Svenska Cellulosa Aktiebolaget SCA (publ)

Good morning and welcome to this presentation of SDA's first quarter results for 2023. With me here today, I have President and CEO Ulf Larsson and CFO Andreas Evert to go through the results and take your questions afterwards. Over to you Ulf.

Thank you for that Anders and also from my side, good morning and warm welcome to the presentation of the results for the first quarter 2023. And when I summarize the first quarter, I can state that we have delivered a stable result, not least driven by profitable growth in renewable energy, but also resilience against the increasing wood costs. The later of course due to our relative high degree of self-sufficiency in our wood supply. EBITDA increased by 4% in comparison with the fourth quarter last year up to 2.055 billion SEK and our EBITDA margin increased to 43% for the first quarter. However, we see a continued weak demand in solid wood products, pulp and also container board. Prices for solid wood products have bottomed out and will start to increase in the second quarter, while prices for container board and pulp are still decreasing. When I compare the first quarter this year with the first quarter last year, I can note that the sales decreased with 4% and that is mainly due to price. EBITDA decreased with 21% during the same period due to decreasing prices in solid wood products and container board. On the positive side, we have had a profitable growth in renewable energy and also good cost control and we will come back to that later. Turning over to some financial KPIs related to the first quarter. As I just mentioned, our EBITDA increased 4% in comparison with the last quarter, reached a little bit over 2 billion SEK for the first quarter this year and that corresponds to a 43% EBITDA margin. Our industrial return on capital employed came out on 31%, calculated as the average for the last 12 months and the figure for the first quarter was around 17%. The leverage is stable around 1%, despite our almost finalized large ongoing investment projects in Åbolla, Ortvik, Bolsta and also in Gothenburg. We continue to finance all our investments including strategic projects with our operating cash flow. I will now make some comments for each segment and I start with the forest. During the first quarter we have had a stable supply of wood to our industries. In general we can note the continued high demand of wood raw materials and by that also continued increasing wood prices as you can see in the graph in the bottom left. When compared the first quarter 23 with the first quarter 22, fault wood prices have increased by almost 30%, somewhat more for birch and somewhat less for conifer. The corresponding figure for stologs is an increase around 10%. Fault wood prices in the Baltics are slightly down compared to Q4 last year but substantially higher of course in comparison with Q1 2022. When we compare Q1 23 with Q1 last year, sales were up 14% and EBTA was up 33% mainly due to higher prices but also due to higher harvesting level in our own forest. We can finally note the continued high interest to purchase forest land in Sweden but also in the Baltics. Then I turn over to business area wood and in general we have a continued weak market for solid wood products. Building activities remained on an okay level during the first quarter but new housing starts are in the decreasing trend as we all know. Anyway we can note the reduced supply and in most market customers have finalized de-stocking and started to buy again and SEA has maintained a normal delivery during the first quarter. Price levels for solid wood products hit the bottom already in Q4 2022 and as earlier communicated we estimated unchanged prices between Q4 and the first quarter this year. That was also realized as you can see in the graph bottom left. The stock of home goods is relatively low in all markets today and the supply will not increase and we also now see a seasonally stronger consumption of wood in Q2 despite an unsecure economic macro environment. My best guess for the coming quarter is that we will see a solid price increase with high single digits in percent. Since then EVTA was substantially down due to price and cost to raw material when we compared Q1 2023 with the same quarter last year. 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. We note that inventory volumes are on somewhat high level to some extent due to the Finnish harbor strike. Anyway SEA has maintained normal deliveries as I said during the first quarter and by that we have a balanced and I would say a normal stock. As can be seen in the diagram to the bottom left the Swedish and Finnish SOMI's production has been on a rather normal level. Outside the Nordic countries we have seen production containment not least in Germany and also in Canada. Today we cannot see any Russian or Belarussian wood in the European market which also helps the balance of course. When looking at the diagram to the top right we can note that the price peaked in the third quarter 2021 on a historically high level. Prices have come down substantially since then and at the same time the prices for sawlocks have increased with of course a major negative effect on the profitability in this business. So over to PALP. First I'm happy to say that our CTMP expansion continues according to plan regarding production ramp up and also sales growth. Sales was up 20% when comparing the first quarter this year with Q1-22 while ABTA was in line with last year. And we cannot price volume and currency on the positive side in this comparison while higher wood raw material costs were on the negative side. We saw a weak demand for PALP during the first quarter. Europe and US were soft during the whole quarter while China started up okay but ended with a very low demand. Coming into the second quarter now we still see a slow demand in not least in China but we are now waiting for new price level to be established in China and by that I believe that the trade will start again. The European PIX price peaked in September-October last year close to 1500 USD per tonne and since then we have seen declining prices for all PALP crates in all markets and the price for deliveries to Europe in April is 1340 USD per tonne. We expect the PALP prices to continue down during the second quarter. In China prices are decreasing rapidly and will probably reach the bottom already in Q2. High cost producers no longer cover the cost and therefore we don't expect prices to stay on this level very long. Already today we see weakening supply to China not least from Canadian producers. In Europe and US prices are falling slower and here I expect prices to bottom out in the second half of this year. For SCA weak demand and increasing prices have been mitigated by high level of contracted volumes on our core markets and also by the high exposure to the tissue segment. As you can see in the graph inventories for both hardwood and softwood PALP still are on the high side. Then I move over to Containerboard and the successful start up was affecting the production volume and costs in Ebola negative in the first quarter this year when comparing with last year. But long term of course this will create a good foundation for a highly successful project. The new recovered fibre line which is the necessity to reach full capacity in Ebola is progressing according to plan and is planned to be read in the first half of 2023. And as earlier communicated we expect to reach full capacity in Ebola in 2026. Sales was down 9% due to lower prices while ABTA was down 41% mainly due to lower prices but also due to the effects of an early start up of the new paper machine short term causing higher costs. This project is anyway a little bit unique by the fact that we have delivered a strong cash flow throughout the project duration. Box demand has continued to decline in Q1 mainly related to low retail sales and de-stocking effects. European demand of craft liner have decreased to a corresponding degree by around 15% in the first quarter this year in comparison with the first quarter last year. However we now hear signals from customers that de-stocking effects are levelling out. We see a strong demand in the second half of this year. On the other hand there is additional supply of test liner coming on stream in the next quarters and that will of course put some pressure on the supply demand balance. Brown craft liner has decreased with 110-140 euro per ton in the first quarter depending on region and timing and cumulative since the peak in September 22 with 200-230 euro per ton. Craft liner white top decreased with 95 euro per ton in Q1 and cumulative since the peak in September 22 with 125 euro per ton. We have seen a continued price decline in April for container board. Natural gas prices have come down sharply from the peak in August last year which eases the cost pressure for energy intensive industries like test liner. We estimate that prices in Q2 is approaching break even levels for high cost producers and therefore will be levelling out supported by production containment. Availability of OCC is still good because of historical high supply of corrugated boxes and lower current demand of test liner. Todays price has increased a bit and is around 80 euro per ton which is almost 120 euro per ton lower than peak in July 22. Since we are seeing demand decline to level off and strong demand in second half of the year we can assume that OCC prices will continue to increase based on limited supply. Finally I am happy to for the first time present renewable energy as a separate segment. We start this quarter with a strong profitable growth and higher prices in comparison with some same period last year. In general we have had a strong market development during 22 in solid biofuels. Q1 this year has been warmer than normal in Europe and also in Sweden by that stock levels in Europe for fossil fuels are high and inventories have increased. Biofuel prices has a downward trend from the second half of the fourth quarter last year. Anyway we estimate the continued relative strong biofuel market in 23 due to an expected shortage long and mid term. In wind power we took our first step in realizing our revised wind strategy by the acquisition of Skogberget Wind Farm at the end of last year. Land lease agreements on SCA land reached 7.8 terawatt hours in Q1 which is in line with our communicated plan. The result for wind power was substantially better Q1 this year in comparison with Q4 last year and that is mainly driven by Skogberget Wind Farm but also due to higher land lease revenues. In liquid biofuels we see an improved result mainly driven by higher green premiums for CTO or crude tail oil. The bio refinery in Gothenburg is under construction and we have a planned commissioning during the fourth quarter this year. So by that I hand over to you Andreas.

Thank you Ulf and good morning everybody. I'll start off with the income statement for the first quarter. Net sales declined 4% to 4.8 billion mainly driven by lower prices in wood and container board. EBITDA reached over 2 billion despite a weaker market driven by growth in renewable energy and high results in our forest division. EBITDA margin declined to 43%. Depreciation increased to 460 million due to the activation of the new paper machine in Obola. EBITDA margin declined to 43% and financial items totaled minus 60 million. We have an effective tax rate of around 20% bringing net profit to 1.2 billion or 1.7 sec per share. On the next slide we have the financial development by segment. Starting with forest segment to the left, net sales grew to 1.9 billion driven by increased volumes and higher prices compared to the previous quarter. EBITDA increased to 780 million where seasonal lower harvest from SA's own forest was offset by higher prices. In wood, prices have bottomed out after several quarters with declining prices. In Q1 we had a positive mix effect which increased EBITDA to 120 million corresponding to a margin of 10%. In pulp, lower prices were offset by higher volumes and a continued high share of deliveries to core markets. Net sales increased to 1.9 billion and EBITDA was in line with the previous quarter at 590 million corresponding to a margin of 32%. In container board, craft?line prices continued to decrease. Net sales decreased slightly to 1.6 billion and EBITDA totaled 450 million corresponding to a margin of 29%. The planned maintenance stop in Obola had a negative impact of 21 million. In renewable energy, strong growth and higher prices increased EBITDA to 180 million corresponding to a margin of 35%. EBITDA was positively impacted by the quiet wind farm in Markbygden and higher tallow prices. On the next slide we have the sales bridge between Q1 last year and Q1 this year. Prices declined 9%, driven by lower prices in wood and container board. Volumes declined 1%, where higher volumes in pulp was offset by a weaker wood market and a start-up of the new paper machine in Obola. And lastly, currency had a positive impact of 6%, bringing net sales to 4.8 billion. Moving on to EBITDA bridge and starting to the left, price mix had a negative impact of 555 million, again driven by lower prices in wood and container board. Higher costs for wood raw material and chemicals had a negative impact of 140 million, while energy had a positive impact of 31 million, which really shows our high sales efficiency in both energy and wood raw material. We had a positive impact from currency and a negative impact from higher fuel prices and start-up costs. In total EBITDA decreased 21% to approximately 2.1 billion, corresponding to a margin of 43%. We continue to have a strong operating cash flow of 1.2 billion for the quarter, and this means that we are continuing to fund our strategic investments with operating cash flow. Looking at the balance sheet, the value of the forest assets increased to 99 billion, working capital stood at 4 billion, and total capital employed increased to 107 billion. Net debt increased to 11 billion, corresponding to 1.2 times EBITDA, and the increase was driven by the dividend of 1.8 billion. Equity was in line with the previous quarter at 96 billion, and net debt to equity was 12%. Thank you. With that I'll hand back to you Ulf.

Thank you for that Andreas. And well, just to summarize the first quarter, I mean we have delivered a strong quarter, 43% EBITDA margin, driven not least by profitable growth in renewable energy, but also I would say resilience against increasing wood costs. So by that I think that we can open up. So operator please open up for questions.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We'll now take our first question from Robin at Carnegie. Your line is open, please tell the height.

Thank you very much and good morning to everybody. The first question I have is on the wood segment. Clearly a quite good performance in a very challenging market for you guys. How should we expect costs going forward? I just typed the numbers into my model and it seems that the sort of cost per ton is actually clearly down, whereas I believe that log prices were still moving up. What is the reason for the lower cost in the quarter and how should we expect those costs going forward in the wood segment? Thanks.

If we start with the cost for logs, I mean we see that log prices will, they have increased, which is a little bit of a surprise at least for me, but I think also they will continue to increase during at least the second quarter. So I don't know if that was the answer. We have

the cost for Q1 compared to Q4. We had a positive mix effect and we also had some higher income from the byproducts, from the sodas etc. from our sawmills.

Alright, I understand. Thanks. In terms of demand, I guess supply is now declining somewhat and you explained inventories are on a healthy level. What do you see in terms of demand and if that is a bit improving, where is it coming from, what kind of markets and what kind of segments is showing improvement?

I don't think that we should expect an increase in demand. I mean you have a seasonally positive effect in the second quarter and that normally also at least in the beginning of the third quarter. So that is of course on the positive side. When it comes to the balance, I think that we now see curtailments in Central Europe, not least Germany, but we also see them in Canada. As you saw in the statistics, I believe that the production in Sweden and Finland are on a normal level. But of course if we see continued increasing log prices, that means either increasing prices for solid wood products or curtailments. Because as you can see now, many producers are more or less on a break-even level. But the underlying demand, I mean that is not very encouraging. I think this situation will remain for a while. But still I think that it is a healthy balance just now. The de-stocking is already done and customers have started to buy solid wood products again.

Thanks. And the final question I have is related to the forest segment where you have the operative earnings really strong. In Q1, if we exclude revolution, you are clearly up year on year and higher at least than I expected. I understand that log prices and power-foot prices are up, but I also believe that costs are quite clearly up. Is there anything exceptional in the quarter? Is this essentially the operative level we should expect going forward if logs and power-foot prices remain at this level?

I mean we don't give forecasts. But again I think we have seen an increased volume from our own forest, which is good. And I mean that is according to what we have said. We shall in a five-year period go from 4.4 million cubic meters up to around 5.5. And that we will do of course. And we also have rather balanced supply of resources into the forest sector just now. And it has been for a while hard to get access to harvesters and so on, but we feel that that is in a better position just now. And so again if we can keep up the volume harvested on our own land and also have rather good cost control in the forest, I mean that will give us increased result as prices for pulp logs and saw logs will continue to come up a little bit further I would say.

Yeah, and we had no one-offs in the forest division during the quarter.

Alright, thank you very much and well done in the quarter.

Thank

you.

Thank you. We will now move on to our next question from Johannes at DMB. Your line is open. Please go ahead.

Yes, good morning everyone. I would like to ask you about the new business division here, renewable energy. It was a very nice result. Anything unusual in that result? How do you foresee the coming quarters? I got the impression that you sounded that it was sort of very much the normal we should expect perhaps. Could you comment on that?

Yeah, I mean I would say it's the normal, but again also in the energy business you have seasonal effects. Of course the fourth quarter and the first quarter should be stronger than two and three due to energy prices, so that is quite easy to understand. But I mean again step by step we increase the capacity on SDA land and that will give an increased income from the lease. We have had a good start in the wind farm in Skogberget that we acquired. Of course when energy prices come down in the second quarter and the third quarter the income will be reduced a little bit. We see a very positive development for CTO as I said and we are also positive because of the fact that we will start up the first biorefinery in the fourth quarter this year and we are really excited about that. So I think that we will see a healthy growth in this area, but of course from quarter to quarter you can see some difference due to seasonal effects. Okay,

okay. On that subject on the new biofuel plant in Gothenburg, how much will that impact this business? I mean I know you are 50-50 owner of that plant. Could you just remind us about the ramp up and what kind of earning contribution you

foresee that? I can take that one. We showed a guidance on our capital market days and with trend prices we expect the biorefinery in Gothenburg to contribute with around 200 million in EBITDA when once fully ramped up. Currently we have had stronger prices, but during if you look at trend prices we expect around 200 million.

And the ramp up

for that? Yes, we expect some time for ramp up as well.

Then I have a question also on wood products. You gave a pretty firm indication on how we should expect your prices. Q1, we also talked about cost, but what about volumes? Any changes there for the coming quarters compared to Q1?

I think we will see price increases between 5 and 10 percent and I think that the volumes should be normal. I mean the de-stocking is already done and the inventory level among customers are on the low side and they need to buy in order to run their operations. And we also at least in SCA we have a rather normal stock and it's also well balanced when it comes to quality. So I think normal.

Yes, so you have

to add to that.

I think we have compared to the first quarter we also have a stronger seasonal effect during December, but in terms of summer volumes as Ulf said we expect a normal quarter. Okay,

thank you.

Thank you. We will move on to our next question from Oscar at Dunsacre Bank. Yolani, so you can please go ahead.

Yes, good morning. First question is on pulp. Are you seeing any indications of production curtailments due to low prices or is it only because of sort of wood scarcity which is I suppose the situation that we had in British Columbia at the beginning of the year? For example, are you seeing any indications of production curtailments from pulp producers in continental Europe? That's my first question. My second question if I may is on container board. How large were the negative impacts on costs related to the startup in this quarter and how should we expect them to sort of dissipate? And when will the recovered paper line start up and what would be the impact of that on costs roughly? And then my third question if I may is on wood availability. You and one of your peers in the industry have been talking quite a bit about sort of tight wood markets and it doesn't appear to be only cyclical, it's also a structural issue. Do you see this limiting your ability to expand your industrial operations in your current industrial footprint in Sweden long term? And those were my three questions. Thank you.

Yeah, and then we see if we can remember them. But we start with the pulp and curtailments. Well, I would say that at least what you see in Canada in some areas that is also due to the fact that Chinese prices, I mean, as I said just now, you don't have a trade in China and by that prices will come down rapidly and sharply. I think that will end up somewhere where we have a break even situation. But I think that it is also due to profitability that we see curtailments now. And that's the reason also why I think that we will reach the bottom in the second quarter in China and then I think the trade will start again and that will of course be good. In the European US, I mean, we have seen also decreasing prices from 1500 down to 1340 now in April. And I think which is, I mean, if you look at the result that we have in in pulp, which is quite okay. I mean, I think that the price decrease will continue for a while, but I think it will level out in in the second half of this year. But of course, there's always some in it is it is a question about supply demand and but still we feel that demand from at least the tissue sector where we are mainly focused on is still okay and is still okay also in Europe and US where we have our main markets. So that was the first one, then we can take wood availability and then I hand over to Andreas for the container board question here. I mean, well, it is a tight situation and one reason is of course that Russian and Belarusian wood is no longer coming to Europe and that is around 10 million cubic meters per year. Another thing for at least impacting us in the northern part will be when Sveaskog is reducing the harvesting level, they've said one and a half million cubic meter in Norrbotten and Västerbotten. So that will of course, at least regionally have an effect. I mean, for us being the biggest private forest owner in Europe, we are not afraid of the wood supply. As you know, we also have an ongoing program in the Baltics to buy more forest land, we have done 70,000 hectares of we set the target for five years of 100,000 hectares and we are absolutely in line with that plan. So I think we, as you know, we try to balance what we have in the forest with what we have in the industry and what we have in terms of energy supply. So that's more or less our business model, which we find is very successful, not the least in the time that we have just now. But of course, wood will be an issue for many companies going forward and if you don't control the supply chain, that will of course cause some challenges. I think I hand over to you Andreas for the container board.

Yeah, for the third question, then if you look at the container board, the recover fiber line will begin operation at the end of the second quarter. So we expect to have a positive volume impact on the second half of the year. In terms of startup costs, we have some startup costs, which is normal since we are trimming the new paper machine. So if we find something that's not working perfectly, we take it down and we trim it and start up again. So you have a bit of extra cost, but nothing significantly and that's expected to continue for several more quarters. But they've done a fantastic job in the project to keep a very strong cash flow for the entire project and during the startup.

Thank you very much.

Thank you. We'll take our next question from Linus Larsen at SEB. The line is open, please go ahead.

Thank you very much and a good day to everyone. My line isn't perfect, but I hope you can hear me well, otherwise apologies. On variable costs, sector peers have given quite different views on the near term outlook. I wonder if you could please share your views, I guess, in pulp and container board segments as to chemicals, logistics and maybe the aggregate of variable costs. Q2 on Q1, please.

Yes, if you look at the cost, if you look at the largest cost, which is wood raw material, that's going to continue to increase during the second quarter. If you look at other direct cost chemicals, they have peaked. If you look at OCC prices, they have bottomed out. I think they will start to increase during the second half of the year. Oil prices have gone down, so it's a mix. And if you look at fixed cost, inflation is still driving that, but it's a mix. But the main wood cost is still going up, but there we have an advantage of getting 50% back in the forest division.

And logistics?

Logistics has also peaked, so that's started to come down slightly.

Okay, great, thanks. And then maybe also just jumping back to renewable energy. When we look at that Q1 EBITDA figure, I wonder if you could maybe break that down a bit for us. How much is from the new wind farm? How much is CTO? How much is pellets? Lease revenues, etc.?

I don't think we have given that amount of details on the segment, but just to give some flavor, if we start with the wind farm, we produced 63 gigawatt hours in the first quarter. And we had healthy electricity prices. And on top of the prices, you also have quite high prices of rights of origin during the quarter, which helped. So that you can calculate if you assume 63 gigawatt hours. And then we have previously guided on lease that we expect the lease income to be around 100 million per year at the end of this year. And then we have a seasonally strong deliveries of pellets during the winter season, especially during Q1 and Q4. And then the tall oil prices have continued to increase as you mentioned, and tall oil we produce around 50,000 tons per year.

And the tall oil price trend remains positive into the second quarter? Yes,

I would say the tall oil is usually the oil price plus the green premium. And that green premium has been trending up the last several years, and that will remain in the second quarter. And then it depends on how the underlying oil prices develops.

Thanks

a lot.

Thank you. We'll move on to our next question from Martin at ABJ. Your line is open. Please go ahead.

Good morning. Two questions. Could you indicate the Ebitye effect in Q1 from the start of the container board and the pulp mill? And secondly, on the forest side, you usually have seasonal pickup in harvesting and also in Ebitye, 100 million up quarter to quarter. Will that still be there, given that you harvested more in Q1?

The forest, we have a seasonal uptick in Q2. But as you mentioned, we did a bit more harvesting this quarter. So the delta between Q2 and Q1 will be less than the previous year. And if we look at the startup costs, we have some startup costs that are not significant. But if you remember the EBITDA average, I show we have around 100 million in extra costs. It's not only the startup cost, it's also higher fuel prices. But let's say around -60% of that is higher startup costs.

Thank you.

Thank you. Once again, as a reminder, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We'll now move on to our next question from Cole Horton at Jeff. Your line is open. Please go ahead.

Morning. Thanks for taking my question. Just following up on the pulp wood dynamics in the Nordic region, I mean, normally when we see the barn come off, we generally get this cost relief for the end markets of pulp and craft line. I'm just wondering, you know, this cycle with the dynamics of less availability of wood, Russia coming in, should we be effectively thinking that we're not going to get this raw material relief in the Nordic region? And secondly, what does that mean? Does that benefit someone like yourself with kind of lower cost acid base? And we're effectively going to need the lower prices by someone closing capacity in that region? That's the first question. And then secondly, if you could give any color on, you know, what you're seeing potentially in other regions in Europe around wood prices, are the dynamics on wood trends different in Central Eastern Europe? Will they get more relief from wood, having traditionally bought less from Russia? Thank you.

Yeah, I mean, first, I don't think that we will see at least not short or mid term cost relief. I mean, the situation is changed now. For reason I mentioned Russia, Belarus studies at least 10 million cubic meters. And in addition to that, I mean, we have at least in the northern part of Sweden, we will have reduced harvesting level from from Sweden school the state on forest. So that will, I think that will remain and that is also what we see in the market, because typically when we have this situation for, I mean, end products in all areas, immediately, raw material prices should start to come down and that has not happened. And then what kind of impact will that have? Yeah, the first thing is that we will reach the bottom price wise faster because we will reach breakeven levels faster than than we've done in the past. And of course, in that perspective, it is very good to have a good degree of self sufficiency, which already today can see in the result of SDA and also some of our colleagues being in the same situation. So that is of course, positive. I think that it is, if not the global market of for wood raw materials, but many companies they are in the Baltics trying to buy wood in that area. We've seen the spruce beetle disease in in big parts of Central Europe for a couple of years now. And that will also give some limitations, I think, in terms of wood supply in in Central Europe. So I think it will be a rather scarce situation for for raw materials for a while now, and that will of course impact the price. And by that we will reach breakeven levels faster. And that's the reason also, I think that we will reach the bottom in in more or less all markets during during this this year. And of course, if you're in addition to that, if you have well invested assets and low cost that that will give you a better position. That's for sure.

And we've seen that if you look at our wood division, that in the high wood log cost in in Central Europe is driving the price increases. And they have basically

Yeah. Yeah. Have you lost line or

You're back now. Thank you.

We are back. Thank you. Was that the clear answer.

Yes, I just lost the last sentence from from address.

I just said we've, we've seen that the prices have bottomed out in in in the world because of the high log cost in in Europe, while we have a lower cost here in in Sweden or self-sufficiency, which means that we still have a healthy margin or wood division of 10% while other continental players are struggling.

Perfect. And then just one on on craftliner. You you call that you're starting to see a bit of an improvement in in orders and you know, de-stocking coming towards an end. Just wondering if you can expand on that any color that you're getting from from your customers and any seasonal effects we should be thinking about from kind of an agricultural season or anything like that that could support a bit of demand for craftliner from here through to the rest of the year. Thank you.

I mean, again, maybe I was really clear. I mean, we saw we lost 50% of the consumption in the first quarter and we still have a low consumption. I think of a craftliner that is very much related to the e-commerce and and I mean, we don't see any improvement in that area. But again, as you say, I mean, we have seen started to see de-stocking effects among customers. We also I think Andreas mentioned that that OCC prices has already started to come up. I mean, we were down to 65 euro per ton and now it's up to 80 and as the supply of old boxes will be reduced now that will I think cause an extra pressure on OCC prices that will come in the in the autumn. And then again, what will happen with any reprises and and so on. But I think we will see continued decreasing prices for a while. But my best believe it is that we will we will see the bottom in the in the second half of this year driven I think by higher cost structure for for test line producers. On the other hand, we also know that you will have some additional test line capacity coming on stream now so that will impact the supply demand balance in a slightly different way. So I mean, it will still be

a

it will be a tight year. But I think we will see the bottom this year at least.

Thank you. Thank you. Now we'll move on to our next question from Andrew Jones at UBS. The line is open. Please go ahead.

Hi, just a question on the effects factor. I mean, that was clearly supportive. And I guess in the results we just seen, can you give us a bit of a steer as to how you expect for the extra impact the second quarter and just talk us through how that dynamic might work?

We have in our report that we have had from 70 to 80% of our currency becoming two quarters. You have the exact hedges in in in our report, but we don't expect any significant difference between Q1 and Q1. We found a

similar You mean between Q1 and Q2?

Yeah, Q1 and Q2, yes.

Okay, got

it. Thank you. We have no more questions in Q1. As a last reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. We'll take our follow up questions from Cole Hawthorne at Jefferies. Your line is open. Please go ahead.

Thanks for taking the follow up. Just coming back on to the ability to harvest and manage your wood costs from your forest. How have you changed your harvesting plans, given the wood cost dynamics, if at all? Should we expect your own forest harvesting to be elevated near term to make sure you don't have to pay any higher spot wood prices? Yeah, it's a good question.

But I mean, we are in a phase just now, as I said, I mean, we said a couple of years ago that we should go from 4.4 million cubic meter per year to up to 5.5. And that we will do. And that is of course due to the fact that we have treated the forest in a good way. So by that the potential is higher. Normally we try to keep the harvesting level in the forest at the same level from year to year. I mean, in good times you always need more cash. In bad times you also need more cash. So I think it's good to keep some kind of strict line in that perspective. And another perspective is of course how to get access to good entrepreneurs to keep the cost level in the harvesting operations. And that has been, that's not the secret. I mean, it has been a challenge to get access to good people to come to the forest and do the harvesting operations. Just now it's a little bit better and maybe some resources are coming back from Russia and so on. So I mean, we have a little bit better balance in that perspective. We have also employed some more people and we have bought some more harvesters inside SDA just in order to secure the wood supply in a better way. But to be honest, no tactical things in this area. I mean, we have a fantastic situation where we can get at least 50% of what we need from our own forest. And we try to stick to that line in good times and in bad times.

Thank you very much.

Thank you. There are no further questions in here. I will now hand it back to your host for closing remarks. Thank you.

Thank you for joining us today and welcome back in July and July 21st for the half yearly results. Thank you for joining us.