for craft liner white top has decreased with 30 euro per ton. Despite the lower demand, inventories have been kept on a stable level during the fourth quarter by producers reducing supply. And we would estimate production to be around 10% lower in the fourth quarter 2022 in comparison with the fourth quarter 2021. So by other words, inventories of container water are still on a high level, no doubt about that. but they have not increased more than according to normal seasonal effect due to the mentioned production curtailments. So by that I hand over to Andreas.

Thank you Ulf and good morning everybody. I will start off with the forest valuation. Forest prices in northern Sweden continue to increase. In the graph, we have the development of forest prices in SCS region, according to Svefa and Ludvig & Co. And the prices have increased over 400 SEK per cubic meter. In SCS forest valuation, we used a three-year average price, which has increased by 13% to 366 SEK per cubic meter. The valuation of SCS forest increased by over 13 billion to 98 billion SEK in 2022. The increase was driven both by the price increase of 30% and the increase of standing volume by 2% to 267 million cubic meters, approximately 1.8 billion and through the P&L. If we move on to the income statement and focus on the full year to the right, Net sales grew by 10% to 20.8 billion, mainly driven by higher prices. EBITDA increased a record high of 10.2 billion, corresponding to a margin of 49%. The EBIT margin increased to 42%, and financial items totaled minus 39 million. With an effective tax rate around 20%, bringing net profit to 6.8 billion, or 9.6 SEK per share, which is the highest ever. If we look at the fourth quarter to the left, EBITDA declined to just below 2 billion, corresponding to a margin of just below 41%. The decrease was mainly driven by lower prices in wood, and the production stop at Östrand, which impacted results with 138 million. Net profit for the quarter totaled 1.2 billion, 1.76 sec per share. Looking at the dividend, we have a proposed dividend of 2.5 sec per share, a 25-hour increase compared to the ordinary dividend last year, which is in line with our target of a stable and increasing dividend over time. On the next slide, we have the sales pitch for the full year. Prices increased 12%. Record high prices in pulp and container board were partly offset by lower prices in wood. Volumes declined 3%, mainly driven by a weaker wood market and the startup of the new paper machine in Obola. Currency had a positive impact of 4%, and exit publication paper had a negative impact of 3%. Moving on to EBITDA average, price mix had the biggest impact of 2.3 billion driven by higher prices in pulp and container board. Volumes had a negative impact of 340 million driven by a weaker wood market and a startup of a new paper machine in Obola. Higher cost of wood raw material and chemicals had a negative impact of 980 million, while higher energy costs had a neutral impact, which really shows our high sales efficiency post-exit publication paper. We had a positive impact from currency and a negative impact from higher fuel prices. In total, EBITDA increased 12% to approximately 10.2 billion, corresponding to a margin of 49%. On the next slide, we have the financial development by segment. Starting with the forest segment to the left, net sales increased to 6.7 billion, and EBITDA increased to 2.7 billion, mainly driven by higher pulpwood and soil log prices, which was partly offset by increased fuel costs. In wood, we had another strong year with an EBITDA of 2.1 billion, corresponding to a margin of 31%. EBITDA was driven by a very strong first six months, while the market deteriorated during the second half of the year, with prices going down 20% in Q3, and another 25% in Q4, as Ulf mentioned. In pulp, we had a record high year, where net sales increased to 7.2 billion, and in beta increased to almost 3 billion, corresponding to a margin of 41%. In the fourth quarter, we had the unplanned production stop at Östrand, which impact results with 138 million in lower volume and reduced energy production. and the stock will impact Q1 with a similar amount, as Ulf mentioned. In container board, we had a record high EBITDA of almost 2.9 billion, corresponding to a margin of 42%. And this is despite having lower volumes and startup costs, relating to the ongoing ramp up of the new paper machine. On the next slide, we have the sales bridge between Q4 last year and Q4 this year. Prices decreased 5%, but lower prices in wood was offset by higher prices in pulp and container board. Volumes increased 1%, where higher volumes in wood and pulp was offset by lower volumes in container board due to the startup of the new paper machine. And lastly, currency had a positive impact of 7%. Look at the EBITDA average for the fourth quarter and starting to the left. Price mix had a negative impact of 330 million, mainly driven by lower prices in wood. Higher volumes in wood and pulp was offset by lower volumes in container board, again due to the startup of the new paper machine. High cost for wood, raw material and chemicals had a negative impact of 400 million, and higher energy costs had a negative impact of 70 million, mainly relating to lower electricity production at Örestrand due to the production stop. We had a positive impact from currency and a negative impact from higher fuel prices and startup costs in C10P, where we now had a full organization in place. In total, EBITDA decreased just below 2 billion, corresponding to a margin of 41%. We had another year with strong operating cash flow. Almost 5.7 billion in 2022 compared to 5.2 billion in 2021. This means we are continuing to fund our strategic investments with operating cash flow. In the quarter, we had several large strategic cap experiments. Overall investment of around 800 million. Acquisition of the wind farm in Marksbygden of 800 million. Forest land in the Baltics of 400 million. and a CTP investment of 300 million. Looking at the balance sheet, the value of the forest asset increased to 98 billion. Working capital increased to 4 billion due to higher prices. Total capital employed increased to 106 billion, and net debt stood at 10 billion, one times EBITDA. Equity increased to 96 billion, and net debt to equity was 10%. Renewable energy will be reported as a new segment in 2023. On this slide we have the EBITDA impact on each segment for 2022. Starting with forest segment to the left, unprocessed biofuels and wind power releases will be reported in renewable energy. The performer effect for 2002 was approximately 90 million. In wood, pellets will be reported in renewable energy, which had an impact of approximately 130 million. Pulp and container board sell tallow for a fossil-based price to renewable energy, which is responsible to maximize the value of the green premium. The impact was around 80 million in pulp and 60 million in container board. In total, renewable energy had a performance EBITDA of 355 million. And from January, our new wind farm will also be included. And from late next year, also our investment in liquid biofuels. Thank you. With that, I'll hand back to you, Ulf.